An improving housing market and renewed export demand from China caused lumber prices to rally to an eight-year high late this year, but lumber futures prices are expected to fall in 2013 as production ramps up, according to Forest Economic Advisors LLC.
On Monday, contracts for March delivery of lumber were selling at $374.80 per 1,000 board feet on the Chicago Mercantile Exchange. That's down 6.1% from last week when prices surged to almost $400 per 1,000 board feet.
Prices skyrocketed in November as lumber sellers with low inventory tried to meet a surge in demand for domestic consumption as the number of housing starts reached a four-year high this year. Exports to China also grew as its building market showed signs of growth.
As a result, expect lumber mills, which were pummeled during the recession, to ramp up production to help satiate the demand, said Paul Jannke, principal at Forest Economic Advisors, a Massachusetts-based consulting firm.