(Bloomberg) -- U.S. lumber futures jumped almost 8% to the exchange-imposed limit on concern that damage from Hurricane Ida will hinder deliveries in the U.S. South just as some North American mills pull back on production.
The November lumber contract shot up 7.9% to $576.20 per thousand board feet on the Chicago Mercantile Exchange.
The surge extends a tumultuous year for lumber, which at one point was among the best-performing commodities as a pandemic-fueled construction boom drove demand. After reaching an all-time high in May, the common building material tumbled through mid-year as mills ramped up output. It has recouped some of those losses in recent weeks as producers slow the pace.
“It is a combination of Ida and all the announcements of slowdowns in production coming from the western mills,” that drove prices on Thursday, said Brian Leonard, an analyst with RCM Alternatives in Chicago. “There had been a tempered reaction to any production news over the last few weeks, but reports of new transportation and production issues throughout the South has sent the shorts for the exits.”
Prices are still well below the record high of $1,733.50 reached in May, when low inventories and strong homebuilding demand spurred prices and raised housing costs.
Lumber being transported by truck in the U.S. South is either getting tied up or redirected following the hurricane, Leonard said. More producers in the western part of the U.S. and Canada -- where sought-after wood such as spruce and fir are processed -- have slowed output at sawmills, he said.
“More buyers were convinced that the market had bottomed and did their best to buy in yesterday,” William Giguere, who buys and sells eastern spruce with mills for Sherwood Lumber in Massachusetts, said in a note.
“The futures market continued to trade at a considerable premium to the cash market adding credence that current purchases are worth the attention and focus.”
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