Lumber Buyers ‘Pay Up or Run Out’ Amid US Homebuilding Surge

With U.S. lumber prices at fresh record highs, construction companies and wood wholesalers are buying just enough to get by, threatening to make price swings even bigger.

Lumber futures in Chicago reached a record $855.10 per 1,000 board feet on Tuesday, having surged more than 30% since Jan. 12. This price surge during what is typically a winter lull has surprised the industry, raising homebuilding costs and forcing many buyers to purchase only their immediate needs. That may filter through to housing prices, while also boosting earnings at lumber companies such as Weyerhaeuser Co. and West Fraser Timber Co.

Record-low borrowing rates and an exodus from major cities triggered a homebuilding spree, with U.S. home construction starts in December reaching the fastest pace since 2006, while lockdowns also spurred demand for home renovations. At the same time, mills couldn’t ramp up fast enough to keep available supplies from drawing down.

Prices on the physical market have largely tracked the rallies in futures prices, with some time lag, signaling higher prices are yet to come for buyers.

While some fear there may not be enough lumber for upcoming spring needs, analysts see signs the market stress will ease as the year goes on. Between 2019 and 2022, roughly 4.8 billion board feet of new capacity is scheduled to come on line in the U.S. South, which is ready to fill demand, said Joe Sanderson, managing director of natural resources at Domain Timber Advisors, LLC in Georgia.,

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