Wood smiles at volatility

The international price of wood on the Chicago Stock Exchange (CME) remains 28.53% below its maximum level of 1,686 dollars per 110-foot board contract that was registered on May 7, 2021. This Wednesday it traded at 1,204.90 dollars.

However, the value of the wood reached a minimum level of 454.20 dollars on August 19 last. On that date, the raw material lost 73.06% compared to its historical maximum in May.

At current prices, lumber has recovered 165.3% from August to date, but is still 28.53% away from its latest all-time high.

Ana Azuara, Raw Materials analyst at Banco Base, said that the reduction in the price of wood is related to the sentiment regarding the construction sector.

“There is a feeling of reduced demand, since before there was the panorama of building new houses, mainly in Canada, which is one of the main consumers,” he explained.

The analyst commented that “it is expected that there will be a lower demand for houses due to the increase in the prices of raw materials, which implies a lower demand for wood,” she said.

In addition to the construction industry, wood is the raw material for the furniture and paper industry, a sector that “is sensitive to the economic cycle,” added Ana Azuara.

This 2022, volatility has marked the price of wood, since on February 1, the asset registered a drop of 18.56%, now, until this Thursday it has a slight increase of 4.97% in its price on the CME.

Amin Vera, Deputy Director of Analysis at Black Wallstreet Capital, explained that “wood, within the super cycle of raw materials, is one of the commodities that an inflationary environment moves, since it has a slower extraction rate.”

He added that “unlike other raw materials, no matter how drastically one tries to increase supply, it is not possible, since the business model is based on valuations of at least 10 years, and given the expectation of a better inflation scenario. , wood will moderate its price in the market”.

“What the rise in interest rates by the central banks will do is restrict aggregate demand with the aim of moderating inflation, and the increase in interest rates will make acquiring a mortgage loan more expensive, further reducing the demand for houses”, explained the Banco Base specialist.

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