With the sudden disruption to Chile’s supply line, the run on prices has already started in many products dominated by Chilean supply, including softwood plywood, finger-joint and MDF mouldings; shop and better lumber; and finger-joint blocks and blanks. According to International Wood Markets Group (IWMG), this is a result of the dominate market share of imported pines from Chile and other regions of the Southern Hemisphere that have evolved following the spotted owl crisis of the early 1990s in the U.S. pine lumber, moulding and millwork market.

Southern Hemisphere plantation pines represent about two-thirds of U.S. softwood finished pine moulding consumption and 40 percent of industrial clear pine lumber feedstock consumed at U.S. millwork plants. Chile has become the leading supplier from the Southern Hemisphere to the U.S. market of clearwood pine (industrial) lumber and finished pine mouldings as well as MDF mouldings. This is why U.S. clearwood pine lumber and pine and MDF moulding prices are now exploding as a result of the disrupted supply chain from Chile, according to the group. Some product prices have already jumped 25 to 35 percent and some further increases across the board are expected before the supply shock cools.

While it is possible that North American production (in conjunction with products shipped from Brazil, Argentina and New Zealand) could fill part of the short-term gap in U.S. pine markets, log inventories, mill shifting arrangements and marketing efforts taking place in export markets could limit this supply response, according to IMWG. As a rule of thumb on price elasticity, a one percent immediate change in supply can cause a price response of anywhere from two to five percent. As a result, prices on a number of pine products are expected to keep rising through May.

Aside from rising prices, the supply chain is seeing a few selected production ramp-ups at some U.S. companies, and some alternative supply options already are being offered. With some generally lean inventories, wholesale inventories may be drawn down if the disruption lasts more than six to eight weeks. This is likely to start showing up at big box stores first.

News

Leave a Reply

Your email address will not be published. Required fields are marked *