May 2, 2025 Lumber News
SYP The SYP lumber market is finally showing signs of softening for the first week this Spring. Although the average for...
I find some of the lesser-known trees and their unique uses quite interesting. A few years ago, when I lived in Northern Missouri, I spent the better part of several Winters in the woods cutting hedge or hedge apple trees. Beings I had grown up in Pennsylvania I was very fascinated by trees that were so different from anything I had experienced before. Hedge wood is a bright yellow color when freshly cut, incredibly hard, and quite heavy. We sold the straightest logs for fence posts and the rest we cut up for firewood. The fact that the wood was so rot resistant gave rise to several interesting local sayings such as, “One hedge fence post will wear out three post holes.” Or, “Use it for 50 years on each end of the post”. Either way hedge was the post of choice in that part of the country. The firewood was in high demand for anyone who heated their greenhouses with wood because it burned hot and lasted all night. Some of us also used it to heat our homes, although if you opened the door of the wood stove while burning hedge, you could expect a shower of sparks. Though we sometimes milled the nicest of the hedge logs into lumber and used it in applications where you would normally choose treated pine, most of the trees grew too twisted to be widely used for lumber. Hedge is certainly an amazing part of God’s creation of useful trees!
For some of us, we are willing to pay a premium for a given brand in certain commodities. Whether it be a power tool, a tractor, or peanut butter, any preference will almost always come with a premium price. This premium in price will always be subjectively justified for each of our preferences… that is, until the price gap between our preference and the next best option becomes impractical for us.
When it comes to construction materials, the choice between different types of wood is often a matter of cost, availability, and durability. Among these, Southern Pine (SYP) and Spruce-Pine-Fir (SPF) are two popular choices, each with its own set of advantages. SYP is preferred where bending strength is needed in items such as floor joists and trusses. When it comes to studs, purlins, and other specific framing applications, many builders will choose SPF due to its workability (it is naturally softer and easier to nail into and doesn’t warp as easily), and its lower density (making it easier and lighter to lift).
With this preference driving demand, SPF is the largest consumed lumber product in the United States; and you guessed it, it is also more expensive. In fact, the price spread between the species reached historic highs in early December; forcing many builders across the country to at least seriously consider replacing SPF with SYP.
As with any market, as prices continue to fluctuate between seemingly interchangeable items, consumers will always face the challenge of balancing cost with quality. The question is not just when we will choose to pay more for a premium product, but why we are willing to make that decision in the first place. In the end, the threshold for switching from SPF to SYP is influenced by a combination of practical needs, financial considerations, and the ever-present role of our perceptions for each product that are largely influenced by our past experiences.
I heard a story this week from a man’s childhood where his mother would take “off-brand” peanut butter and put it into empty Peter Pan peanut butter jars in efforts to save money on the grocery expenses; all the while hoping that he and his siblings would not notice the possible change in taste of “Peter Pan”. Apparently, she was never successful in her trickery as it never went unnoticed; causing lunch time revolts upon first bites of peanut butter sandwiches. So take that as a cautionary tale while weighing between SYP and SPF for your building needs, as there may be potential for revolts upon first nails driven.
It does appear that the historic gap between prices of SYP and SPF has reached its max as SYP is now trending up in price and SPF down as of late-December. Hopefully, for builders, this will lessen your stress in deciding between your pocket books and your preferences in building material.
It is possible that this hopeful outlook on the gap in prices decreasing is short lived. As we briefly mentioned in last month’s notes, the Trump administration is considering applying a 25% tariff on all imported goods from Mexico and Canada. With Canada being the primary supplier of softwood lumber products imported by the U.S., this could have huge implications on the American softwood market. Further, a vast majority of SPF comes out of Canada. In 2022, the United States imported $429 billion worth of wood from Canada; a 25% tariff would be an additional $107 billion.
Thanksgiving week initiated a downward pressure in demand for panels. Winter weather slowing many building projects, along with many buyers trying to maintain lean inventories to accommodate for soon to come end of year inventory taxes.
