Lumber Boom Boosts Home Depot, Timber Towns
(NEW YORK) -- An improved U.S. housing market plus rising foreign demand for wood are boosting lumber prices, to the benefit of mill owners, retailers like Home Depot, and timber towns like Eugene, Ore.
Home Depot's announcement this week that its quarterly profit had jumped 32 percent -- more than had been forecast -- helped lift the Dow Jones industrial average. The company's shares climbed nearly 6 percent -- their best percentage gain in four years.
Frank Blake, CEO of Home Depot, said in a conference call that he attributed the results in part to the ongoing recovery of the U.S. housing market. New home sales in January rose at their fastest rate since July 2008.
Jon Anderson, president and publisher of timber industry newsletter Random Lengths, tells ABC News that increased demand from abroad for wood products also is responsible for higher prices. For the past five years, he says, China has been increasing its imports of North American lumber, from both Canada and the U.S.
The newsletter's composite price for framing lumber (the kind used in home building) has jumped from $284 per thousand board feet a year ago to $415 now. The composite price for plywood and other kinds of paneling has shot from $332 to $513. Prices for paneling, says the newsletter, are now "within shouting distance of all-time highs."
Publicly traded wood products companies turned in solid fourth quarter results, Anderson reports. The stock of Weyerhaeuser, for example, has climbed steadily for the past 12 months, from a low of $21 to a recent high of over $31. It closed Wednesday at $29.61.
Where might lumber prices go in the next six months?
Anderson says he isn't in the prediction business. But for more than a year, he adds, demand has been on the increase.
"Supply has been chasing demand, but has not caught up," he says. "Producers, because of the depth and length of the recession, have been reluctant to add shifts or increase production. They've held off re-opening mothballed facilities."
Now, though, they are starting to anticipate the day demand exceeds supply.
"You're starting to see mills increase production or come back online," he says.
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