West Fraser to hike production in U.S. South

West Fraser Timber Co. plans to expand capacity at five of its lumber mills in the U.S. South as a homebuilding boom fuels lumber demand.

The pandemic-fuelled surge in home construction last year took North American sawmills by surprise, sending lumber prices to new records. U.S. futures this week hit US$1,600 per 1,000 board feet for the first time, a fourfold increase from a year ago. While production has since ramped up, demand continues to outpace supplies as home-buying and renovations continue.

“In the lumber segment we expect to invest approximately US$150 million at five of our U.S. South lumber mills under the strategic capital program,” the company said Thursday in a statement. “Investments at the target mills will expand their capacity, increase the mix of higher-margin 2x4s and reduce fixed and variable production costs.” The Vancouver-based company acquired Norbord Inc., one of the world’s biggest makers of oriented strand board, in February. West Fraser said it will invest US$30 million at two OSB mills to improve productivity.

Log costs for the company’s Canadian and engineered wood product operations are expected to remain elevated as long as demand exceeds available log supply in B.C.

Higher Canadian stumpage rates and increased costs from extreme weather in the U.S. south, negatively impacted adjusted EBITDA compared to the prior quarter, the company said.

Adjusted EBITDA for lumber in the last three months of 2020, when prices were unseasonably high due to strong home building and renovation demand, was US$425 million. This jumped to US$646 million in the first three months of 2021.

West Fraser shares were up 28 per cent this year through Thursday’s close, after reaching a record high at $106.42 last month in Toronto.