Wood products markets don’t react to hurricanes like they used to
Hurricane Katrina caused historic damage and jolted the wood products markets, which contrasts with the recent Hurricane Ian
Veteran panel traders will attest that wood products markets don’t react to major hurricanes like they did decades ago, and Hurricane Ian is the latest example.
The Category 4 storm slammed into the Florida coast in late September and wreaked havoc along the Eastern Seaboard. Structural panel prices, however, were flat to down in the hurricane’s aftermath. That was in stark contrast to the market’s reaction when one of the country’s most memorable storms roared ashore in 2005.
A very costly hurricane
Hurricane Katrina will long be remembered as one of the most devastating storms to make landfall in the U.S., causing over 1,800 deaths and $125 billion in damage in late August 2005.
At the time it was the most costly hurricane on record, and is now tied with Hurricane Harvey, which hit in 2017.
Louisiana and Mississippi were hit hardest by Katrina. Flooding in and around New Orleans caused most of the loss of life. Eventually, 80% of the city as well as large tracts of neighboring parishes were inundated for weeks. Timber damage from the hurricane-force winds was most severe in Mississippi.
As traders began to assess the devastation left in the wake of Katrina in 2005, wood products markets reacted strongly.
The September 2, 2005 issue of Random Lengths reported: “Panic buying of lumber and structural panels in the wake of Hurricane Katrina continued through Friday, with veteran traders of the panel market conceding they have never seen such emotion engulf trading.
Hefty double-digit gains were posted in many commodity lumber prices, while some Southern Pine plywood and OSB items closed the week with gains of as much as $75-100.
Numerous sawmills and structural panel plants were knocked offline in Louisiana and Mississippi by the storm, and huge volumes of lumber and panels were destroyed at the ports along the Gulf of Mexico.
Transportation problems would extend for weeks, and even months in some areas, as highways and rail lines faced extensive repairs. All Class 1 rail carriers put indefinite embargoes on shipments to New Orleans, Gulfport, and Mobile.
The Random Lengths Framing Lumber Composite Price stood at $355 prior to Katrina’s arrival, and posted increases for the next four weeks, rising to $405. Over the following six weeks it would lose all of those gains and revert close to pre-Katrina levels.
Volatility was more apparent in structural panel prices. The Random Lengths Structural Panel Composite Price was at $361 prior to Katrina, but jumped to $524 over the next five weeks. Like lumber markets, panel prices began to erode in October and fell for eight consecutive weeks, reverting to $361 by Thanksgiving.
Southern Pine timber damage caused by Katrina was massive, but highly variable. Mississippi absorbed the most damage, with more than 3 billion board feet of sawntimber valued at $2.3 billion blown down. Louisiana estimated its timber damage at more than $1 billion, while Alabama’s damage was estimated at $56 million.
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