Lumber Futures Fall Most in 17 Months as Output ReboundsJoe Richter
Lumber futures fell the most in 17 months on speculation that North American mills from Texas to Alberta are boosting output.
Lumber soared 44 percent last year as a jump in U.S. housing starts strained supplies following a cut in capacity during the property slump. Mills coming back online are easing constraints, said Steven Chercover, an analyst at DA Davidson & Co. in Lake Oswego, Oregon. Today, futures declined the most allowed by the Chicago Mercantile Exchange for the second straight day and reached a seven-month low.
“Supply is coming back on stream and catching up to demand,” Chercover said yesterday in a report. “Workers are returning to the mills and the timberlands. End-users are minimizing or deferring purchases in order to get what they need cheaper next week.”
About 55.5 billion of the industry’s standard board feet will be made this year, 6.7 percent more than in 2012, CIBC World Markets estimated last month. That marked the fastest pace in six years after the rebound in U.S. housing, a beetle infestation in Canada and increasing Chinese demand drove last year’s rally, the biggest in two decades.
Lumber futures for July delivery declined by the limit of $10 to settle at $277.40 per 1,000 board feet at 1:18 p.m. on the CME, the lowest for a most-active contract since Oct. 10. The commodity fell 3.5 percent, the most since Dec. 12, 2011.
Futures dropped for the sixth straight session. In May, the price has tumbled 21 percent, heading for the biggest monthly decline in three years.
This year, lumber has slumped 26 percent, outpacing 24 raw materials in the Standard & Poor’s GSCI Spot Index, which has declined 3.6 percent. In 2012, the surge in lumber topped the components in the broad gauge.
Housing starts in the U.S. averaged 783,000 a month last year, up 28 percent from 2011.