A fluctuating lumber market is leveling off but, for those close to it, it has been a real roller coaster ride.
Murray Koebel, second vice-president of the Canadian Home Builders’ Association and past president of the Ontario Home Builders’ Association, says an unusual doubling of the price on lumber, and plywood early on in the construction season has affected smaller contractors significantly.
“Whenever lumber doubles (in price), that can represent anywhere from $5,000 to $10,000 on a house,” he says.
“A lot of the time, that’s the bulk of the builder’s profit margin. A builder only makes about five or six per cent selling price on average...it definitely has an impact on prices for the consumer.”
Koebel says lumber prices, being a commodity, typically rise in spring and then drop in fall or winter. However, time is an enemy for the smaller contractor who is unable to make deals that last longer than a few months, and so the small contractor has greater difficulty weathering large fluctuations than a larger builder does.
“It’s this sort of crazy cycle we find ourselves in the business,” he says. “You try to budget yourself for it as much as possible, but when it gets as high as it has, it’s difficult to budget for.”
Hal Brindley, president of Buchanan Lumber Sales in Thunder Bay and vice-president of the Ontario Lumber Manufacturers, says lumber prices experienced a weak start to the year, followed by a rapid rise in August, and are now on the decline.
He says the forest fires this summer in British Columbia contributed somewhat to the point where prices increased more than $50 (US) per one thousand board feet, but have since dropped to $375 (US) per 1,000 board feet as mills in British Columbia enter back into production. Also, the housing industry has started its seasonal drop.
Brindley says Ontario’s lumber industry is strong, but not as strong as it has been given recent events such as the ongoing lumber duties and the drop in price for lumber.
With the current situation, he says lumber producers are not making any money.
“A mill starts producing lumber and, sometimes, people get lucky as the prices go up. That’s not the situation now,” he says.
“We’re just a very cyclical type of business and we’re starting to see things come back down to normal,” he says.
“We’re a commodity business and that’s just the way it is. We’re like a roller coaster that goes up and down again and again. It’s the nature of the beast.”
Steve Lundon, owner of Northern Do-It Centre in Fort Frances, adds that the high price of panel wood such as plywood and oriented strand board (OSB) have seen considerable increases in from $9.95 per sheet to $26.
“(The prices) have just gone through the roof and there’s nothing in sight for any period of time yet,” he says. “It’s so high for a multitude of reasons, but as far as I’m concerned, it’s just greed.”
Softwood duties and a sudden drop in the supply of lumber on the market as a result of forest fires this summer in British Columbia are two causes often cited, both Koebel and Lundor say. The conclusion of the war in Iraq in May and the subsequent reconstruction have also created a heavy demand on plywood.
“That happened just at the time when the market was just beginning to rise so that spiked it way up,” says Koebel. “It’s not that the order was huge; it was an indicator that there was a demand from sources outside the country. Lumber is a commodity and there is a tendency to find excuses to raise the price of lumber and this was just one more excuse.”
Lundon concurs.
“There were a few little hurricanes and a booming housing market in the states. Any reason to raise up the prices,” he says. “It’s putting a considerable increase on the price of a house. People are saying ‘I’ll just wait.’
