Daily lumber price chart continuous contract for January 24, 2018 (Source: Stockcharts).

Are U.S. Lumber Prices Headed Lower?

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).

Daily lumber price chart continuous contract for January 24, 2018 (Source: Stockcharts).
Daily lumber price chart continuous contract end of day January 24, 2018 (Source: Stockcharts).

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.

Like this post? Have a problem with it? Have other ideas? Please leave a comment below.

TIMBERCHECK™ is a simple way to increase profitability, reduce risk, and build networks of trust in forest product markets. Join.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s