By Tony C. Dreibus - December 31, 2012
May Fall 25% After Leading Commodities in 2012
futures may tumble as much as 25 percent from a seven-year
high as output increases in Canada, the world’s biggest
exporter, according to Forest Economic Advisors LLC.
The price may touch $300 per 1,000 board feet in 2013,
Paul F. Jannke, a principal at the Westford, Massachusetts-based
consulting company, said in a telephone interview on
Dec. 27. In mid-October, he correctly forecast the rally.
Futures on the Chicago Mercantile Exchange on Dec. 26
reached $399.50, the highest since April 2005.
pretty close to the peak,” Jannke said. “The initial
spike tends to be the highest, then production
ramps up. If the mills increase shifts from a
40-hour week to a 50-hour week, that’s a big jump,
and everybody is ratcheting up their work weeks.”
As the U.S. housing market rebounded this year,
lumber prices soared 44 percent, the biggest annual
gain since 1993. That topped the 24 raw materials
in the Standard & Poor’s GSCI Spot Index,
led by a 19 percent rally in wheat futures in
U.S. building permits, a proxy for future construction,
rose to an annual rate of 900,000 in November,
the highest in four years, government data shows.
That helped boost the shares of lumber producers
including Weyerhaeuser (WY) Co. and Plum Creek
Weyerhaeuser’s plants weren’t running at full
capacity this year, and the company may increase
production to meet demand, Chief Executive Officer
Daniel Fulton said on a conference call on Oct.
26. The company is “cautious” on U.S. housing
and prospects for demand in China and Europe,
A leading index for China’s economy rose at a
slower pace in November, signaling limits on a
rebound. Gross domestic product in the third quarter
expanded 7.4 percent, the lowest since the first
quarter of 2009.
the consumer of 10 percent of the world’s softwood lumber,
reduced imports of logs and lumber by 19 percent in
the eight months ended Aug. 31 from a year earlier,
Wood Resources International LLC in Bothell, Washington,
said in October.
Lumber was the top commodity pick for 2013 at Scotiabank
Group because rising demand in the U.S. and China will
strain tight supplies. “Substantial” mill closures across
North America since 2006 set the stage for a multiple-year
recovery, the Toronto-based bank said in a statement
on Dec. 20.
The average cash price of lumber will be $360 per 1,000
board feet in 2013, up from $298 in 2012, Patricia Mohr,
a Scotiabank economist, said in an e-mail on Dec. 27.
Demand from China is ebbing because builders made “regular
purchases” in the second half of 2012, Shawn Hackett,
the president at Hackett Financial Advisors Inc. in
Boynton Beach, Florida, said in a telephone interview
on Dec. 27. Rising production from mills in North America
will drive prices lower in 2013, he said.
“We are heading for a tremendous crash in the lumber
market,” Hackett said. “We’ve gotten way overdone to
the upside. This is the time to be a bear.”
Lumber futures for March delivery fell 2.5 percent to
close at $375.10 at 1:07 p.m. in Chicago. In the fourth
quarter, the price jumped 34 percent, the most in two
Shares of Weyerhaeuser, based in Federal Way, Washington,
rose 0.9 percent to $27.82. They soared 49 percent this
Seattle-based Plum Creek (PCL) gained 1.2 percent to
$44.37. The stock climbed 21 percent in 2012.