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Lumber Prices Clobbered, Limit Down at CME

December 31, 2012 10:53 AM EST Send to a Friend
Traders have their eyes on lumber stocks Monday with lumber futures limit down on the CME. March 2013 lumber contracts fell $10 to $374.80 per 1,000 board feet.

The downside could come as analysts at Forest Economic Advisors LLC predicted that lumber futures may fall 25 percent from seven-year high as output increases in Canada.

"We're pretty close to the peak," Paul F. Jannke told Bloomberg. "The initial spike tends to be the highest, then production ramps up. If the mills increase shifts from a 40-hour week to a 50-hour week, that's a big jump, and everybody is ratcheting up their work weeks."

Stocks that could be impacted on the drop in lumber prices include: Weyerhaeuser Co. (NYSE: WY), Plum Creek Timber Co. Inc. (NYSE: PCL), Deltic Timber Corporation (NYSE: DEL), Potlatch Corporation (NYSE: PCH). Notably, all are trading near multi-year highs.

On the flip-side of the trade, lower lumber prices could be margin positive for companies that sell lumber-intensive products, including: Louisiana-Pacific Corp. (NYSE: LPX), Masco Corporation (NYSE: MAS), Universal Forest Products Inc. (NASDAQ: UFPI), Lumber Liquidators (NYSE: LL).




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