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ETFs to Benefit from Soaring Lumber Prices

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Lumber is currently the hottest commodity in the US, as prices have more than tripled over the past year. Surging demand for suburban housing, thanks to record low mortgage rates and migration from cities, and a frenzy of home renovations, continue to push lumber prices higher.

Lumber prices had plunged in March last year and sawmills had curtailed production when coronavirus related shutdowns started. By April, almost 40% of North America’s sawmill capacity was shut down, per WSJ. While mills have ramped up production significantly, it still remains about 16% below the 2006 peak, which is the last time the demand from housing was so high.

Per Freddie Mac, the current supply of single-family homes is 3.8 million units less than the demand. Home builders would need to construct between 1.1 million and 1.2 million single-family homes per year to meet long-term demand, according to the National Association of Home Builders. And they’re going to need a lot of wood to build those homes, as wood-framed units make up 90% of new homes, per Bloomberg.

The iShares Global Timber & Forestry ETF (WOOD - Free Report) holds 25 timber & forestry stocks while the Invesco MSCI Global Timber ETF (CUT - Free Report) invests in 81 timber companies. West Fraser (WFG - Free Report) , the largest lumber producer in North America, Weyerhaeuser (WY - Free Report) , Rayonier (RYN - Free Report) and Potlatch (PCH - Free Report) are among the top holdings in these ETFs.

To learn more about these ETFs, which are up over 80% over the past year, please watch the short video above.

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