Chart showing CME one-month futures contract ($ per thousand board feet). Lumber prices have hit a record high due to the home improvement boom

Gold and silver have outshone most assets, but another commodity is shaping up to be this year’s best performer: lumber.

Prices for the wood have hit a record high after demand surged as homeworking as a result of Covid-19 spurred a wave of renovation projects, from fences to sheds, at a time when inventories were running low.

Lumber prices have soared 104 per cent this year — almost four times gold’s percentage increase — to $828 per thousand board feet. In early August, prices broke through the previous record of $651 set in 2018 when harsh winter weather in Canada caused transportation problems for months. Last week alone, they gained 13 per cent.

“This is the most violent, steepest and overbought rally in lumber’s history,” said Robin Cross, a broker at StoneX.

As the pandemic began to spread across North America, many mills reduced production in expectation of plunging demand. But they “misplayed”, Mr Cross said, pointing to inventories — already low because of the strong pace of new US homebuilding before the pandemic struck — dwindling under pressure to liquidate them and a surge in demand.

“Many people staying at home decided to do new renovations, whether it was to build decks or a new room,” said Chris McIver, vice-president of sales at West Fraser, North America’s largest lumber producer.

Lumber prices received extra support from low interest rates that fast-tracked a recovery in housing demand, as urbanites pined for rural homes. “Pure and simple, I think this is people exiting the cities and suburbs,” said Greg Kuta, president of broker Westline Capital Strategies.

Lumber is not a truly global market, with thin trading volumes despite being one of the world’s largest commodities by usage and production. Even so, European and Russian producers are selling into North America to profit from elevated prices, while Canadian producers are funnelling more lumber to the US instead of Asia, brokers said.

The lumber rally has gone so far that it threatens to impede the recovery of the US housing market, the National Association of Home Builders warned last week. Lumber traders also said that they were watching closely whether the coronavirus crisis would dent the incomes of white-collar workers who steer housing demand.

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