100% of the analysts that I read, and, if I'm not mistaken, close to 100% of the mill owners recognized that this was a temporary blip, and that lumber would fall back into the $500sh range (There is a natural floor - that's the price at which BC mills no longer make money and start shutting down/curtailing capacity.)
None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.
> None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.
Oh, nice call out. I wish there was a way for me to get information on stuff like this in general. That is the proxies for the future like you say.
Doesn’t have to be profitable. It could be stuff everyone trading lumber futures already knows. Just for curiosity and so I can validate my news sources.
This was predictable and extremely profitable trade. I made a lot of money this year from this alone.
The price increase was a result of a usual 90 day delivery for new contracted lumber and nobody anticipating people would actually try to build houses in winter time (which they did). A lot of production was wound down and supply contracted out in the future was pulled to earlier dates leaving future contracted lumber demand unfilled leading to price spike and then a crash after extra supply was brought online.
All the information is available but you have to pay for this. There are companies specializing in getting this info for you daily by calling lumber mills.
Fwiw, timber itself is only up about 10% (comparable with 2010 prices)
> This is false, the mills were expanding and the increased throughout increased supply and prices crashed (along with construction work backing out)
Yeah and that was obviously the entire idea about the trump tariffs. Saw mills in the USA are insufficient, that's the point of the tariffs, those jobs are supposed to come back when capacity is being increased.
Those jobs never left. The largest lumber producer in the world, from Canada, operates saw mills in the USA. They don’t pay tariffs on product made in the USA. Side note, the tariffs are always paid on import by the importer. Not by the exporter. Imposing tariffs on foreign goods usually raises prices for the end buyer.
Here is more information including a 7% job growth for loggers
""Low mortgage rates, low volumes of homes available for resale, favorable demographics, increasing acceptance of remote working and the underlying housing construction deficit due to several years of underbuilding appear to be positively influencing the demand for new housing in North America," the company wrote in an earnings report. "Economists are forecasting U.S. housing starts for 2021 to be approximately 1.5 million units, an increase of nearly 9% over 2020. An aging housing stock and increased repair and renovation spending should also continue to drive strong lumber, plywood and OSB demand.""
The price increase was not relevant to their expansion, but long term trends in which the price increase was irrelevant.
Oh, very interesting. Honestly, I have no problem receiving the information after all its trade value is exhausted. Not looking to trade in this area. Is expired info available for free somewhere?
> None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.
I'm a bit doubtful about this because I know that even German mills started to produce lumber with US dimensions, causing shortages for metric lumber locally.
Definitely overseas suppliers of lumber immediately pivoted their existing capacity and started running extra shifts. I have a friend who works for a lumber wholesaler, and close to 100% of their additional sales came from lumber in Asia.
But, if there was an expectation that these price levels were going to be sustained, the mills would have started engaging in capital programs to increase their capacity - because, and this is critical - there was no supply of raw-timber issue, indeed - the price of raw timber didn't increase.
That those capital programs did not take place, is the strongest representation I can think of of Mill owners true assessment of the long term prices.
Part of the issue was caused by issues getting Canadian supplies of lumber into the USA due to a trade dispute. It's possible that these German mills are just taking advantage of being in a temporarily good trading position, with the understanding that cheap Canadian imports will retake their market position shortly.
If they thought this was permanent, they would have expanded to supply the USA, rather than doing so at the expense of domestic production.
That's interesting. The things I was reading before the prices started coming down in earnest were all noting what you're saying here--that mills weren't expanding capacity. But they were using that fact as justification for their belief that prices would remain high since there was no reason to expect supply pressure to ease.
None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.