On Monday, April 11, Lumber futures (LB1: COM) fell by 8.4% to $870 per 1,000 board feet, hitting a new four-month low.
The decrease represents a continuation of the March trend for lumber, which plummeted by almost 30% from the beginning of the month.
In late 2021 the Covid pandemic and British Columbia floods pressured supply chains and disrupted production at sawmills which finally recovered easing some of the supply concerns. It is predicted that tight lumber supplies will no longer be an issue for the markets.
Currently, the lumber price is hovering around levels experienced in early December of 2020.
Home renovation suffocated
One of the larger market segments for lumber is the do-it-yourself (DIY) market which apparently consumes 40% of lumber. In the U.S. Home Depot Inc. (NYSE: HD) and Lowe’s (NYSE: LOW) cover most of the inventory needs for this market niche.
It is expected that supply and demand should come into balance in May as lumber is usually a seasonal commodity, as DIY market segment receives a boost during springtime.
Stockpiles are also full at sawmills, with a reduced number of railcars, “producers are sitting on a lot of inventory because they can’t ship the stuff,” said Mark Wilde, an analyst with BMO Capital Markets.
Rising energy prices might also affect lumber, especially in Europe once winter towards the end of 2022 rolls around. High oil prices and gas imports which are increasingly being diverted from Russia, due to their aggression on Ukraine might introduce wood as a fuel source in numerous Euroupean households.
Tracking inflation will have to be more sophisticated in the new environment of geopolitical issues cuased by the Rusian-Ukraine war. Seasonality in lumber could now be more affected by rising energy prices and the fact that DIY niche could be further pressured by inflationary forces.
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