Lumber futures have fallen to levels not seen since November, in a stark reversal from all-time highs set last year during the COVID-fueled homebuilding boom.
Chicago lumber futures (LB1:COM) for July delivery fell on Wednesday by the exchange maximum $49, or -7.5% to $604.50 per 1,000 board feet, extending this year's slump to 46% and nearly two-thirds below the peak of $1,733 per $1,000 board feet from about a year ago.
"Lumber markets are probing for a floor," Kevin Mason, managing director of ERA Forest Products Research, told Bloomberg, citing plunging home sales and higher interest rates, adding lumber prices may fall to $400 per 1,000 board feet in the next two months before producers curb production to remove excess supply.
Sales of newly built homes plunged 16.6% in April from March to the lowest level since April 2020, at the height of the COVID lockdowns in the U.S., and the biggest drop in nine years.
Lumber buyers have slowed orders and wood is piling up at mills, which are weighing on prices, pricing service Random Lengths said, according to The Wall Street Journal.
But barring a recession, Matthew Saunders of John Burns Real Estate Consulting told WSJ that he does not expect lumber prices to fall all the way back to pre-COVID levels, which rarely exceeded $500 per 1,000 board feet, due to the many problems in Canada's western forests, where mills have struggled with fires, floods, high prices and hard-to-get timber.
Canfor (OTCPK:CFPZF) said last week that its Canadian sawmills have been operating at ~80% of production capacity since late March, and will continue reduced operating schedules due to ongoing global supply chain challenges.