Lumber Wipes Out 2021 Gains As Demand And Prices Drop

Plunging prices have wiped out all the gains this year in lumber.

Lumber had been among the world’s best-performing commodities in the first half of 2021 as the global pandemic sent construction demand soaring and stoked fears of inflation. At one point this spring, lumber futures were trading as high as $1,733.50 U.S. per thousand board feet, more than quadruple the level a year earlier.

However, prices have plunged in recent weeks and at Monday’s close (July 13) are now down 0.6% for the year as demand eases and supply expands in response to earlier gains.

Lumber’s drop is among the most dramatic examples of the easing in commodity prices after rallies in raw materials from copper to corn earlier this year fueled concerns that rising costs would undercut the economic recovery.

U.S. Federal Reserve Chair Jerome Powell recently cited lumber’s decline as evidence that price pressures will cool as supply bottlenecks from the reopening economy are worked out and stimulus fades.

Lumber prices for September delivery fell 5.6% on Monday to $712.90 U.S. per thousand board feet. Prices have declined on rising inventory levels and a significant drop in lumber demand at large retail stores, where do-it-yourself home renovators typically make their purchases.

The market has also shrugged off more than 300 wildfires and rail car gridlock in British Columbia, the centre of Canada’s lumber industry.

Still the current price level is historically high. Since the 1990s, lumber futures have mostly traded between $200 U.S. to $400 U.S. per thousand board feet. Historically high prices for lumber threaten to keep housing costs high in North America for the foreseeable future.