Newspaper article The Canadian Press

Analysts Trim Forecasts for Lumber Prices in 2013 despite U.S. Housing Surge

Newspaper article The Canadian Press

Analysts Trim Forecasts for Lumber Prices in 2013 despite U.S. Housing Surge

Article excerpt

Analysts lower lumber price forecasts

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MONTREAL - A resurgence in U.S. housing construction is still expected to boost lumber prices, but perhaps not as high as had been expected this year.

A 21 per cent drop in the cash price since mid-March and lower future prices have prompted several analysts to trim about five per cent off their 2013 price forecasts.

Western SPF (spruce-pine-fir) softwood prices are now expected to increase 20 per cent, on top of the 16 per cent increase realized in 2012.

RBC and CIBC now expect prices will average between US$350 and US$360 per thousand board feet in 2013, which is about $20 lower than earlier forecasts, but up from US$299 in 2012.

Analyst Paul Quinn of RBC Capital Markets maintained his outlook for 2014 at US$400, but lowered his price in 2013 to US$350, from US$370.

He also reduced his forecasts for OSB (oriented strand board) and plywood.

A 10 to 15 per cent increase in North American production in most regions and weak exports is "spelling trouble in the short-term," Quinn wrote in a report.

Analyst Mark Kennedy of CIBC World Markets lowered his 2013 forecast to US$360 and reduced his 2014 forecast price by seven per cent to US$400, from US$430.

He conceded that his outlook for lumber prices could be conservative in light of historical prices when they averaged above US$500 during several years in the 1990s and hit US$468 in 2004.

Lumber prices normally strengthen as the construction season heats up in the second quarter and weaken at the end of the year.

But prices increased by US$100 in the fourth quarter of 2012 to reach US$370 and but by May 24, about mid-way through the second quarter, they had dropped to US$320.

"While this price correction has been a 'gut check' time for us, we still see this pricing pullback as a correction rather than a fundamental change in lumber price trends," he wrote in a report. …

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