What’s happening with the lumber prices?
British Colombia is and always has been known for it’s beautiful lumber. There has always been a surplus of lumber so in theory, it should be inexpensive, and relatively, it has been… until COVID-19. With stores, offices closing, and more time off work, construction has been booming. With more demand for buildings, lumber prices and wood panel prices are adding thousands of dollars to building bills as the supply can’t keep up with the demand.
What’s the market saying about the lumber prices?
Standard two-by-four boards for example, hit a record level of $760 US per thousand feet, up $82, according to Kevin Mason, managing director of ERA Forest Products Research. In an interview, he says “You’ve got buyers who care more about just getting product than they do about the price,” he said in an interview.
“The companies have purchase orders sitting on the desk and it’s, like, when you get product, send it to us, and just tell us what we owe you. Buyers don’t care. Right now, it’s an absolute panic, a scramble to get product.”
How will this rise in lumber prices affect overall single-family houses in Canada?
Homebuilders say increases this year will equal $8,000-$10,000 more to build a single-family house in Canada in comparison to regular industry prices prior to the pandemic. The rise in demand comes from an interest in renovations due to more time spent working
from home, as well as the extremely low-interest rates that have been established for new home-owners, enabling people to consider renovations.
Could supply be affecting the lumber prices?
On the other hand, supply has fallen as several mills have closed because of a shortage of wood due to mountain pine beetle infestation, wildfires, and COVID-19 working restrictions. Additionally, new regulations and fees have been put in place for harvesting crown land lumber, so many mills have closed permanently. Analyst Paul Quinn of RBC Dominion Securities said Lumber was about 1.6 billion board feet lower in April and May as compared to the same.
“We expect that actual demand was higher than production in both April and May due to strong R&R (renovation) demand, which resulted in distributors drawing down inventory levels,” he said, adding that the tight market could continue even though most mills have returned to production.
“With new residential construction returning with a vengeance in June-July, we expect that even normal supplies would be wholly inadequate to meet demand.”
Canadian lumber production declined by 18.9 percent in May, he said, with B.C. production down 26.2 percent year-over-year to 677 million board feet. In the U.S., production fell by 6.8 percent.
In another report by CIBC analysts, current lumber prices are just two percent less than the all-time peak in November 1996 when the price for two-by-fours hit $480 US (or $775 US in today’s dollars after adjusting for inflation).