UPDATE 1-U.S. lumber futures soar on talk of China demand

Tue Nov 27, 2012 11:20am EST

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CHICAGO Nov 27 (Reuters) - Lumber futures at the Chicago Mercantile Exchange rose by the $10 daily trading limit on Tuesday morning amid short-covering and talk of Chinese buying, traders said.

"There is talk of Chinese business," said Robin Cross, a broker with INTL FCStone in Chicago. "There is also short-covering going on."

Traders said China was believed to have purchased lumber from West Fraser Timber Co Ltd in British Columbia, Canada.

"We are selling lumber to China on a daily basis," West Fraser Chief Financial Officer Larry Hughes told Reuters. "We don't normally comment on any specifics."

Much of the lumber purchased by China comes from British Columbia and Alberta in Canada, Hughes said, adding that there was "a little bit of U.S. lumber going to China."

He said demand for lumber at this time of year, when inventories typically run low going into winter, was unusual.

"What we've got right now is the beginnings of a recovery in the U.S. housing industry," he added. "Our industry collapsed in 2006, and it has been in a slow recovery."

The January contract climbed $10, or 3 percent, to $329.10 per thousand board feet, and March rose $10, or 3 percent, to $336 before easing to $334.90.

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