Lumber Extends Rally to Five-Week High on Demand Gains, BeetleWhitney McFerron
Lumber futures extended a rally to a five-week high in Chicago on signs that demand is increasing in the U.S. and China while an infestation of beetles threatens to cut supplies from Canada.
Prices have climbed 13 percent in the last six sessions on the Chicago Board of Trade, after rallying 44 percent last year as Commerce Department data showed the U.S. built the most new homes since 2008. China’s new home prices rose in December in the most cities in 20 months, the statistics bureau said Jan. 18. Mountain pine beetles killed more than half of the pine inventories in British Columbia, Canada’s biggest lumber province, between 1998 and 2011, according to the government.
“There is the strong increase in U.S. construction, Canada shipping volumes to China and problems in raw material supplies, especially in British Columbia,” Lars-Goran Olsson, the president of Woodstat, a forestry analysis company in Jarfalla, Sweden, said today in a telephone interview. “Altogether if we are looking forward, the market for softwood lumber is going to be stronger and stronger.”
Lumber futures for March delivery rose 2.2 percent to $387.40 per 1,000 board feet by 7:43 a.m. in Chicago. The price earlier rose to $389, the highest for a most-active contract since Dec. 28. Trading volume was 286 percent higher than the average of the past 100 days at this time of day, according to data compiled by Bloomberg.
China is the world’s biggest importer and exporter of wood products by value, while Canada ranks third as the largest shipper after Germany, according to the International Trade Centre, a Geneva, Switzerland-based joint agency of the World Trade Organization and United Nations. China purchased $15.86 billion in wood products in 2011, up 41 percent from a year earlier. Canada’s exports were worth $9.16 billion.
China’s log prices rose to a record in the fourth quarter, spurring a 26 percent increase in imports from New Zealand and the U.S. during the second half of 2012, compared with the first six months, according to Seattle-based Wood Resources International.
Lumber production in Canada fell 5.8 percent in November from October, Statistics Canada said Jan. 31. Mountain pine beetles killed more than 710 million cubic meters of British Columbia pine from 1998 to 2011, and about 1.3 million hectares of forest in Alberta have been affected by infestations since 2001, according to the State of Canada’s Forests annual report put out by Natural Resources Canada.