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Lumber prices are on the way back down

GULFPORT — Prices of lumber have spiked since the beginning of the year and while everything from El Nino to the earthquake in Chile have contributed, experts say it’s mostly the recession causing the increase.

Relief will come quickly for builders.

“Lumber prices are going to fall and they’re going to fall as sharply as they went up,” said Shane Finley, who does purchasing for Klumb Forest Products in Gulfport.

The company is a wholesaler, selling primarily in the Southeast. In one day his cost of spruce dropped about 8 percent, he said.

Finley doesn’t expect the prices to fall back to last year’s nearly 20-year low.

Contractor John Goff said building was just beginning to pick up and now he’s concerned the rise in material prices could curtail building plans.

The budget for a small building he is putting up on the Coast rose 15 percent in 32 days, between Jan. 31 and March 2. He said the price of lumber is up 125 percent since last year and 25 percent since Jan. 1. The price of plaster board also is up, he said, and OSB board went from $7.50 to $13.98.

December 2009 and January and February 2010 were the worst three months for the lumber business in 20 years, said Finley.

Thousands of lumber mills closed or curtailed production during the recession. Just as families dig into their freezer during tough economic times, he said lumber supply stores lived off their inventory over the winter.

When building started to pick up in the spring, “They started digging out of our inventory,” said Finley.

He said the rise in lumber prices isn’t so much the increase in demand as it is the decrease in production at the mills.

“Some companies are running at 20 percent production,” he said. Coming off months of recession, he said the mill owners can’t afford to add staff or significantly increase production as wholesalers buy to replenish inventories.

The earthquake in Chile caused the price of molding and trim to jump 25 percent this year.

“There was very little damage at the mill level,” said Finley.

The port was closed and it took 30 to 45 days to move shipments to the country’s other four ports.

“It really did create a shortage,” said Finley.

He thinks prices of molding will come down slowly by the end of the year.

Molding is among the company’s top products and Finley said it takes 90 days from the date of order to delivery. To get through the shortage, the company had to reach out to secondary suppliers in the United States, some of whom had too much supply after panic buying.

Finley said people don’t realize how much better the construction industry is in South Mississippi than most of the country.

Federal dollars are funding projects across the coast as cities continue to rebuild from Hurricane Katrina. The building boom in the Florida Panhandle after Hurricane Ivan is gone, and he said construction is down from the company’s locations in Loxley, Ala., to Atlanta.

He said in South Mississippi, “We’re actually the crown jewel of the company right now.”

The price of lumber and building remains significantly lower in the South than the rest of the country.

The National Association of Home Builders tracks the average price per square foot of new single family homes. In 2008, a home in the South averaged $80 per square foot compared to the national average of $89. The cost was $87 in the Midwest, $112 in the West and $114 in the Northeast.

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