(Updates with closing prices)
By Michael Hirtzer
CHICAGO Feb 4 U.S. lumber futures rose to
their highest level in 29 months on Thursday, spurred by
retailers and distributors restocking supplies ahead of the
spring building season, analysts and traders said.
It was the sixth straight session of higher prices, which
rose on Thursday by the $10 daily trading limit set by the
exchange to limit volatility. Contract highs were set in the
March, May, July and September.
Despite the six-day rally in futures, analysts said the
surge could be short-lived amid continued concerns over demand
for housing and the nascent economic recovery.
The analysts said that in addition to restocking, some home
builders rushed to finish projects before the expiration of a
home-buying tax credit.
Pit-traded CME March lumber 2LBH0 closed up the $10 limit
at $279 per thousand board feet, a gain of 3.72 percent.
Prices in the cash market posted even stronger gains, with
traders pegging the closely-watched cash spruce price at $290
to $300 per tbf, up at least $20 from the price widely watched
industry newsletter Random Lengths quoted earlier this week.
Random Lengths is expected to issue its latest report early on
"It's kind of amazing given where we were a year ago," said
Curt Cunningham, president of Pacific Futures Trading. "The
industry finally got production in line with the demand out
Lumber prices typically peak in early February as builders
buy wood for spring projects.
The seasonal trend may be even more pronounced this year as
builders and buyers alike seek to take advantage of a federal
housing credit of up to $8,000 for first-time home buyers.
To qualify, contracts must be signed by April 30 and the
deal closed by June 30.
"Consumer (lumber) yards and distributors ran their
inventories down to zero, and then we saw a pickup in activity,
forcing them to come to the market," said Brian Leonard, lumber
analyst with Rosenthal Collins.
"Every time there is a surge in business, the mills can
increase their prices," Leonard said.
New U.S. housing starts fell unexpectedly by 4 percent in
December to an all-time low, but building permits rose by 10.9
percent, the highest level since October, 2008, the U.S.
Commerce Department said late last month.
Cunningham, based in Seattle, Washington, said a builder he
knows is planning to complete all of his projects in the first
six months of the year.
"There's still a real caution about what happens when the
next set of mortgage tax stimulus dollars dry up," he said.
(Reporting by Michael Hirtzer; Editing by John Picinich)