Mills were able to hold pricing rather firm through the first weeks of December; but with only two weeks left in the year, prices are finally reflecting this lack of demand. We have seen a $30 to $45 decrease (per thousand square feet) in a 3 week window.
The pallet industry seems to be facing widely varying conditions at the present. we hear of some shops who are running overtime and others who are still working hard time and struggling to keep orders. This indicates that not all factories who use pallets are running steady at this point. In general, having a diverse base of customers seems to be helpful in maintaining steady flow of work. Overall margins continue to be fairly slim and pricing remains quite competitive. In our region it seems like most of the pallet shops are a bit busier than they had been a couple months ago. This is leading to some slight increases in cant prices in the Appalachian region. Average price is running around $475/mbf.
Any company that uses standard size pallets for shipping their products can choose between two different categories of pallets: whitewood or rental. Whitewood pallets refer to any pallets made from unpainted wood (which is most of the pallets produced in many of our communities). They could be new or recycled pallets. Rental pallets refer to the pallets provided by one of the large rental pallet players. These companies typically paint their pallets all one color for traceability (for example, the blue pallets provided by CHEP). Often time the rental companies have more national or even global reach because of their large scale which allows them to easily supplies pallet users who have factories scattered across the country. Often it comes down to cost and availability when a company is making a choice on which pallets to use for their product as well as whether a rental option is even feasible give their supply chain dynamics. The whitewood pallet markets tend to be a bit more resilient when pallet demand spikes.
In a recent survey of large pallet users, there were quite a few factories who expressed a preference of including both rental and whitewood pallets in their regular supply. Whitewood pallets have tended to be a bit cheaper in the last year and as companies continue to build good relationships with whitewood pallet providers, it may make their supply chain more resistant to disruption if there would be a sudden spike in demand. For example, during the post-COVID bubble, several of the rental pallet giants struggled to make their scheduled deliveries because of short supply. CHEP currently repairs a lot of their rental pallets in Mexico because of cheaper labor costs but if tariffs go in effect for trade between the US and Mexico then CHEP will likely shift to having more American suppliers handle their production and repair of their rental pallets. This would increase demand for the pallet shops who have contracted with CHEP to repair and produce pallets for the rental giant.
At the present most hardwood sawmills are experiencing steady demand for cross-ties. One cross-tie buyer that we heard from recently said that he expects demand in 2025 to be very similar to 2024. The Railroad Tie Association announced their most recent inventory numbers which do seem slightly concerning for the future of cross-tie demand. Their current inventory has passed the 19 million mark which is the highest inventory level in the last 7 years.
We have been talking with various hardwood sawmill operators about the current hardwood grade market. White Oak continues to experience reasonably strong demand but some species and especially red oak are becoming worse. In the past the Chinese markets have bought a lot of red oak to use in the flooring in new housing construction but in recent months the Chinese housing market has fallen dramatically and the result is that much less lumber is being imported by China. Pricing has moved down on red oak as a result.
There are some areas of the hardwood grade Market that are experiencing a slightly better outlook. Some hardwood grade lumber buyers that had been controlling their purchases have now informed sawmills that they are willing to take whatever the mill can produce in certain species. At the same time though many hardwood mills especially in the Midwest have low log supplies because prices are still too low to allow loggers to operate profitably.
There are several factors that still seem to be negative for the Housing Industry including high interest rates, a lack of buildable lots, and high construction costs. The National Association of home builders and Wells Fargo have a housing market index that reflects the sentiment of home builders about the current housing market conditions. In December the index was at 46 for the second month in a row. Any index below 50 is considered negative.
Looking forward, there does seem to be a general positive anticipation of what the Trump administration may bring to the housing market overall, such as domestic tax cuts, deregulations for builders, and interest rates dropping. New building permits rose 6.1% in November compared to the previous month which reflects some optimism about the housing market in 2025.
