Lumber prices hit record high after lockdown spurs DIY boom

Lumber outshines gold after spurt in renovation projects hits amid low supply

Gold prices may be glittering at close to record highs - but  a less eye-catching asset is still outshining the precious metal.

This year's best performing commodity is instead the humble wooden log, after the value of lumber surged amid a DIY boom triggered by homeowners sprucing up their properties during lockdown.

The price of lumber futures has more than doubled in 2020 due to buoyant demand and low stock levels, made worse by mill shutdowns during the height of the Covid crisis.

Surging costs have sent lumber to a record high of more than $850 (£611) per thousand board feet, racking up quadruple the gains enjoyed by gold. The one-month futures contract on lumber has jumped more than 50pc in the last month alone, according to data firm Refinitiv.

The rocketing wood price could be a sign of recovery in the US, according to analysts. Investment in homes has helped push prices higher and generally points to growth in the world’s largest economy, said BCA Research analyst Mathieu Savary. 

He said: “Construction activity drives lumber prices and residential investment is one of the most interest-sensitive sectors of the economy."

Mr Savary said the lumber rally indicates that central bank stimulus is having a positive impact on the economy. 

However, other experts have warned the sudden price surge could hurt the property market because it will lift the cost of building American homes.

The National Association of Home Builders said last that week record prices could slow momentum in the housing market, despite ultra-low interest rates luring in buyers. It estimated that the lumber rally had increased the average price of a new home in the US by $14,000.

Paul Quinn, an analyst at RBC Capital Markets, said: “Given the rapidity of the rise and scarcity of lumber, we would not be surprised to see projects be delayed to 2021.

“While this would eventually put a lid on lumber pricing, we expect that most projects will not be cancelled.” 

He added that delayed projects will start again once lumber prices head back towards normal.