Lumber Prices Keep Tight Grip On Shippers And Importers

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For lumber suppliers, the tight supply and mile-high price of lumber that impacted construction projects nationwide this spring continue to cause frustration. But builders and homeowners remain optimistic as prices have since fallen to $479 per thousand board feet, down 68% since peaking in May at an all-time high of $1,515. Fortune reported that prices have dropped for the ninth consecutive week.

It's unlikely that lumber prices will return to pre-pandemic levels, but whether they will continue their descent is up for debate. In fact, some are predicting an upswing in prices as we enter the back end of 2021. 

Andy Hafertepe, division vice president at Echo Global Logistics, predicts lumber prices will fluctuate until mid-2022. He expects demand to keep lumber prices elevated, alluding to the increase in home renovation and construction projects spurred by cabin fever among activity-starved consumers. 

"At the current phase of the pandemic, some people may want to spend money on a variety of things if they are in the financial position to do so, including travel, experiences and of course house upgrades," Hafertepe said.

Joshua Mahony, senior market analyst at trading platform IG, points to the $1 trillion infrastructure deal moving through Congress and ever-increasing housing prices as reasons to expect prices to rebound.

Seasonality may also give credence to price hike expectations. Mahony added that the fourth quarter is commonly a "buoyant" period for lumber prices. Regardless, it's clear that the roller-coaster ride won't be over anytime soon.

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While SONAR's U.S. Flatbed Outbound Tender Reject Index shows that rates are on the decline, carriers are still rejecting loads at a far greater rate than seen over the past three summers. 

Flatbed haulers have fared well this season as many have been able to insulate themselves from shortages by hauling a variety of construction materials. When plywood is unavailable, they've been able to turn to bricks, generators, tile, and roofing materials, as well as steel and other metals.

As for lumber shippers, because capacity is tight in the flatbed and dry van markets, moving lumber freight has been challenging. 

"While capacity is tight in both the flatbed and van markets, I have never seen this tight of capacity in flatbed in my 22-year career," Hafertepe said.

Hafertepe added that intermodal rail is an option too, but that its carrying capacity (43,000 pounds) is less than ideal for shipping 8-foot plywood sheets compared to a flatbed trailer (46,000 pounds) or a dry van trailer (45,000 pounds).

Importers, too, find themselves in a pressing situation. Recent tariffs and hardwood bans from China have forced many to import from Vietnam and Indonesia, countries that haven't been able to match China's production volumes of wood products.

"Rising container costs and availability are also a problem in addition to port congestion across the U.S.," Hafertepe said. "While importers are used to having three months of inventory ‘on the ground' in warehouses around the country, orders are now being written up to ship out as soon as warehouses strip the containers. The current situation is truly unprecedented."

One of Echo's clients is Taraca Pacific, a U.S. importer of high-grade custom plywood. The company's marketing director, David Wozniak, said the recent issues within the lumber industry have had the same effect on plywood as other wood-based products in that raw material components have become more expensive and less available.

"I believe that all inventories throughout the industry have decreased as replacement flow has been restricted by reduced shipping capacity while demand has remained very high," Wozniak said, adding that he expects wood sector inventories to remain low as lightweight goods sold online monopolize available shipping container space.

"As long as COVID-19 continues to impact countries where our goods come from, the supply chain will be challenged, and materials will remain in short supply," Wozniak said.

Describing Taraca Pacific's operations this year as "stressed" across the board, Wozniak said that if there's a silver lining, it's that these disruptions have exposed weak points for companies to properly address.

Taraca Pacific has relied on Echo for its inland transportation needs throughout this year's ups and downs, and with the help of Echo's team of logistics experts, the company has managed to avoid situations like untarped loads and extended trailer dwell times in carrier yards. 

"Echo has done an excellent job of keeping trucks under our goods and getting the best price in the market without sacrificing safety on the road or the care of our goods," Wozniak said.

Echo boasts an impressive suite of proprietary technology for shippers to simplify transportation management through the use of artificial intelligence, machine learning and advanced load-matching algorithms.

Shipments can be quoted, booked, shipped and tracked, and invoices managed in real time using EchoShip, an innovative, self-service web portal that consolidates and simplifies the shipping process. With its simple, user-friendly interface, EchoShip eliminates repetitive workflows and speeds up shipping with an efficient, four-step process, giving Echo's clients time back to focus on their business.

"At Echo, we simplify transportation management by working closely with our clients and communicating with carriers, warehouses, freight forwarders, vendors, and more in order to prioritize our clients' needs," Hafertepe said.

Click for more FreightWaves content by Jack Glenn.

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Image by Pexels from Pixabay

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