Friends and neighbors,
During this time of year, we typically see increases in lumber and commodity pricing based on several factors. What we are seeing now is almost beyond belief in the pricing increases. My hope is not to scare you about why pricing is going up but rather, to educate you on the reasons and to provide some clarity on why we are following the market.
All of us who sell commodity lumber waited all winter long for the current administration to decide what to do with the expired softwood lumber agreement, (the counter veiling duty). We all got to experience the inflated pricing to protect the mills from the possibility of a retroactive tariff when it was finally announced at 19.88% in late April. Moving ahead a few more months and the next big run up was caused by a separate issue between the US and Canada and the subsequent anti-dumping duty at 6.87% effective June 30, 2017.
Per Investopedia, an anti-dumping duty is a protectionist tariff that a domestic government imposes on imports that it believes are priced below fair market value. Dumping is a process where a company exports a product at a price lower than the price it normally charges on its own home market.
Nearly all the lumber we sell at our stores is domestically produced and not subject to the tariffs and duties. Unfortunately, the panels and cedar products are imported so the combined tariff means higher prices. The additional duties put pressure on the domestic supply and tend to dry it up quickly as the volume buyers and traders look for the best deal. Once that supply is gone, and it is now, the domestic producers raise prices based on limited supply with a very strong demand.
Further adding to the limited supply issue and the role of import lumber in keeping prices stabilized is the threat of fire in the Provincial forests in Canada that is keeping logging at a minimum. We also had a mill fire that took an OSB mill out of commission along with normally scheduled summer maintenance at some mills. (Some suppliers we talk to think the fire threat is gamesmanship being played based on the CVD/ADD from the US.)
The real estate market around the country is very strong with very little inventory so builders are experiencing a boom when they have the labor to get the work done.
Our guess is that the market remains strong with higher than normal pricing through the building season with prices holding in the weeks ahead. If the rumors are true about a new ten-year softwood lumber agreement, we could see pricing stabilize with some market correction before the end of the season.