Lumber futures skyrocket

Friday 21 May 2021

There is a construction boom taking place around the world, as governments look to build themselves out of the pandemic's economic woes.

Key points:

• Iron ore and Lumber Futures hit record highs this week
• Timber supplies in Australia are very low and imports are falling
• The federal government's HomeBuilder Scheme is said to be putting 'extreme pressures' on building supplies

It has pushed the price of building-related commodities through the roof, with timber and iron ore — which is used for making steel — hitting record prices this week.

Lumber futures skyrocket

Last week, lumber futures in the US broke a record, surging beyond $US1,700 per thousand board feet for the first time, a meteoric rise for a commodity that was sitting below $US400 this time last year.

The rocketing price is being driven by America's housing boom but also appears to have accelerated in recent weeks as investors pile in. Activity on the futures market has lumber's price chart looking more like a cryptocurrency than wood.

According to the US National Association of Home Builders, the soaring lumber price could add an extra $US36,000 to the price of building an average single-family home.

What about Australia?

Timber prices in Australia are also up this year but for a variety of reasons. Independent forestry consultant Rudolf van Rensburg said Australian softwood prices had increased between 5 and 15 per cent.

"Australia faces a situation where there hasn't been any significant expansion of the softwood plantations since the 1990s, so the supply from current plantations is fairly static and demand is increasing with a rising population," he said. "What is also exacerbating [the price] is a scarcity in imports.

"With lumber prices in the US being very attractive, exporters are focusing on that market ... and with freight [shipping] rates very high, it's making the distant Australian market less attractive." Mr Rensburg said Australia traditionally imported about 20 per cent of its timber needs.

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Source: ABC

To get your head around exactly what the shift in lumber pricing means, check out the image below sent in by one of our readers this week. It shows what you would have got in the form of housing one year ago if you’d spent $50k on lumber compared to today.





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