After all of the volatility experienced in the lumber and oriented strand board (OSB) markets in 2021, it's anyone's guess what will happen in 2022. As a reminder, lumber and OSB prices surged to record levels in the late spring of 2021.
In the case of lumber, prices hit as high as $1,733 per thousand board feet in May. By September, prices had fallen through the proverbial floor, reaching under $400 per thousand board feet. To top things off, prices then rebounded to just under $1,200 per thousand board feet by the end of the year.
OSB prices followed a similar pattern earlier in the year. Into the summer, prices reached the $400 to $500 range per thousand board feet range. Where things have differed is OSB prices started dropping towards the end of the year and have not really recovered. In the last week of the year, prices actually went down $100 per thousand board feet to $325 while lumber prices saw a big increase. That's a massive 23.5% drop.
Despite the wild price fluctuations in 2021, we are going to try to anticipate what OSB prices are going to do in the first quarter of 2022.
Where Are OSB Prices Headed in First Quarter of 2022?
After a big drop at the end of the year, analysts are guessing the price of OSB might drop further, perhaps to as low $200-$250 per thousand board feet. At issue in recent weeks has been the drying up in demand.
Part of the demand problem might have to do with seasonal issues as homebuilders have been battening down the hatches for wintertime. Most of their big purchases to shore up inventory likely took place in the fall as prices headed downward.
One factor that could force prices even lower is the actual anticipation of lower prices. If OSB consumers believe prices could go as low as $200 per thousand board feet, they won't be too interested in paying $325.
Looking beyond what is likely to happen in the first few weeks of 2022, any other estimates are likely to be nothing more than educated guesses. If prices do continue to dip on weakness, there will be a price point when consumers will jump in and start making large purchases. That holds the potential of driving prices up just as fast as they have been dropping.
Experts and consumers alike would simply like to see OSB prices stabilize and return to more predictable price patterns. If that were to happen, prices would stay weak through the first quarter of 2022 and start strengthening into the second quarter.
We suspect prices will continue to rise until at least March/April, and we could even see numbers as high as the record setting May 2021.
Price Factors Worth Considering
In the U.S. market, the price predictability of OSB is likely to be influenced by three factors that the lumber and homebuilding industries have not experienced in the last few decades.
The first factor is inflation. In the U.S., inflation has hit near an annualized 7% in the last few months. That is a startling development considering that kind of an inflation number has not been seen in 40 years. To be clear, all consumer goods are being hit with inflationary numbers, some items more than others. If inflation doesn't cool by springtime, OSB prices will get hit with a price increase demand or no demand.
Second, increased new housing demand in states like Arizona, Florida, Tennessee, and Texas will eventually affect the home building industry with higher prices for materials. This new demand is being driven by a population migration out of states like California, Connecticut, Illinois, New Jersey, and New York into the states that offer more economic stability. The migration is already underway, forcing home buyers to purchase existing homes. Still, we can anticipate that when spring rolls around, the demand for new housing will take hold.
The final factor has to do with supply chain issues. Two years into the COVID19 pandemic and the world is still struggling to get things back to normal. In the American and Canadian OSB manufacturing and shipping industries, employment has yet to return to optimal levels. That has caused shortages of manufactured goods and delays in the shipping of purchased inventory. Until supply issues get resolved, OSB price volatility could be an issue.
All three of these factors should eventually result in higher OSB prices perhaps by the end of the first quarter of 2022. How High? A number similar to last May 2021 ($400 to $500 per thousand board feet) would not be a surprise. We can then expect more upward pressure on prices until lumber mills and OSB manufacturers get back to full staffing.
With new COVID variants popping up in recent months, it is near impossible to predict exactly when OSB prices will stabilize. Until they do, consumers will likely be jumping in to make OSB purchases as prices tick down and subsequently backing off every time prices reach an uncomfortable price point.
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