Lumber prices have fallen to the lowest in over nine months, as demand from homebuilders stabilizes and sawmills boost production output.
Lumber futures on the Chicago Mercantile Exchange plummeted to around $500 for the upcoming September contract, marking the lowest since November 2020, as prices fell by nearly 70% since their record peak in May.
The sharp decline marks a sudden reversal in the skyrocketing trajectory of building material costs, as demand in the construction and home renovating sector forced lumber supply to significantly tighten. Since May’s peak, though, sawmills have been able to relieve some of the output constraints, while supply bottlenecks for other building materials, such as windows and siding, have forced the overall pace of construction activity to slow.
“While most of the wood out there today is pegged for a job site, the slowdown keeps it all backed up,” RCM Alternatives analyst Brian Leonard explained to Bloomberg. “The industry has to work through that issue before it goes back to the mills to buy. That is forcing the mills to lower prices daily to get rid of prompt wood.”
Information for this briefing was found via the CME and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.