Vanishing Profit Margins Due to Rapidly Rising Lumber Prices

Vanishing Profit Margins Due to Rapidly Rising Lumber Prices

July 3, 2013

You may have recently noticed lumber prices on the rise. Lumber prices have risen $105-$115 per MBF in the last two months, and are expected to climb another $40-$50 MBF in the next two months. Many companies have bid jobs or have priced products many months ago and are now faced with the fact that they cannot raise prices.

Many companies feel that they have worked so hard to be awarded a job or an order that they hate to go back to renegotiate with the customer. The feeling is,  "I will make it up on the next order." Unfortunately, many times there is not a repeat order.

As a result, a company is often working at a loss and cutting into valuable reserves. It is critical that manufacturers pay constant attention to their raw material prices.

At WPMA we are hearing from many companies that have been "holding on, waiting for the economy to finally rebound", and now realizing they have been bleeding more than expected and must close their doors. As difficult as it is, it is often better for a company in the long run to decline an order rather than jeopardize the long term financial stability of their business.

Our association constantly works to help members run their business in a profitable manner. At WPMA we suggest performing a thorough review of their lumber and raw material costs. With razor thin margins it does not take many jobs that lose money to bankrupt a company. In our July newsletter, we have a detailed breakdown of price increases by species to help companies with their costing structure. This is one of the many services we offer to help a company remain competitive in today's global economy.

For more information contact us at 978-874-5445 or via email at woodprod@wpma.org