Lumber slumps to seven-month lows as housing market bears brunt of rate hikes
PaulGrecaud/iStock via Getty Images
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.
ETFs: (NYSEARCA:XHB), (NASDAQ:WOOD), (CUT), (NAIL)
Potentially relevant tickers include (WY), (WFG), (LPX), (PCH), (RFP), (OTCPK:CFPZF), (OTCPK:IFSPF), (OTCPK:WFSTF)
"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.
Recommended For You
Comments (32)
Think about it. The ones who are going to hurt are the manufacturers. HD will do good, WY and others will drop
That’s a bold prediction. I think it’s more likely housing hits a wall, and with the pent up projects long gone as well, we will see $300-350 at the bottom on the cycle in the next 6-18 months. Longer term, $400-500 may be the new norm, if the input costs stay high (especially).What is the basis for your prediction?
People mention costs haven't come down or been passed onto the retail end. Would you sell at a loss or try to keep margin as high as possible for as long as possible?
Only way costs are going down is if demand stays down or competition kicks in. I don't plan on lowing my costs unless I lose sales, then I know others are lowering their prices.
BTY, this goes for gold and silver. Two years ago their prices were down but try buying at that time and Kitco and JM were saying no stock. They really meant they didn't want to sell coins and bars at a loss on inventory they had paid a higher cost on
