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 4,500 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 $22 million annually.
- The lumber distribution industry consists of about 4,500 firms that employ 114,000 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
Recent Developments
Sep 21, 2023 - Inventories, Sales, Prices Decline
- Although choppy, lumber distributors’ sales have gradually risen in the first half of 2023, but by midyear, sales were down sharply compared to the same time a year earlier. Meanwhile, industry inventories have gradually moved lower in 2023 and, by midyear, were also down compared to mid-2022 levels. This may suggest lumber distributors are trying to work through inventory that was built up as a hedge against earlier supply chain issues. Producer prices charged by lumber distributors were down significantly in mid-Q3, year-over-year. Lower inventory values and producer prices may be due to lumber prices coming off their pandemic-era highs and weaker housing demand amid elevated interest rates. At mid-year, industry employment and wage growth were down slightly compared to mid-2022.
- Home builder confidence declined in September as high interest rates and materials and labor shortages undermine buyer purchasing power, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), fell five points to 45 in September 2022, which followed a six-point drop in August. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The HMI’s September decline was the first drop in five months. The NAHB said that mortgage rates pushing above 7% are hurting housing affordability. Supply-side challenges - including shortages of workers, materials, and available lots – are also contributing to higher home prices.
- US mortgage applications for new home purchases rose 20.6% in August compared to a year earlier, according to the Mortgage Bankers Association (MBA). New home mortgage applications were up 4% in August over July. The MBA’s Deputy Chief Economist Joel Kan said, “There was strong purchase demand in August for newly constructed homes, as existing for-sale inventory remains low with most homeowners locked into lower mortgage rates and unwilling to give those rates up in this higher rate market.”
- The number of building permits issued for single-family, privately-owned housing units, a demand driver for moving services, increased 2% month-over-month and rose 7.2% year-over-year in August 2023. Single-family housing starts fell 4.3% month-over-month but grew 2.4% year-over-year in August. Single-family housing completions fell 6.6% month-over-month and declined 5.8% year-over-year in August. New home construction continues to be a leading option for would-be homebuyers as high interest rates make many owners of existing homes reluctant to sell, according to Reuters.
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