Traders bid up lumber futures after Canfor Corp., one of North America’s largest lumber producers, said on Wednesday it was curtailing production capacity at its Canadian sawmills as a result of extreme wildfire conditions in Western Canada. As of the end of the trading day on Thursday, a contract for 1,000 board-feet of lumber for delivery in September was priced at US$647, up more than $100 from its closing price on Tuesday.
Vancouver-based Canfor said it was scaling back production because the wildfires are significantly impacting its ability to transport product to market. Amid rail-lines damage and supply-chain backlogs the fires are causing in the province, some analysts expect other sawmills to follow suit.
But there are other factors beyond the fires that could once again put pressure on wholesale lumber prices, says Kéta Kosman, publisher of Madison’s Lumber Reporter.
Lumber prices spiked as sawmills, which had pared back production right after the onset of the COVID-19 health emergency, scrambled to meet demand from home builders and renovators amid the pandemic housing boom.
In May, prices reached an all-time high of more than US$1,600 per 1,000 board-feet, up from around US$400 per thousand board feet in February 2020.
Since then, though, they’ve been on a steep decline as sawmills were finally able to ramp-up supply and the high prices started prompting some customers to defer their purchases.
“Production finally was able to catch up … and demand is still strong, but now we’re starting to reach an equilibrium,” Kosman says.
The question is whether the pandemic roller-coaster of lumber prices is now headed up again.
While sawmills are well-stocked with logs right now, home-building activity remains strong in the U.S., which accounts for 65 per cent of Canadian lumber exports, Kosman notes.
Kosman sees another potential source of price pressures in the violent storms that are hitting the East Coast.
Storm season, which is two months early in the Southern and Eastern U.S., drives up demand for plywood — first to board up windows and then to rebuild roofs, Kosman says.
If you’re wondering what this means for your backyard deck revamp or DIY reno project, the answer is likely very little for now, according to Kosman.
Anecdotal evidence suggests the lumber prices consumers are paying at home improvement stores still reflect the earlier high of wholesale prices, Kosman says. Consumers put off by high prices may want to check back in a couple of months, she adds.
Still, with housing construction in the U.S. now likely set to remain elevated for a while, lumber prices are unlikely to return to their pre-pandemic lows, Kosman warns.
“Don’t expect that ever again.”