Industry Center - Lumber, Wood Production

Timmmmm-berrrrr!!! What drives demand for lumber and timber products? Construction, construction, construction. Thanks to the US's seemingly untoppleable housing market -- and strong demand in Asia -- prices for lumber and wood products have remained strong despite increases in capacity...but that may change.

The US housing market, fueled by record low interest rates, fueled a boom in construction, and rising lumber and wood construction product (engineered panels, oriented-strand board, plywood) prices from 2002-2004. As interest rates rose, prices were forecast to drop rather sharply in 2005, but actually fell off only modestly ~2% as housing starts remained high while the industry's capacity increased by more than 2 billion board ft., from 79.7 billion to 81.9 billion, according to Engineering News-Record. Unless housing starts increase in 2006, which seems unlikely considering rising interest rates, a fall in lumber prices seems inevitable as the industry's board ft. capacity continues to increase.