Timber industry veteran Kyle Little told CNBC on Tuesday that it was a sensible decision to wait with discretionary construction projects to begin given the high cost of timber.
“The jobs you have don’t expect us to go back to what we’ve seen in the last 10 years. However, if you can wait, there’s no reason not to,” said the chief operating officer from Sherwood Lumber on “The exchange.”
“We’re seeing some relief in the next six to twelve months, albeit still at prices much, much higher than prices we’ve seen in the recent past,” added Little, who added more than a decade at Sherwood Lumber, a privately held wholesaler based in New York. He is also a former timber merchant.
Wood futures saw significant weakness last month after a big surge during the Covid pandemic. Wood futures for July, Tuesday delivery fell more than 5% to $ 1,158 per thousand board feet, a decrease of more than 30% from a record $ 1,711 on Jan.
Despite the recent declines, the timber industry has grown by more than 200% in the past 12 months.
In late May, Little told CNBC that he expected the current wood cycle, with volatile trading and high prices, to last “for the foreseeable future.” At the time, he stressed that prices could leave their highs but could still be above the historical average.
He reiterated that view on Tuesday, saying the company’s guidance “really hasn’t changed”.
“We are in the 12th month of what we think will be a 24-30 month … cyclical bull wave,” said Little. “We really believe the new three-year mean will be much, much higher – almost twice as much as it has been over the past 20 years.”
The sharp rise in timber prices has increased the cost of projects and has been identified as a factor in a. cited Decline in residential construction that was reported in April.
Little said a decline in lumber is “inevitable” as higher prices dampened demand.
“These builders and our customers are very accomplished,” added Little. “They’re instructing their clients: If it doesn’t have to be done today, it may be a better time to take a breather and start this project later in the fourth quarter, possibly the first quarter of 2022.”