Lockdown reno boom sends prices soaring
B.C. lumber producers cut production too deeply at the start of the COVID -19 pandemic, it seems, which has sent prices soaring to record levels and mills scrambling to catch up with a still-hot U.S. housing market.
In March and April, B.C.’s major forest companies scaled back operations, West Fraser Timber Co. Ltd. by as much as 45 per cent, in response to a “massive disruption in the marketplace” due to pandemic-induced shutdowns.
“Everybody stopped producing, on both sides of the border,” said Susan Yurkovich, CEO of B.C.’s Council of Forest Industries, “pretty much every mill (in North America) was down when COVID first hit.”
However, while supply was “stopped in its tracks,” demand in the U.S. housing market picked back up, along with an unprecedented boom in home renovations driven by homebound consumers.
“It’s literally a supply-and-demand situation,” said Keta Kosman, publisher of the market report Madison’s Lumber Reporter, which has tracked lumber prices as they’ve soared to a record US$712 per 1,000 board-feet for Western SPF (spruce, pine, fir) 2x4s, the market benchmark.
A month ago, the price was US$556 per 1,000 board feet and US$350 at the beginning of April, according to Madison’s.
“Lumber inventory is very low,” Kosman said, to the point that order files at B.C. sawmills have stretched into the fall at a time of year when it would take only a few days to turn around orders.
“If somebody’s ordering from a sawmill right now, and everybody’s ordering from a sawmill because wholesalers don’t have any wood, resellers don’t have any wood, reload (facilities) don’t have any wood, it’s not even going to go into production until October,” Kosman said.
However, Yurkovich said the situation is a mixed blessing for mills. It offers some financial respite to beleaguered bottom lines, but doesn’t resolve problems like B.C.’s shrinking supplies of merchantable timber due to the mountain pine beetle infestation.
“Remember, we operated (with prices) below cost for a long time too,” Yurkovich said. “It doesn’t change the fundamentals around some of the struggles we have with our sector, but certainly with this price spike, people are trying to produce as much as they can to take advantage of the market and to get people back to work.”
However, there are also limits in putting people back to work in a sector that has been plagued by mill closures and job losses over the past decade, a trend that accelerated in 2019.
“Mills curtailed (in March and April) and they started back up,” said Russ Taylor, a consultant at Forest Economic Advisors, “so you’re back to Square 1.”
Conditions won’t encourage companies that permanently closed mills to reopen them, Taylor said, and even adding production shifts at mills that are operating would be difficult.
“They’ve got to ramp up their logging and a lot of logging crews have left the Interior because there’s a shortage of wood,” Taylor said. “The second part of it is, where do you get trained workers to run your mills? All the good people have moved on to other sectors.”
At the moment, Taylor said prices have soared because buyers are willing to pay any price just to secure lumber, but that can’t last long.