On this episode of ETF Highlight, I converse with Brooks Mendell, CEO of forest trade consulting agency Forisk, concerning the sizzling lumber market.
Lumber costs have skyrocketed this yr, primarily on account of disruptions attributable to the pandemic and unprecedented demand from the housing markets. They’ve come down barely after reaching a report excessive earlier this month.
Skyrocketing lumber costs have resulted in excessive earnings for forest-products firms and sawmill house owners, however timber growers are nonetheless getting the bottom costs in many years for logs as there are plenty of timber within the US South and no scarcity of timber provides. Bushes which are able to be harvested proceed to exceed sawmill capability. Per Brooks, timber markets are uniquely native, leading to provide and demand imbalances.
Dwelling builders would want to assemble between 1.1 million and 1.2 million single-family properties per yr to satisfy long-term demand, in keeping with the Nationwide Affiliation of Dwelling Builders. They usually’re going to wish plenty of wooden to construct these properties, as wood-framed items make up 90% of latest properties, per Bloomberg.
Lumber firms are working arduous to maintain up with the hovering demand. North American sawmill capability elevated by 1.four billion board toes over the previous twelve months, with much more anticipated within the second half of 2021, per Forisk. They count on {that a} rebound in provide will result in moderation within the worth of lumber over the approaching months.
The iShares International Timber & Forestry ETF (WOOD) holds 25 timber & forestry shares whereas the Invesco MSCI International Timber ETF (CUT) invests in 81 timber firms. West Fraser (WFG), the most important lumber producer in North America, Weyerhaeuser (WY), Rayonier (RYN) and Potlatch (PCH) are among the many high holdings in these ETFs.
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Weyerhaeuser Firm (WY): Free Inventory Evaluation Report
Rayonier Inc. (RYN): Free Inventory Evaluation Report
Potlatch Company (PCH): Free Inventory Evaluation Report
INVS-TIMBER (CUT): ETF Analysis Studies
ISHARS-GL TF (WOOD): ETF Analysis Studies
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