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Lumber Futures Continue Downward. Starts Need To Pick Up

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United States Of America – Lumber futures continue on a downward trend as transportation bottlenecks that sparked an early rally during early March begin to ease. Chicago lumber futures fell towards $950 per thousand board feet Tuesday, a level not seen since early February.

Exceptional pricing for the start of a busy season with a tremendous accumalting backlog of homes.

Flooding in British Columbia disrupted the transportation network and supplies in late 2021, but output volumes at sawmills have recovered from such constraints due to better spring weather, alleviating supply concerns after months of tight inventories.

Furthermore, rising mortgage rates should help to cool the overheated US housing market.
New home sales in the United States fell for the second month in a row, surprising markets that expected them to rise.

Lumber is now overstocked at lumber mills in both Canada and some areas of the United States. As we enter the busy construction starts season The United States Of America’s backlog of homes has continued to compound as home builders and overall construction starts were lackluster over the winter months.

Issues with the overstock backup of both finished and unfinished materials at mills will result in supply chain and logistic bottlenecks along with prices rising again if projects don’t proceed or resume at the pace needed, while, taking advantage of seasonally low prices in comparison to the past.

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Home Builders, Developers and Construction companies need to shake any uncertainties associated with either the war, financing or inflation scares when the Forward Contract Lumber Prices are this attractive at this point in the season and lower for months out scheduled projects.

Lack of start action from multifamily builders, home builders, developers and construction companies could result in deflation of existing home prices, assets and property if the starts are not addressed soon.

Continued backlogs and pauses in supply chains will result in larger repercussions in the form of inflation next season when infrastructure bill projects and capital expenditures all come on line together.

Due to overstock at mills of both finished and unfinished lumber material it can cause lumber mills to go offline resulting in layoffs that could again put a kink in production if needed rapidly or caught of guard during a unexpected surge similar to what we saw during the pandemic.

Canfor Corporation (TSX:CFP) announced that, as a result of the cumulative effects of the unprecedented global supply chain crisis that has been ongoing for several months, it will implement reduced operating schedules at its Western Canadian sawmills beginning April 4, 2022.

The reduced operating schedules will be in effect for at least four weeks, and the Company will continue to evaluate and adjust operating schedules as supply chain conditions change.

“We are experiencing extreme supply chain challenges that are significantly impacting our operations and it has become imperative to reduce operating schedules to address our unsustainable inventory levels. We regret the impact that the reduced operating schedules will have on our employees, contractors and communities and we will make efforts to mitigate the negative effects,” said Don Kayne, President and CEO, Canfor. “We will continue to leverage our global operating platform to minimize disruptions in supply to our customers.”

 

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