Offbeat Lumber prices catch fire as tight supply meets trade tariffs

23:46  15 may  2018
23:46  15 may  2018 Source:   bloomberg.com

Mortgage rates surge to their highest levels in 7 years

  Mortgage rates surge to their highest levels in 7 years <p>A sharp sell-off in the bond market is sending mortgage rates to the highest level in seven years.</p>The average contract rate on the 30-year fixed will likely end the day as high as 4.875 percent for the highest creditworthy borrowers and 5 percent for the average borrower, according to Mortgage News Daily.

Lumber prices are above 0 due to a convergence of high demand and tight supply . Housing growth, Canadian tariffs , insect infestations, and Chinese imports all pushing lumber to record prices . Sec. Mnuchin is trying to defuse trade tensions.

The report also provides insight on the Canadian lumber tariffs . “After threatening to impose trade duties “MHI has long advocated that consumers need access to a stable, dependable and affordable lumber supply . “For one thing, lumber prices actually declined after the tariffs were announced.

The lumber market is red-hot, with futures rising to another record on Tuesday thanks to a confluence of import tariffs, transport bottlenecks and strong housing demand.

Futures traded as much as $15 higher -- the daily maximum -- to $627.70 per 1,000 board feet on the Chicago Board of Trade. They’ve surged 68 percent in the past 12 months, a bigger gain than any of the raw materials tracked by the Bloomberg Commodity Index.

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Price are likely to keep rising, according to analysts at Bloomberg Intelligence and much to the chagrin of U.S. homebuyers. Here’s what supporting the market:

U.S. Tariffs

The lumber rally picked up steam after the U.S. in November imposed average import duties of 21 percent on Canadian shipments of timber following a years-long trade dispute. While the move supports U.S. producers, it’s bad news for domestic builders, who get more than a quarter of their needs from north of the border. For house construction in particular, the U.S. simply doesn’t have enough supply to meet demand. The National Association of Home Builders, an American industry group, estimates the tariffs will increase the price of an average single-family home built in 2018 by $1,360.

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Mid-week lumber and panel prices were released on Tuesday night by Random Lengths. The midweek figures show both lumber and wood panel prices continuing their recent upward charge.

Updated: September 19, 2017 6:52 pm. U.S. governor wants Canadian lumber tariffs lifted amid potential post-storm ‘ price -gouging’. Cellphone catches fire , woman injured aboard Vancouver-bound Air Canada flight.

Transport Woes

Canada’s rail delays haven’t left just grain and oil stranded on the Prairies. Lumber producers such as Canfor Corp. and West Fraser Timber Co. also have piles of inventory stacked at their sawmills because of a lack of transport capacity. Canada is the biggest softwood lumber exporter to the U.S., and the disruption is contributing to price gains. Producers may work through the backlog this year -- Interfor Corp. said this month it plans to catch up on shipments in the second quarter.

Tight Supplies

Single-family housing starts, which use about three times as much wood as multifamily construction, continue to increase, and orders are expected to rise now that spring building season has arrived. The U.S. housing recovery and demand for residential repairs may lift lumber consumption in 2018, according to RISI, Bloomberg Intelligence analysts Joshua Zaret and Evan Lee said Tuesday in report. They also cite "razor-thin” inventories, owning to the duties and transportation delays, as well as a seasonal uptick in demand. The framing-lumber composite price probably will rise 20 percent in 2018 to a record, according to Bloomberg Intelligence.

Cramer: This trade-led rally makes sense—just look at the retail sector .
Jim Cramer unpacks the market's response to the U.S.-China trade truce that sent the major averages higher on Monday."While we often act like only the large-capitalization stocks like Caterpillar and Boeing ... are really in the crosshairs here, the truth is it's much, much bigger than that," the "Mad Money" host said on Monday. "So [...] let's talk about why this rally actually makes a lot of sense.

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