Lumber Prices at All-Time High; Here’s Why

Written by: Faith Maina
April 20, 2021
  • Lumber prices are at an all-time high at $1,326.7; up by about 164% over the past 6 months.
  • The surge results from the heightened demand triggered by COVID-19 pandemic.
  • The demand is likely to continue as the US economy continues on a stable path to recovery.

Lumber prices are at an all-time high amid heightened demand triggered by the coronavirus demand. On Tuesday, it was up by 2.47% at 1,326.7.

lumber prices

Pandemic-driven Demand

Lumber price are at the highest they’ve ever been as the demand skyrockets. For instance, the 2by4-inch wood has had its price rise by more that three times. Plywood and other wood products used within the housing industry have also become more expensive.

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Granted, commodities ranging from copper to crude oil and corn have been on an uptrend for months as economies recover. However, for those keen to invest in commodities, the rallying of lumber prices beats that of any other asset.

When the coronavirus pandemic hit in 2020, the US housing sector became one of the worst-hit industries. For instance, housing starts were at a 5-year low in April 2020 at 0.891 million. Subsequently, a significant number of US lumber mills closed down as futures dropped to the lowest level since 2016.

However, the demand soon rose as individuals sought to improve their houses. Besides, entertainment joints established outdoor accommodations in an attempt to adhere to the safe-distance measure. With the low mortgage rates, the demand for suburban housing also rose. With the recovering economy, lumber prices are likely to continue benefiting from the high demand.    

Lumber Prices Technical Outlook

Lumber prices are at an all-time high following the steady rise in demand. Over the past 6 months, they have surged by about 164%. On Tuesday, the futures were up by 2.47% at 1,326.7 after moving past the 1300 mark in the previous session. On an hourly chart, the price is above the 25 and 50-day exponential moving averages with an RSI of 84.

While lumber prices are likely to fall in the long run, I am of the opinion that the rally will continue in the short term. It will probably trade sideways in the ensuing sessions before soaring further. From that perspective, the product will find support at 1300 as the bulls eye the next targets at 1400 and 1500. On the flip side, a move below 1300 will place the next support level at 1200.