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Reports of the death of lumber may have been premature

Lumber prices begin to tick higher

In the past few months, I’ve seen far too many charts overlaid with lumber trying to prove that everything is about to collapse.

I can count on one hand the times that I’ve seen anything useful come out of the overlay of two unrelated charts and lumber will be no different.

While lumber has become synonymous with the quickly post-pandemic boom-and-bust in commodities, the bust part doesn’t tell the whole story. Prices are down 63% from the spike but they’re still well-above the 2020 and 2019 troughs.

Now, prices have started to rise again. Thinly-traded futures are up 40% from the September low and the Random Lengths W. SPF prices is up 5.5%. Interestingly, there’s a $130 premium in the futures market over cash.

We get new home sales data at the top of the hour and that could offer some clues. Others are pointing to rebuilding demand after hurricane Ida. Random Lengths also reported that Chinese demand has been delayed as importers wait for Evergrande to clear up before restocking.

Overall, this is another market to watch, particularly for US housing demand. I don’t think we’ve seen the end of the drama in commodity markets, including this one.

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