Last summer, B.C. experienced its worst fire season. More than 1.2 million hectares burned, roughly twice the size of PEI, and caused over $500 million in damages. Because of the fires, ten sawmills in the province were forced to halt operations for an extended period of time, which significantly reduced Canada’s lumber inventories.
“This limited supply and there was high demand,” says Kube. One of the main drivers of the Canadian lumber industry is home construction in the U.S.
During the fall/winter of 2017/2018, there were transportation difficulties and problems with moving Canadian lumber to international markets.
“The trains had difficulty transporting our lumber. There was too much demand and the train system is overtaxed,” says Chris McIver, vice president of sale and marketing at West Fraser.
“There were also limited trucks. The trucking force is aging and it’s not attracting young drivers,” says Kube.
As U.S. lumber inventories became low, Kube says, they started to buy up Canadian lumber.
All of these factors contributed to an all-time high price in May of $639 USD/1000 board feet. In 2011, it was $211 USD/1000 board feet.
Since May, the price of lumber has plummeted to 473 USD/1000 board feet, as of August 21. McIver says the reason for the “hard fall” is because timber inventories are well-stocked and demand has decreased.
“Demand slows in the summer. It’s too hot to build in the U.S. South and housing has stalled.”
Although the amount of area burned in B.C. is almost 400,000 hectares as of August 15, which is a third of the area burned in 2017, there’s still a month of fire season left. Kube says the fires this season, could cause another price spike later on.
Regardless, McIver says the mid to longer term fundamentals look “very good” with housing slowly recovering, and increasing international demand for Canadian lumber.