Lumber prices have dropped 25% since early August, as uncertainty over tariffs, oversupply, and a slowdown in U.S. homebuilding continue to weigh on demand. In response, major North American producers are scaling back output.

Futures are trading at $522 per thousand board feet, down from a three-year high last month. Spot prices are also falling, with Random Lengths' Framing Lumber Composite Index down 12% since August 1. Analysts attribute the decline to stockpiling ahead of expected duties and a drop in building permits, which fell in July to 1.4 million units, the lowest level since mid-2020.

Interfor, the third-largest lumber producer in North America, plans to cut output by 12% across mills in the U.S. South, Pacific Northwest, British Columbia, and eastern Canada. Domtar is also reducing operations, idling mills in Glenwood, Arkansas and Maniwaki, Quebec.

The U.S. government is weighing new tariffs on imported wood under national security reviews. Meanwhile, antidumping and countervailing duties on Canadian softwood lumber, responsible for 24% of U.S. consumption, rose in August to 35%, up from 15%. Canadian producers stockpiled in anticipation, but analysts told WSJ that inventories now exceed projected demand for the fall.

U.S. construction spending fell 3.4% in July from its record high in May 2024. Lower borrowing costs could eventually support new construction and home improvement, both major drivers of lumber demand. Mortgage rates have eased in recent weeks, but traders expect further production cuts unless demand improves.