(Updates with closing prices)
By Michael Hirtzer
CHICAGO, Feb 4 (Reuters) - 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 Friday.
“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 there.”
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)