High timber prices will last for the ‘foreseeable future’, says executive
A lumber industry veteran told CNBC on Thursday that he expects the warm lumber market to persist, at least for a few more months, keeping prices and volatility high.
“We believe this cycle we’re in right now … is here for the foreseeable future,” said Kyle Little, chief operating officer at Sherwood Lumber, a New York-based private wholesale distributor. He is also a former timber trader.
“That’s not to say we’re not going to trade these latest highs,” Little said in an interview with “The Exchange,” referring to May 10, when lumber hit a record high of $ 1,711 per thousand feet. -board.
“But the lows will tend to be much, much higher than they were in the past due to the lack of supply and the high rate of demand in the market,” he said.
Little said his perspective was informed by research his company conducted late last year, analyzing seven previous bull cycles in wood over the past 35 years. They ranged from nine months to 41 months, he said, with the average being between 18 and 24 months.
He said the current boom was in roughly its eleventh month, sparked in part by a pandemic-related surge in home construction that caught home builders and lumber producers by surprise.
“Volatility is everywhere and we expect it to continue to be that way in the lumber business,” Little said.
The Chicago Mercantile Exchange has a maximum price range, known as the upper and lower limit, within which futures contracts for various commodities are allowed to trade in each session.
Lumber futures for July delivery rose 4.75% on Thursday, hitting the session limit at $ 1,390 per thousand board feet.
Thursday’s action follows a mad session a day earlier, in which wood futures hit the limit and then hit the limit later today.
There has been some question as to when soaring lumber prices, which add to construction costs, would start to cause demand to slow. Recent data showed that in April, single-family home starts fell by more than 13% from the previous month, and the cost of lumber and other products was seen as one of the factors in the decline. slow-down.
For Sherwood Lumber, Little said that “one of the key metrics we look at specifically to measure near-term demand and pace of sales is to look at our current shipments versus our actual pace of sales.”
Over the past six months, as the lumber market has warmed, sales versus shipment rate have accelerated to more than “double and triple the amount,” he said. But that has changed recently.
“We have seen a decrease from the peak we saw at the end of April of around 27% over the past two weeks,” he said. “It looks like we’ll see a similar reduction this week as well.”