Softwood Lumber’s 28% Price Drop
Prices of products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), declined by 1.1% month over month in June 2022 and by 14.3% compared with June 2021. Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index (RMPI), edged down 0.1% monthly in June 2022 and increased 32.4% year over year.
In June, the IPPI declined 1.1% month over month and was 14.3% higher than in June 2021. This was the first monthly decline in the IPPI since August 2021 (-0.3%).
The decline in the IPPI was mostly driven by a 28.0% drop in softwood lumber prices. This was softwood lumber’s third consecutive monthly decrease and the most significant monthly decline since July 2021 (-32.9%). Year over year, softwood lumber prices were down 37.2%, the most significant decrease since the series began in 1956. Even with the substantial drop, prices in June were nonetheless 80.3% higher than those in January 2020, before the onset of the COVID-19 pandemic.
Lower lumber prices were partially attributable to slowing demand for construction. The June price drop followed a 14.4% decline in monthly US housing starts in May, the most significant monthly decrease since April 2020. The US residential construction market is the primary customer for Canadian softwood lumber. Rising interest rates and high costs for construction materials also played a role in driving prices and housing starts down.