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Entries in lumber (2)

Thursday
Feb282013

Lumber Boom Boosts Home Depot, Timber Towns

iStockphoto/Thinkstock(NEW YORK) -- An improved U.S. housing market plus rising foreign demand for wood are boosting lumber prices, to the benefit of mill owners, retailers like Home Depot, and timber towns like Eugene, Ore.

Home Depot's announcement this week that its quarterly profit had jumped 32 percent -- more than had been forecast -- helped lift the Dow Jones industrial average.  The company's shares climbed nearly 6 percent -- their best percentage gain in four years.

Frank Blake, CEO of Home Depot, said in a conference call that he attributed the results in part to the ongoing recovery of the U.S. housing market.  New home sales in January rose at their fastest rate since July 2008.

Jon Anderson, president and publisher of timber industry newsletter Random Lengths, tells ABC News that increased demand from abroad for wood products also is responsible for higher prices.  For the past five years, he says, China has been increasing its imports of North American lumber, from both Canada and the U.S.

The newsletter's composite price for framing lumber (the kind used in home building) has jumped from $284 per thousand board feet a year ago to $415 now.  The composite price for plywood and other kinds of paneling has shot from $332 to $513.  Prices for paneling, says the newsletter, are now "within shouting distance of all-time highs."

Publicly traded wood products companies turned in solid fourth quarter results, Anderson reports.  The stock of Weyerhaeuser, for example, has climbed steadily for the past 12 months, from a low of $21 to a recent high of over $31.  It closed Wednesday at $29.61.

Where might lumber prices go in the next six months?

Anderson says he isn't in the prediction business.  But for more than a year, he adds, demand has been on the increase.

"Supply has been chasing demand, but has not caught up," he says.  "Producers, because of the depth and length of the recession, have been reluctant to add shifts or increase production.  They've held off re-opening mothballed facilities."

Now, though, they are starting to anticipate the day demand exceeds supply.

"You're starting to see mills increase production or come back online," he says.

Copyright 2013 ABC News Radio

Monday
Dec172012

Lumber Prices Jump with Housing Market Recovery

iStockphoto/Thinkstock(NEW YORK) -- With lumber prices on the rise, analysts are watching whether the commodity could cause a logjam in the recovery of the housing market.

Housing prices have risen for six months in a row, according to the latest data from the S&P/Case-Shiller home price index, signaling that the country is recovering from the housing bubble burst about six years ago.  Along with the housing market, the logging industry has also rebounded strongly since the recession, said Robb Granado, analyst with financial analysis firm Sageworks.

The industry's profit margins are relatively low; over the past year it has had a 0.3 percent net margin on average, he said.  Compared with 2006, there are 23 percent fewer businesses in the logging industry today, according to the North American Industry Classification system used by the Census Bureau.

With demand for new homes rising, Granado said there has been rising pressure in its complicated supply chain, which includes raw materials, equipment, and labor.

"A lot of it has to do with the wood as a commodity itself and the inability to differentiate," Granado said.

Mannington Mills, Inc., a lumber manufacturer, is increasing prices for its engineered wood floors by up to 6 percent starting Monday, citing increases in log and transportation costs.

"This is an industry that has been in need of a price increase for a very long time.  Excess capacity and competitive pressure Asia has made this difficult," said Dan Natkin, director of Mannington Mills' hardwood and laminate business.  "We have reached a breaking point where we have to raise prices."

The last time the company had a line-wide increase across its entire hardwood products was about a decade ago, he said.

"Because the home industry has been so depressed, businesses in that sector have kept prices historically low," he said.

Natkin said he has seen lumber prices creep up, due to the laws of supply and demand.  Wood, in general, is closely tied to raw material pricing, he said.

While the homebuilding and logging industry are "very closely related," he said, raw material is just one component of the construction industry.  Wages and fuel and trucking prices are also another component.

Natkin said he does not know when his company will increase prices next, but if it does, the rise will be "modest."

Armstrong World Industries, which designs and manufactures floors and ceilings and is based in Lancaster, Pa., also said it is increasing prices.  Starting Monday, the company is implementing a 6 percent price increase on all its engineered and solid wood flooring to offset the cost of lumber.

Jennifer Johnson, spokeswoman for Armstrong, said the impact its wood flooring increase could have on the overall price of a house is "negligible."

"The real meter to watch on the housing market continues to be consumer confidence," she said.  "As that strengthens so should the housing market."

Copyright 2012 ABC News Radio







ABC News Radio