There is little doubt that demand for wood, steel, and other items will be fueled by President Joe Biden’s proposed $ 2.3 trillion infrastructure package.
However, some construction materials prices recorded phenomenal gains in the first three months of the year, potentially setting a limit for a prolonged rally.
Biden’s infrastructure plan including bridge and road repair, investment and improvement of airports and transportation systems over a period of 8 years.
Steve Loebner, risk management director of a wholesale and brokerage company that lumber, plywood and building materials will “switch to sawn timber”. “The overall demand for forest products will be strengthened and that will have the effect of continuing to increase prices.”
up about 44% this year, at $ 1,260.70 / 1,000 feet on April 15, after prices more than doubled in 2020. Also this year, futures prices
rose 41% and iron ore
transactions 10% higher. Copper
has increased by 20%.
Among the reasons behind the wood’s rally were “demand was soaring in the face of Covid-related production cuts last year, and an industry has reduced its inventories to the minimum, ”said Loebner. Since then, output has increased “a lot,” but “is barely enough to meet the growing demand and large backlog of overbought projects that are now appearing online.”
Weyerhaeuser Co. Forest Products Co.
has benefited from the high prices of sawn timber, with shares up about 15% this year.
The market sees a “virtual end” for Canadian lumber exports to the US following former President Donald Trump impose a tax rate of 20%But the tax rate dropped to 9% last year, said Dennis Gartman, the chairman of Akron University’s investment and funding committee.
There is also “ongoing building and repairing of houses as the ultimate driving force” for timber, he said. Lumber added more than $ 24,000 the average cost of a new home, according to the National Association of Builders. “That could eventually put an end to the sawn rally,” Gartman said.
However, amid infrastructure spending, iron and steel ore prices are likely to continue to rise, added Gartman, who is also the retired editor of The Gartman Letter. He also pointed out that iron ore prices have nearly doubled from a year ago and have spiked in recent times. The price trend is up, but he recommends caution when buying anything after a spike.
The most positive futures contract for 62% of iron ore delivered to China was pegged at $ 171.99 / ton on April 15 on CME. The US Midwest domestic hot rolled coil price for delivery is at $ 1,359 / short ton. Copper trades over $ 4 a pound.
Stuart Burns, chief editor of metal analysis supplier MetalMiner, said Biden’s infrastructure plans “no [an] investment using all metals, ”although spending on bridges and sugar is, among other things,“ all initiatives that promote good metals ”.
Burns estimates the plan will add about $ 621 billion in transportation infrastructure spending, with the metal content making up only a small portion of that – “not nothing, but no possibility. cost increases for the metal economy. “
In the short term, the steel market is very tense, and improved sentiment alone could push prices higher, he said. Meanwhile, President Biden’s $ 1.9 trillion stimulus package passed in March may have “fueled the recovery and helped with consumer demand,” Burns. to speak.
While the proposed infrastructure package worth more than $ 2 trillion has still “not been approved and details need to be agreed upon”, it could “help steel and copper demand as the economy exits Current translation and recovery are aided by stimulation. Burns said.