* Lumber futures rise the $10 daily limit
* Rebuilding after Sandy could stretch well into 2013
* A month before reconstruction likely to start
* Home Depot shares rise on expected rebuilding
By K.T. Arasu
CHICAGO, Oct 31 U.S. lumber futures hit a
19-month high on Wednesday amid expectations for demand to surge
as thousands of homes, damaged by the superstorm Sandy, are
rebuilt in the coming months.
Trade sources said the home-rebuilding process in the
northeastern United States, which bore the brunt of Sandy, could
stretch well into 2013, keeping demand for lumber robust.
The sources also said efforts by homeowners to quickly
rebuild or repair their homes could be hampered by the fact that
lumber mills usually reduce stocks going into the winter months,
when demand tends to wind down.
Sandy, which made landfall on the eastern seaboard late
Monday and has killed at least 64 people, may cause up to $15
billion in insured losses, one disaster-modeling company said.
Some 6.2 million homes and businesses in several states
remained without power on Wednesday morning. In New Jersey, it
could take seven to 10 days before power was restored statewide.
"The widespread impact of the storm could increase demand
for lumber over the next several months. With such devastation
it could take a month or so for any rebuilding to start," said
Gary Vitale, president of the North America Wholesale Lumber
Association, a grouping of 450 mills and wholesalers.
The association represents about a fifth of all physical
lumber traded in the United States.
"Certainly, we see a good portion of the rebuilding taking
place in the spring," he said, adding that winter weather would
limit the pace of repairs to the damaged homes.
Vitale said lumber for the rebuilding would likely come from
mills in the northwestern and southeastern United States, and
also from eastern and western Canada.
"Historically, this is what happens after a natural
disaster," said Michael Young, president of Pacific Futures
Trading in Seattle, Washington, of the surge in futures.
Most of the Chicago Mercantile Exchange lumber futures rose
by the daily trading limit of $10 per thousand board feet and
ended the pit trading session locked at those levels.
November futures rose $10 to settle at $318.80 per
tbf, the highest level since March 2011. Benchmark January
futures gained $10 to end at $331.20 per tbf.
If November futures rise by the $10 trading limit on
Thursday, the daily trading band for lumber futures will be
expanded to $15 on Friday, according to the CME rule book.
"Inventories are on the low side, in part due to the
seasonal trend as we get into the winter months," Jon Anderson,
president of Random Lengths, which tracks prices and trends in
the lumber market, said by telephone from Eugene, Oregon.
He said prices for lumber in the cash market began advancing
last week in reaction to Sandy.
Prices for western spruce in the cash market have risen 7.5
percent since last week, according to data from Random Lengths.
Traders said the lumber market has been gaining momentum in
recent weeks amid promising signs in the housing market, which
was at the heart of the financial meltdown in 2008.
The Commerce Department said on Tuesday that the U.S. home
vacancy rate, which measures empty properties and those for
sale, fell to the lowest level in seven years in the third
quarter, as demand for housing picked up.
Open interest in lumber futures has ballooned nearly 20
percent since last week to 10,428 contracts as of Tuesday,
according to CME data.
The net long position held by non-commercials, which include
hedge funds, has grown by nearly 90 percent since the start of
October to 1,784 contracts as of Oct 23, according to data from
the Commodity Futures Trading Commission.
Traders said speculators were behind much of the buying in
lumber futures as they anticipated improved demand as those
affected by Sandy begin to rebuild or repair their homes.
"There is anticipation of a big rush in demand after this
storm," said a trader, who declined to be named.
The type of lumber traded at the CME is so-called framing
lumber, primarily used in home building.
The optimism over demand for lumber and other home-building
materials was also reflected in Home Depot, the world's
largest home improvement retailer, whose shares rose 2.4