Lumber prices may not stay high for long

Lumber prices shot up this week, as a jittery market reacted to back-to-back hurricanes. Worried distributors stocked up on supplies that typically dwindle at the end of the summer building season.

But the mid-week flurry was largely a knee-jerk reaction to national disaster, not a forecast of future shortages, industry officials said.

“The emotional effects after Hurricane Katrina had started to dissipate. Then along came Rita,” said Jon Anderson, publisher of Random Lengths, an industry newsletter based in Portland.

Lumber producers with the quickest shipping options saw the highest gains this week, amid fears of higher gas prices and higher transportation costs, Random Lengths reported.

But even with the price hikes, lumber costs remain below last year’s near-record prices, Anderson noted. Random Lengths quoted a composite price for framing lumber of $405 per thousand board feet this week, compared with $431 a year ago.

The numbers of homes destroyed by Katrina are staggering, and Hurricane Rita could claim thousands more through high winds and flooding. But the rebuilding is expected to pace itself out over several years. As a result, “We’re not anticipating a huge surge in demand,” said Butch Bernhardt, spokesman for the Western Wood Products Association.

According to Red Cross estimates, Hurricane Katrina destroyed 416,000 homes in a three-state region, and severely damaged 83,000 additional homes. Replacing each of those homes with a standard, three-bedroom structure would require about 6 billion board feet of lumber – representing about one-tenth of the nation’s annual lumber consumption, Bernhardt said.

But the rebuilding is likely to occur slowly, according to predictions from the National Association of Home Builders. Homeowners have to haggle with their insurance companies. Repairing damaged homes usually takes preference over new construction. After past hurricanes, affected areas show only modest increases in building permit activity, according to NAHB officials.

“Replacing units destroyed by the storm will not begin for many months and will take place slowly, over a number of years,” the NAHB said in a press release.

Western mills ship only about 5 percent of their product to the southern states, Bernhardt said. The South rivals the West for lumber production, and though a number of mills closed in the wake of the hurricanes, the main problem was electricity, not storm damage, Bernhardt said. Canada’s eastern provinces also sell lumber in the South.

“If there’s a surge in demand, it would probably pull from those markets,” Bernhardt said.