- The lumber future prices have broken all previous records, trading at a life-time high in the range of US$1600 as of 6 May 2021.
- The global supply shortages are pushing the market to new highs.
- Increased lumber prices will impact house affordability as the cost of new homes will increase significantly.
Lumber future prices are trading at record levels on the NASDAQ. The index is trading at its life-time high and is forecast to move further following the recent trend.
The global shortage of forestry products has skyrocketed the physical price of lumber, which has moved more than 30% this year alone. In the last one year, the lumber prices have soared nearly 280% to reach US$1,359 per thousand board feet.
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The staggering high prices of lumber are also influencing the prices of new homes. The supply shortages and high demand for new projects for summer are boosting the prices. Many analysts believe that it is the panic that is triggering the high prices, which are expected to go up in the near term as no new supply is expected to fill the void.
The US Federal Reserve decision not to alter the interest rates is also adding to the woe. The lower interest rates after the onset of the pandemic have driven the housing market.
At the peak of the pandemic, the sawmills halted their production and emptied their inventory. People living in quarantine and social distancing got encouraged to start on house projects, thus rushed to house building material shops. The lower borrowing rates have also sparked the demand for new homes.
The sawmills were not ready to meet such a surge in demand, thus creating supply shortages - now reflecting on lumber prices.
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Data from the US-based National Association of Homebuilders reveals that the prices for lumber have tripled in the last one year. The surge in the prices have also pushed home prices by thousands of dollars. The association has urged the US President to end the tariffs on Canadian lumber imported in the country to ease the prices.
Given that backdrop, let us discuss a few of the ASX-listed stocks which deal in forestry products.
Big River Industries Ltd (ASX:BRI)
Big River is an integrated timber company engaged in the manufacturing and distribution of timber and building products. The Company controls the domestic business through its regional sales and distribution offices across Australia.
In the last three months, BRI has yielded a handsome return of 17% to its shareholders along with a dividend of A$0.026 per share. The shares of BRI closed the day’s trade with a gain of 4% at A$1.8 on 7 May 2021 with a market cap of A$139.48 million.
Kangaroo Island Plantation Timbers ltd (ASX:KPT)
Kangaroo Island Plantation Timbers is engaged in hardwood and softwood forestry products. The Company operates from the Kangaroo Island in South Australia. The Company is working on an export facility at Smith Bay Wharf.
The shares of KPT traded flat at A$1.1 on 7 May 2021 with a market cap of A$62.05 million.