Wood prices soar after Katrina

Damage inflicted in the southern United States as a result of Hurricane Katrina contributed to a rise of wood prices on the BMO Financial Group Commodity Price Index, BMO Economics reported Sept. 21.
BMO reports the extensive rebuilding work in the Katrina-hit areas such as Louisiana, Mississippi and Alabama has “lifted the prospects of wood products.”
For example, the Forest Products Index fell for the sixth straight month in early August, as plentiful supplies continued to sustain the markets’ negative tone.
However, “Hurricane Katrina caused some panic in wood product markets at the end of the month, with buyers scrambling to secure supplies in the US Gulf region,” Earl Sweet, assistant chief economist of BMO Financial Group, says.
“Lumber and structural panel prices surged in the last few days of August and in early September, and the extent of the devastation in the affected areas has prompted us to revise [upwards] our price forecast for products like lumber,” he says. “Massive reconstruction work will boost demand for wood products over the next several months.”
Katrina’s effect on commodity markets was only partially reflected in August, Sweet adds.
“Even prior to Katrina, August was shaping up to be a record-breaking month for the Index,” he says. “The hurricane’s impact increased upward momentum of a number of key commodities like oil and gas and halted declines in other commodities such as wood products.”
Sweet says the upward effect on prices intensified in early September, as the extent of the damage became clear.
Katrina is expected to affect commodity markets for several months, although much of the surge in energy prices had been reversed by mid-September.