LLumber prices continue to climb, supporting sawmill owners and exchange traded funds linked to the lumber industry.
As lumber prices hit record territory last week, lumber industry sawmill owners like Weyerhaeuser Co. and Canfor Corp. are expected to generate even larger profits than the record profits they reported for the first three months of 2021, the the Wall Street newspaper reports.
Sawmills have become the main beneficiaries of the recovery in the timber market. Companies are capitalizing on a glut of inexpensive pine trees in the southern United States. Meanwhile, demand for finished products like lumber and plywood has jumped amid the recent boom in the housing market and renovation activity.
“Builders are having record home sales and they’ll need this lumber to build those homes,” said Eric Cremers, general manager of PotlatchDeltic Corp.
Lumber futures for delivery in May are now hovering around an all-time high and around four times the typical price for this time of year. Additionally, lumber futures have reached their maximum daily price change allowed by the Chicago Mercantile Exchange for nine of the last 17 trading sessions.
“The nervousness on the part of many traders was palpable as they considered what the downside of the race might look like,” Random Lengths said in its weekly report.
Random Lengths noted that prices for two-by-fours and other wood products have also reached record highs. Without any alternative, traders have ceded high prices to heaven. Factory owners highlighted their saved orders which stretch through June.
“In the absence of a significant increase in mortgage rates or a resurgence of Covid, it is difficult to imagine what could lead to lower demand for lumber and moderation in prices for the foreseeable future. “said Cremers.
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