LUMBER: Lumber futures edge lower, trading at levels last seen since lockdown. Prices (futures) hover steadily above $400 per thousand board feet, hitting a new 52-week low of $383/mbf on December 5th.
The market for forestry products has been in a slump since the end of Q1 2022, when the Fed started hiking rates and herding buyers out of the housing market. This weighed heavily on home builder confidence (which sank to a decade low in November) and put a serious dent in demand for the essential building commodity.
Commodity markets remain mired by sharp contractions in residential construction activity as we embrace the slowest month of the year for homebuying. However, mortgage rates are beginning to ease - if they continue decreasing, FOMO in the housing market will settle in. Renewed demand for housing is slated to bring more builders into the foray and prop up demand for lumber.
Is it possible the lumber slumber is nearly over? Remains to be seen. All eyes are on the Fed as we approach the next FOMC meeting, where Jerome Powell will express his committee’s views on inflation, set interest rate policy, and provide guidance on future rate hikes.
STEEL and others: Metals and metal-based products continue trending down. PPI for Steel mill products is nearly 27% lower in November, compared to last year. Hot-rolled coil steel futures are down 54% year-to-date and U.S. steelmakers are feeling the pinch. Last month, Cleveland-Cliffs, one of the largest US steelmakers, announced a price hike of $60 per short ton (st) on all new orders. It didn’t take long for others to follow suit as US Steel, Stelco, Nucor, and ArcelorMittal Dofasco announced similar initiatives earlier this month.
Why are they hiking prices? Because they’re operating dangerously close to breakeven as the price of their product falls and their costs rise (energy and labor). Outside the forest and furnace, concrete is cementing at higher prices. PPI for Prestressed concrete products is up 32% year-to-date in November. A Massachusetts-based concrete supplier notified customers their prices will increase by $20 per cubic yard on all mix types effective January 1st.
The reason? Higher input costs and supply chain bottlenecks. Diesel drama continues to menace delivery dates and augment uncertainty. Order in advance, folks - construction material shortages can be found in abundance.
