North American lumber prices are near the lowest levels in seven months, after a cold, wet start to spring has delayed construction and kept potential buyers away from the housing market.
Now, market watchers are waiting for the inevitable spring thaw to shake loose lumber that has been building up in warehouses and at sawmills across North America, while searching for signs of demand from U.S. home builders.
“Last year everyone was irrationally exuberant about the spring and about how fast the housing recovery would take hold,” said Steven Chercover, an analyst with D.A. Davidson, an investment-management firm in Portland, Ore. “This year, we were optimistic, but had the worst winter in decades” in parts of the Midwest and East Coast.
The winter halted construction and caused transportation bottlenecks, with heavy snows preventing trains and trucks from moving not only lumber but other commodities as well. As the snow melted, competition from grain and energy shippers left a lot of lumber stuck at mills and warehouses. That left the Canadian National Railway Co. to issue a rare embargo notice to wood and pulp producers in March to say it would stop moving lumber products until the backlog was cleared.
“Whenever the perception is out there that there’s lumber piled up like there is now, the psychology feeds into a real bearish market,” said Paul Harder, a lumber trader with Dakeryn Industries, a wholesale distributor in North Vancouver, British Columbia.