Analysts say there\u2019s little immediate relief in store for Canadian home renovators and builders despite a slight recent softening in the pace of orders for forest products.<\/p>\n\n\n\n
While prices will likely eventually fall from current record-high levels, suggestions that prices for lumber and oriented strand board (OSB) building panels are set to tumble are unlikely, said RBC analyst Paul Quinn in a report to investors.<\/p>\n\n\n\n
\u201cWhile prices are unlikely to remain at these lofty levels, tales of lumber-OSB\u2019s demise seem greatly exaggerated,\u201d said Quinn in his report.<\/p>\n\n\n\n
\u201cIn our view, continued demand strength and a limited ability for the industry to increase production are likely to result in a tight supply-demand balance over the short-to-medium term. This should support pricing well above historical levels.\u201d<\/p>\n\n\n\n
There\u2019s anecdotal evidence of a softening in the \u201cover-the-shoulder\u201d home improvement market due to sticker shock, but all other indicators point to only modest declines in forest product prices, agreed Kevin Mason, managing director of ERA Forest Products Research.<\/p>\n\n\n\n
\u201cPeople who are doing big R&R (remove and replace) contracts \u2014 so the big contractors \u2014 and homebuilders, there\u2019s no slowing there,\u201d he said.<\/p>\n\n\n\n
\u201cThose guys, who obviously make up a bigger chunk of the overall market, are still very active and are still worried more about supply than they are about price.\u201d<\/p>\n\n\n\n
The wood products futures market has had dramatic swings in prices recently but represents a tiny part of the overall market and is subject to volatility from speculation, Mason added.<\/p>\n\n\n\n
Earnings reports from major building supply retailers Lowe\u2019s and Home Depot this week showed huge increases in sales in the first quarter and both indicated lumber continues to fly off the shelves in both Canada and the United States, Quinn pointed out.<\/p>\n\n\n\n
Home Depot reported comparable U.S. sales in the first two weeks of May that were 30 per cent higher than the two-year average. Lowe\u2019s said it hasn\u2019t seen any slowdown in May compared with robust sales in April.<\/p>\n\n\n\n
Earlier this week, CIBC reported that a lumber composite price from industry trade magazine Random Lengths had jumped by one per cent to a record high of US$1,508 per thousand board feet, while Western SPF (spruce, pine, fir) lumber prices were unchanged from the previous week\u2019s record high of US$1,630.<\/p>\n\n\n\n
It says, however, there\u2019s been a slowdown in the pace of new orders as buyers grow wary of risk in view of declining SPF futures prices and mills work on filling orders for delivery deep into next month.<\/p>\n\n\n\n
OSB panel prices, meanwhile, were reported to have jumped 1.6 per cent in the north-central region to a record US$1,275 per thousand square feet, an increase of almost 350 per cent in 12 months.<\/p>\n\n\n\n