In July last year this column wrote that one of the more bullish-looking commodity price charts was that of lumber.
Too true. With a bit of help from the Trump trade the wood has been among the best performers in the resources sector this year.
US lumber prices this week hit their highest price since the start of the housing market crash that triggered the global financial crisis.
Random length lumber futures trading on the Chicago Mercantile Exchange at one point on Monday touched $414.6 per thousand board feet.
That was the most expensive since February 2005 when new home sales in the US were around 1.3m.
The latest figure is less than half that, but demand is expected to improve.
Consumers are optimistic, demographics are supportive — analysts believe the millennial buyer will soon be entering the market with some gusto — and with bond yields still not far above historic lows, mortgage rates are cheap.
In addition, the spring is when homebuilding tends to pick up as the weather improves.
Then there is the two-part Trump effect. First, traders are wary that should the president’s mooted infrastructure boost come to pass then it may ratchet up lumber demand.
Second, President Trump’s desire to renegotiate Nafta could result in lower lumber imports from Canada, with the likely impact of pushing up domestic prices.
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