Lumber Price Prediction: Is the Boom Back?

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Dec 22, 2021
  • Lumber price is back on upward momentum amid heightened demand.
  • Heavy rainfall in British Columbia has impacted supply.
  • Prospects regarding interest rate hikes in the coming year are also at play.

Lumber price will likely not threaten the all-time high set in 2021’s first half. But then again, prior to the coronavirus pandemic and subsequent lockdowns, the futures had never hit $1,000 per thousand board feet. Notably, investors and analysts alike are expecting it to record significant gains into the winter season. The trend is often observable prior to the spring building season.

To begin with, the floods experienced in British Columbia have made it difficult for sawmills in the region to get the product from the forests and reach the customers. Output within the Canadian province has decreased since last month when heavy rains washed out railways and roads.

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Prospects of interest rate hikes cooling the current hot housing market have further boosted lumber demand. Earlier in the year, skyrocketing lumber price was at the center of inflation talks. It was one of the scenarios sited to counter the Fed’s assertion that the inflationary pressures are transitory.

Builders are are of the opinion that the cycle is coming to an end. As such, they are striving to complete their projects before the expected interest rate hikes in the coming year. Higher rates will result in increased borrowing costs for home buyers. Subsequently, they may not be able to meet the price hikes that builders have imposed to offset the soaring construction costs.

Lumber price prediction

After hitting its all-time high at 1,735.4 in mid-May, lumber futures plunged to the lowest level year-to-date at 461.4 in mid-August. Within that timeframe, the price had dropped by about 73.47%. Even with the subsequent rebound, it remained below the psychologically crucial level of 1,000 since declining past it in mid-June. However, about two weeks ago, the ongoing rally boosted lumber above this zone. However, it extended its losses past 1,000 on Tuesday.

At the time of writing, lumber price was down by 4% at 985.2. On a daily chart, it is trading above the 50-day EMA and slightly below the 25-day EMA. Besides, it has formed a rounded bottom; which usually occurs at the end of a downtrend and signals a probable price reversal.

Based on both the fundamentals and technicals, the commodity will likely be on upward momentum in the short term. Nonetheless, I expect the rallying to be milder compared to the one observed in the year’s first half.

in the ensuing sessions, the psychological zone of 1,000 will be a crucial one for lumber price. A pullback past its current level will have the 25-day EMA at 936.0 and 50-day EMA at 843.7 as viable support levels. On the flip side, a move above last week’s high of 1,143.6 could pace the resistance level at 1,264.2.

lumber price
lumber price
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