Wood Prices Plunge 40%... Still Twice as High as Pre-Corona Levels

Giving Back Gains in a Month
As US Economic Reopening Becomes Visible, Travel Increases Instead of Home Remodeling

[Asia Economy Reporter Kim Suhwan] Lumber prices have plummeted by more than 40% this month alone, giving back most of the gains made earlier this year. Analysts suggest that lumber prices have turned downward as signs emerge that housing remodeling demand is cooling ahead of the reopening of the U.S. economy.

On the 30th (local time), lumber futures prices on the Chicago Mercantile Exchange (CME) closed at $737.40 per 1,000 board feet (bf).

This represents a drop of more than 40% in just one month, returning most of this year's gains. Based on monthly changes, this is the largest decline since 1978.

Previously, lumber prices had rallied due to a surge in U.S. housing remodeling demand.

In May, prices had risen to six times the level of April last year, which was the lowest point during the COVID-19 pandemic.

The reason behind the reversal in lumber prices is interpreted as the reopening of the U.S. economy becoming more visible, leading to increased travel demand ahead of the summer vacation season instead of housing remodeling.

Brad McMillan, Chief Investment Officer (CIO) of Commonwealth Financial, said about the lumber price plunge, "It shows that inflation caused by demand and supply imbalances is not permanent," adding, "As suppliers focus on expanding supply, the raw material shortages are gradually being resolved, and the lumber supply shortage appears to be easing."

However, some argue that the decline in lumber prices has not completely dispelled concerns about raw material inflation.

Peter Boockvar, CIO of investment advisory firm Bleakley Advisory, emphasized, "Lumber prices still remain at twice the pre-COVID-19 levels," and "the inflation risk has not completely disappeared."

Boockvar also pointed out concerns over the CRB index, an international commodity price index, which recently hit its highest level since 2011.

Additionally, the continuous rise in U.S. housing prices has not alleviated inflation worries.

As of April, the U.S. Housing Price Index (S&P Case-Shiller) surged 14% compared to last year, marking the largest increase in 30 years.

CNBC reported, "While lumber prices have fallen, they remain significantly higher than pre-COVID-19 pandemic levels," noting that lumber still contributes to rising housing prices.