US wood price collapses at a record pace

Microchips, industrial metals, rubber, screws: from raw materials to industrial intermediate products, many goods on the world market have become scarce in recent months. Delivery times are getting longer and prices are skyrocketing, with sometimes dramatic consequences for companies and private customers. One product in which this development had a particularly severe impact, with noticeable consequences, is raw wood, especially on the world's largest housing market. There the wood price quintupled within a year in US. That was about a month ago. After the wood price in the USA had reached its all-time high of just under 1700 dollars (per "1000 board feet", that is about 2.36 cubic meters), it initially fell slowly and then fell at record speed last week. On the commodity futures exchange in Chicago, the price of wood fell by 18 percent, more than ever before within a week. This means that the price is still many times higher than the level of the previous year and previous years. But the decline shows that there was a certain exaggeration in the price increases of the past few months. In addition, the suppliers and buyers have reacted to the development, which has led to a partial relaxation on the market. American sawmill operators, whose capacity has been the decisive bottleneck in the past few months, have now expanded their production somewhat and announced investments in new, larger systems. At the same time, the demand side on the timber market turned out to be more flexible than was initially assumed. Buyers have been deterred by the extreme prices and have postponed orders in the hope of a larger offer at a later date. This was also evident in the past few weeks in construction activity in the USA, which had declined significantly, reports Bloomberg, citing market participants. A timber merchant from Massachusetts reports that recently a lot of wood was offered for sale by the sawmills. The buyers apparently felt no urgency. The financial analyst CIBS stated that customers are currently "waiting on the sidelines" and only buying the bare essentials. Despite the latest correction, the analysts by no means expect prices to quickly fall back to their pre-Corona level. Given the expected continued strong demand in the housing market, the wood price is likely to level off between record high and the old level, said analyst Scott Reaves of the consulting firm Domain Timber Advisors Bloomberg. A new equilibrium could soon be established in other tense markets as well, if buyers are deterred by excessively high prices or suppliers expand production. The UN Organization for Food and Agriculture, for example, is forecasting higher harvests for the coming season and thus, in the medium term, easing of the recent sharp rise in prices for the most important food raw materials. In the case of other goods, however, there are other factors that prevent the supply from quickly adapting to the increased demand, including the limited capacity of container shipping for transport, for example, from electronics manufacturers, most of which are based in Asia, to their customers in Europe or North America.