Lumber prices catch fire in wake of tariffs
The lumber market is red-hot, with futures rising to another record on Tuesday thanks to a confluence of import tariffs, transport bottlenecks and strong housing demand.
Futures traded as much as US$15 higher — the daily maximum — to US$627.70 per 1,000 board feet on the Chicago Board of Trade. They’ve surged 68 per cent in the past 12 months, a bigger gain than any of the raw materials tracked by the Bloomberg Commodity Index.
Prices are likely to keep rising, according to analysts at Bloomberg Intelligence and much to the chagrin of U.S. homebuyers.
The lumber rally picked up steam after the U.S. in November imposed average import duties of 21 per cent on Canadian shipments of timber following a years-long trade dispute. While the move supports U.S. producers, it’s bad news for builders, who get more than a quarter of their needs from north of the border. For house construction in particular, the U.S. simply doesn’t have enough supply to meet demand. The National Association of Home Builders, an American industry group, estimates the tariffs will increase the price of an average single-family home built in 2018 by US$1,360.
Lumber producers such as Canfor Corp. and West Fraser Timber Co. also have piles of inventory stacked at their sawmills because of a lack of transport capacity. Canada is the biggest softwood lumber exporter to the U.S., and the disruption is contributing to price gains. Producers may work through the backlog this year.
Rail delays are contributing to price gains as Canada is the biggest softwood lumber exporter to the U.S.