Timber sector-related exchange traded funds are gaining momentum as lumber prices rebound on wet weather conditions affecting supply and a cardboard box boom adding to demand.
During the past month, the iShares Global Timber & Forestry ETF (WOOD) gained 4.0% and the Invesco MSCI Global Timber ETF (CUT) rose 2.8%.
Southern timber prices are rebounding after a year-long slump. Wet weather conditions have caused a lot of woodlands to become too mushy to log, which has created a premium on trees that can be harvested from drier areas, the Wall Street Journal reports. Consequently, the the average price in the South for pine trees that are used to make lumber is at its highest level in over a decade.
Saw timber gained to $26.44 per ton over the fourth quarter, according to TimberMart-South. Nevertheless, while saw timber prices have rebounded 18% from the half-century lows of summer 2020, prices remain well below the $40 level that big logs fetched two decades ago.
“Prices are trickling up,” Jody Strickland, chief business officer at F&W Forestry Services Inc, told the WSJ. “All these weather events we’ve been having and the shortage of labor have led the mills to have trouble keeping inventory.”
The housing boom and weather-related problems across lumber-producing areas in British Columbia have helped to lift southern yellow pine two-by-four prices to records this week of about $1,500 per thousand board feet, according to Random Lengths.
Further supporting the lumber market, cardboard boxes are in high demand due to the increase in e-commerce during the ongoing COVID-19 pandemic. The American Forest and Paper Association stated that U.S. production of containerboard, which is used to make shipping boxes, hit a new high in 2021, up 5.6% year-over-year.
Meanwhile, lower grades of pine timber, like young, thin, and knotty trees that are ground down to pulp for paper and cardboard, have seen prices jump more than those for logs, rising by about a third since summer 2020, according to TimberMart-South.
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