The price of random length lumber in the United States reached an intraday high of $482.90/mbf last Friday, January the 19th (continuous contract).
Unlike previous lumber rallies in which lumber prices spiked above $400/mbf only to sell-off, this market has managed to stay above $400/mbf for more than 4 months.
The market has been so strong that it managed to rise roughly 8% to it’s monthly high in January, a time period in which lumber prices have typically swooned nearly 5% in recent years.
But how long can this price strength last?
Looking at key factors causing lumber prices to soar over the past year, some of these variables may already have had their effect and no longer provide a tailwind.
For example, the effect of protective trade policies may buffer any additional effects from a weaker US Dollar.
And while the U.S. housing market may continue to need new houses just to keep up with population dynamics, new headwinds are growing, specifically in the form of rising interest rates.
New home sales fell 9.3% in December to a seasonally adjusted rate of 625,000 units versus the expected rate of 675,000.
As the median sales price for new houses sold in the U.S. continues to climb to an all-time high of $335,400.
Are U.S. lumber prices headed lower? Of course, no one has the answer to this question, but the risk of a lumber price correction in the near-term appears to be significant.
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