Global construction boom pushes up prices for lumber and iron ore


There is a construction boom around the world as governments seek to extricate themselves from the economic hardships of the pandemic.

It pushed the price of construction-related commodities through roof, lumber and iron ore – which is used to make steel – reaching record prices this week.

Iron ore jumped to US $ 228 a tonne on Tuesday as Chinese steel mills continue to ramp up production.

“This is exactly US $ 173 a tonne more than what the (Australian) Treasury assumed when calculating the 2021 budget deficit last year, so about as wrong as it gets,” the presenter said. ABC Finance Alan Kohler.

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Alan Kohler explains why the price of iron ore has skyrocketed.

The future of wood is soaring

During the week, US lumber futures broke a record, topping US $ 1,700 per thousand board feet for the first time, a dramatic increase for a commodity that was below $ 400 US this time last year.

The surge in prices is being driven by the US housing boom, but also appears to have accelerated in recent weeks as investors pile up.

Activity in the futures market makes the wood price chart look more like cryptocurrency than wood.

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According to the National Association of Home Builders of the United States, the soaring price of lumber could add a $ 36,000 additional to the cost of the construction an average single family home.

And Australia?

Timber prices in Australia are also on the rise this year, but for a variety of reasons.

Independent forestry consultant Rudolf van Rensburg said Australian softwood prices rose 5 to 15 percent.

“Australia is facing a situation where there has not been a significant expansion of softwood plantations since the 1990s, so the supply from the current plantations is quite static and the demand is increasing with a growing population,” did he declare.

“As timber prices in the United States are very attractive, exporters are focusing on this market … and on freight. [shipping] very high rates, this makes the distant Australian market less attractive. “

Mr Rensburg said Australia traditionally imports around 20 percent of its timber requirements.

A newspaper being processed in a sawmill.
Wood has become a very popular raw material.(

Provided: Timberlink Australia

)

The HomeBuilder effect

Speaking to ABC News Radio last month, Master Builders chief executive Denita Wawn said the federal government’s HomeBuilder program created a lot of work but caused “extreme pressures in the supply chain.”

“We have an [building] boom across the country, which is very unusual, ”she said.

“This puts enormous pressure on the supply chain as a whole, as not only Australia but the world are using housing to boost economies and there is a global shortage of essentials.

Mr Rensburg agreed that HomeBuilder had “amplified” the demand for lumber and that construction costs would “clearly increase”, although “the cost of lumber is a relatively small proportion of overall construction costs. [of a house]”.

It is estimated that up to 60,000 hectares of softwood plantations were lost during the black summer bushfires, another factor affecting supplies in Australia.

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