Lumber Distributors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 4,600 lumber distributors and wholesalers in the US act as middlemen between suppliers, retailers, and builders. Companies purchase stock and custom-ordered materials from sawmills, plywood and engineered wood product manufacturers, importers, and foreign suppliers and resell them to retailers, builders, lumber yards, and manufacturers. Firms may also provide engineering services or product modification such as cutting or planing wood to specified sizes or thicknesses.

Demand Tied to Residential Construction

Demand for lumber is largely tied to residential construction spending, which is cyclical and influenced by economic conditions.

Fluctuating Lumber Costs

The prices that manufacturers charge for wood products can fluctuate significantly and rapidly, driven by variability in underlying commodity costs.

Industry size & Structure

The average lumber distributor employs 24-25 workers and generates $21 million annually.

    • The lumber distribution industry consists of about 4,600 firms that employ 113,000 workers and generate about $98 billion annually.
    • Plywood, veneer, millwork, and wood panel wholesalers account for 60% of firms and 49% of revenue. Lumber distributors account for 40% of firms and 51% of sales.
    • The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for 50% of industry revenue.
    • Only 1.5% of firms earn $100 million or more annually; those firms account for 29% of industry sales.
    • Large firms include BMC/Builders First Source, Forest City Trading Group, US LBM. Some of the largest firms, like Rex Lumber, still operate regionally.
                              Industry Forecast
                              Lumber Distributors Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 30, 2022 - Rising Interest Rates, Inflation Reduce Housing Affordability
                              • US housing affordability fell to its lowest point since the Great Recession in the third quarter of 2022 amid rising mortgage rates, inflation, low housing inventory, and high home prices, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). Only 42.2% of new and existing homes sold between July 2022 and the end of September were affordable for households with a median income of $90,000. The third quarter of 2022 marked the second consecutive quarterly record low for housing affordability in more than 10 years. According to the HOI, the median home price in Q3 2022 was $380,000, down from the all-time high of $390,000 set in Q2 2022.
                              • The number of building permits issued for privately-owned housing units decreased 2.4% month over month and declined 10.1 year over year in October 2022. Housing starts fell 4.2% month over month and decreased 8.8% year over year in October. Housing completions fell 6.4% month over month but rose 6.6% year over year in October.
                              • US mortgage applications for new home purchases fell 28.6% in October compared to a year earlier, according to the Mortgage Bankers Association (MBA). New home mortgage applications were down 13% from September. The 30-year conforming rate for mortgages hit 6.81, marking the highest rate since 2006. The MBA’s Chief Economist said, “New home purchase activity weakened on a monthly and annualized basis in October, as the sharp jump in mortgage rates to nearly 7% reduced both overall demand and the purchasing power for many prospective buyers.”
                              • High interest rates, inflation, and lack of affordable housing inventory have put downward pressure on lumber demand. In March 2022, lumber futures were trading around $1,477 per thousand board feet, according to Random Lengths. Since September, prices have hovered between $400 and $567. In late November, lumber futures were trading at $425. Industry watchers suggest lumber futures will likely remain stagnant until conditions hindering housing demand improve. However, the consumer price index (CPI) rose 0.4% in October from September and was up 7.7% from a year earlier, both lower than many economists expected, according to CNBC. If signs point to easing inflation, it could prompt the Fed to back off its strategy of increasing interest rates which could positively impact housing affordability and lumber demand.
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