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The price of timber has plummeted from the peak of the epidemic. According to Joshua Mahony, a senior market analyst at the IG trading platform, timber prices will rebound by 65% by the end of 2021.

As of Friday (July 30), lumber futures prices hovered around US$603 per thousand board feet, 64% lower than the record high of US$1711 set in May. A year ago, the commodity was traded at approximately US$448 per thousand board feet.

Timber prices, which have continued to fall, finally slowed down the downward trend last week. However, market trends will not change immediately. Market dealers actually control the current market initiative, and sawmills facing the off-season sales in summer can also accept current market prices for the sake of maintaining market shipments.

But according to Mahony, with the passage of the US$1.2 trillion bipartisan infrastructure agreement in Congress, near-zero interest rates have led to continued housing price increases, and seasonal historical trends, timber prices are likely to rise again as high as 1,000 per thousand board feet. Dollar.

Most of the infrastructure plan will be used to build roads and bridges, which will undoubtedly stimulate the demand for construction materials including wood. Most importantly, many Americans continue to build new houses or renovate existing houses. Despite rising housing prices, low interest rates, consumers' attention to the importance of housing, and strong demand in low-density markets such as suburbs and outer suburbs continue to support residential demand.

How long will this price last? For the North American timber market, although prices in the futures market have fallen by 64%, the price paid by builders in the end market remains high due to the potentially huge difference between the dealer’s inventory holding cost and the inventory buying and selling price. In the short term, the price level of terminal houses cannot be effectively improved.

The senior analyst also pointed out that there are seasonal factors behind his forecast.

Mahony said that the last quarter of the year is usually an "active" period for timber. In the past 12 fourth quarters, timber prices increased in 9 quarters, while the decline in the other 3 quarters was small, less than 5%.

"There are good reasons to believe that the decline in recent months may soon bring another major buying opportunity, allowing the bulls to regain the dominant position." He said.

Mahony believes that the fact that the gains were erased in the first half of this year is also "not unusual."

Mahony said, “Historically, this reversal will lead to a bullish reversal, regaining lost ground, and turn the situation positive before the end of the year. The current pullback is actually part of a seasonal trend, which usually appears dramatic towards the end of the year. Recovery."