Lumber Falls as US, Canadian Output Outpaces Housing Demand
Chicago, May 22 (Bloomberg) -- Lumber prices fell to an 18- month low, extending a 20 percent decline this year, on signs that North American mills produced more plywood and planks than the U.S. construction market could absorb.
Production in Western states, which account for a quarter of lumber output in North America, rose 10 percent in the first quarter from the year-earlier period. That expanded a glut at a time when the booming U.S. housing market is beginning to slow.
``Until the major producers decide to curtail production, prices are going to continue to be under pressure,'' said Neal Schmaedick, a lumber analyst with Salomon Smith Barney Inc. in Eugene, Oregon. ``We've heard a lot of talk about curtailments, but haven't seen anything solid yet.''
Lumber for July delivery fell $2.30, or 0.8 percent, to $276.90 per 1,000 board feet on the Chicago Mercantile Exchange, the lowest closing price since November 1998. Prices are down about 18 percent from a year ago.
Lumber output in the 12-state western region of the U.S. totaled 4.77 billion board feet in the first three months of this year, compared with 4.32 billion in the year-earlier period, according to Random Lengths, the Eugene-based provider of lumber industry data.
Canadian Lumber
Production by Canadian mills rose 4.3 percent to 4.81 billion board feet in January and February, from 4.61 billion in the first two months of 1999.
Compounding the supply concern are expectations that the demand for new homes in the U.S., the biggest market for North American lumber mills, will weaken in the coming months as interest rates rise, boosting the cost of a mortgage. Summer typically is the peak period of demand from homebuilders.
In a sign that homebuilding may be slowing, the number of building permits issued in the U.S. through April this year was down 4.2 percent from the first four months in 1999.
``Even the perception of a slowdown can cause lumber prices to decline,'' Schmaedick said. ``People use the wealth effect to buy houses, and the markets have taken a lot of wealth out of the economy.''
May/22/2000 15:16 ET |
