Q. What do you think is going to happen to the price of hardwood lumber?

A. My Crystal Ball says…  

At the Wood Pro Expo in Baltimore, I addressed this question isdetail. In brief, here is what I see for the next year or two. I see severalkey points that lead me to believe the price of lumber will increase by as muchas 50 percent in the next 18 months.

First, during the recent recession, the number of hardwoodloggers and hardwood sawmills dropped by at least 50 percent. Now that the demandfor lumber has increased, there is a definite shortage of logs to meet thisgrowing demand.

Second, the number of people buying cabinets, furniture,millwork, flooring and other wood products is increasing. In fact, we canpredict the average market increase because the potential buyers are already inthe “pipeline.”

Third, with oil fracking being a big, growing industry in theMidwest and with the lack of pipelines to carry the oil to the refineries,railroads are being used. Estimates are that 200,000 oil trains will be runningthis year. The number of railroad ties required to support the tracks for thesehuge loads is growing tremendously. In order to encourage sawmills to cut tiesrather than lumber, the price of ties has increased substantially. With an oiltrain hauling cargo worth $750,000, there is no way that the railroads willtolerate a lack of ties, so they will pay whatever it takes to get the numberof ties they need. (Further, if the U.S. develops an energy conservation policythat encourages rail transportation, the demand for ties will grow evenfaster.) With tie prices increasing dramatically, the value of the remaininglumber in the log will also increase. Further, with more ties, the pallet andflooring industries will have to purchase higher grades of lumber at higherprices, and both of these markets are growing. So, when the cabinet andfurniture industries look for lumber for their needs, the price will be higherthan ever.

What can you do?

I see three possible options to mitigate the rising prices andthereby put you ahead of the competition.

One option is to buy standing trees now (this usually requires apayment to the landowner immediately, even if harvest will be delayed forseveral years). Then contract with a sawmill to saw these trees into lumberthat you can use (and probably no ties).

Another option is to buy and stockpile kiln-dried lumber now,lots of it, and then use this “lower cost”lumber in the coming years.

A third option is to learn how to be more efficient whenprocessing lumber into products By higher efficiency, I mean less waste, higherrecovery (or yield), more efficient designs, and fewer rejects during and aftermanufacturing. In case my crystal ball is indeed correct, why not set amanufacturing goal for your plant of a yield increase of 6 percent? I’llbet that the opportunity for such an increase is real and that you can do it ifyou apply excellent processing techniques.