Lumber prices have already bottomed - and 3 forces will drive them higher going forward, one investment head says

Carolyn Cole/Getty ImagesAccording to Ed Egilinsky, Direxion, the lumber price has already bottomed.After a severe decline, he expects lumber will stabilize in the near future.Egilinsky also identified three bullish drivers that he believes will push lumber prices higher.Subscribe to our daily newsletter 10 Things Before The Opening Bell.According to Ed Egilinsky (Managing Director and Head of Alternative Assets at Direxion), the lumber price has already bottomed following a sharp selloff and should stabilize around current levels over the next few weeks.On Monday, lumber futures were slightly lower at $530 per 1,000 board and are almost 70% below the record high of $1711 set in May. Prior to this record, lumber prices rose more than 500% in the immediate aftermath COVID-19's pandemic. This was due to supply-chain disruptions and an increase in homebuilder growth.Egilinsky stated that he considers the $500 level, which was recently tested, to be a support level for the commodity. However it is still higher than pre-pandemic pricing.Insider was told by he that he believes it will stabilize here in comparison to the downtrend it has seen since July.Egilinsky identified three drivers that he believes will underpin lumber in the next weeks. He said that these factors in confluence will significantly reduce lumber supply and drive prices higher.The first is the tightening labor markets. Egilinsky stated that this is why there are fewer mills in operation.New data supports his assertion. It shows that the US saw record numbers of job openings in June. This was a record number and more than the available workers since the pandemic.The second is the raging wildfires.He said that fewer mills are operating due to wildfires, and added some of the effects of these remain unpredicted.For example, these fires have already affected Canfor, one the largest lumber producers in America. On July 20, the company announced that it would reduce its output at its British Columbia mills.The third is the new Delta variant.Egilinsky stated that the new strain could cause the closure of sawmills and disrupt a supply chain that is about to rebound.He told Insider that "[Sawmills] might need to be shut off for any length of time."Continue reading: Credit Suisse advises you to buy these 21 growth stocks as now is the best time to help them thrive and reduce the risk of losing money.