The price of lumber is going up. In fact, it has eclipsed the highs set back in 2008.
This startling bull market in lumber is being driven by a number of themes. First of all, the U.S. real estate sector has slowly and steadily come back off its lows.
Still, due to the great recession, there remain some 5 to 6 million houses that weren’t built. Latent demand is huge as wages are creeping up as well. Some expect a surge of building over the next three years to peak at 2 million houses a year by 2020.
Second, the winter in North America has been extremely warm and without storms which has elongated the building season. There has also been a historic, first quarter reload in inventory.
The market has also speculated that some Canadian producers have begun to prepare for anti-dumping laws, which they expect to be retroactive 90 days, and have been raising prices to compensate for that possibility.
On top of this, and in line with the cyclical nature of commodities, mills are running at near capacity. Hundreds of lumber mills from Maine to Oregon, to British Columbia have closed over the last 9 years and there will be capacity limitations this year.
All of this is a net positive for lumber stocks, none of which have yet caught the market’s interest. I’m writing about my favorite, low-cost lumber producer in this month’s Bubble and Bust Report. It could easily be a 300-400% gainer by 2020.
All best,
Christian DeHamer
BBR
