Are Aluminum, Copper and Lumber Prices Lowering?
In a follow-up to our newsletter last month regarding tariffs’ impact on construction costs, we’re here with some surprising news: futures prices for aluminum, copper and lumber are actually dropping. Below, are the one-month charts for the future trading for all three.
The one million dollar question: If futures prices are dropping, is that an indication that prices for those commodities will drop in the future?
The answer: Not necessarily. While a drop in futures prices can indicate expectations of lower prices in the future, it is not a guarantee. Futures prices reflect market participants’ expectations based on current information, including supply and demand forecasts, economic conditions, geopolitical events and monetary policy.
Here are some key reasons why falling futures prices might not always lead to lower future spot prices:
Market Expectations Can Change – New information (e.g., weather conditions, government policies, or economic data) can shift market sentiment, causing prices to rise again.
Speculation and Hedging – Traders and producers use futures contracts to hedge risks or speculate, which can cause short-term price movements that don’t always translate into actual future spot prices.
Macroeconomic Factors – Interest rates, inflation and currency exchange rates can influence futures prices but may not directly impact the actual commodity’s supply and demand.
Lumber futures have experienced a decline in part because of the exemption of Canadian lumber from new tariffs. Recent tariff measures did not include additional duties on Canadian softwood lumber, which constitutes a significant portion of U.S. lumber imports. This exemption alleviated concerns about immediate price increases, leading to a decrease in lumber futures prices.
The tariff discussion is changing by the day with lots of speculation regarding what is going to happen next. We will do our best to keep you up-to-date as new information becomes available.