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Lumber mills trail rebound in U.S.

North American lumber mills are operating at the fastest pace in four years as U.S. home building rebounds, just as the worst beetle infestation on record curbs supply.

October 18, 2012  By Bloomberg News

About 52.5 billion board feet, the standard industry measure, will be sawed this year, 5.4 percent more than in 2011 and the most since 2008, CIBC World Markets estimates, according to Bloomberg News. Lumber traded on the Chicago Mercantile Exchange may rally 11 percent to $350 per 1,000 board feet by March, the highest since 2006, said Paul Jannke, an analyst at Forest Economic Advisors LLC, a Westford, Massachusetts-based industry consultant.

Sales expectations among U.S. homebuilders for the next six months turned positive in September for the first time since 2007 as record-low borrowing costs boosted new-home purchases and sent housing starts to a four-year high. CIBC estimates about 20 percent of North American capacity has been shut or idled by mills, as lumber futures slumped to the lowest in at least a quarter century in 2009.

“As demand continues to improve, more capacity will be added, but the market is going to need that capacity,” said Mark Kennedy, a CIBC analyst in Calgary whose recommendations on the shares of forestry and paper companies returned 19 percent in the past six months. “We’ve already seen the lows for the year.”

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