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Lumber prices up on

US construction surge

CHICAGO: A surge in U.S. summertime home construction ignited a rally in the prices of lumber and copper futures Wednesday.

Lumber prices on the Chicago Mercantile Exchange surged by as much as $10 per thousand board feet, the daily limit set by the exchange, and copper jumped by almost 3 cents a pound on the Commodity Exchange in New York.

The Knight-Ridder Commodity Research Bureau Index of 21 futures prices finished the day at 234.79, up 0.51 points.

Traders said the surge in building supply prices came in response to the Commerce Department's report Wednesday morning that July housing starts rose 6.7 percent from June to an annualized rate of 1.38 million units, the greatest gain since March 1994.

The department also revised June housing starts to up 0.9 percent at 1.293 million units from down 0.1 percent or 1.263 million.

"The housing starts numbers were extremely strong," said Neil Schmaedick, forest products analyst at Smith Barney.

"I think you are finally seeing the impact of the lower interest rates the past three months," he said.

Schmaedick said the gain in building permits also signalled a strong demand picture for housing and lumber.

Some lumber traders tried to tie gains to Hurricane Felix, which is heading toward the U.S. Atlantic coast. Schmaedick refuted that talk, saying traditionally hurricanes do not prompt a surge lumber in lumber demand.

Lumber for delivery in September ended bid the $10 limit up at $288.50 per thousand board feet while September copper rose to a contract high of 143.00 cents per but retreated later and closed at 141.75 cents a pound, up 2.8 cents.

Crude oil futures on the New York Mercantile Exchange (NYMEX) bounced back from early losses and ended higher with September closing eight cents up at $17.55 a barrel.

Unleaded gasoline, however, ended down 0.90 cent a gallon depressed partly by Exxon's announcement of a restart of a 135,000 barrels per day distillation unit in Baytown, Texas.

Wheat futures on the Chicago Board of Trade were also down as U.S. exports slowed down after a recent surge amid competition from Eastern Europe.

"We need some export demand in wheat plus Eastern Europe now is our problem, our competition," said Steve Bruce of E.D. and F. Man International.

Overnight Tuesday Algeria announced it was seeking 100,000 metric tons of optional-origin wheat and there were signs Algeria may bypass the U.S in favour of Romanian or Bulgarian wheat.

September wheat closed down 8-3/4 cents at $4.23-3/4 a bushel.

Soybean futures on the CBOT closed mostly higher amid forecasts for another heat wave by the weekend in key U.S. soybean growing states. Hot weather now would hamper the key pod-filling stage of soy development, agronomists said.

Gary Pepper, extension agronomist with the University of Illinois said, "We are at the mercy of the weather no question about it."

August soybeans ended one cent higher at $5.88 per bushel.-Reuter