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article imageWith BC wildfires, lumber prices jump despite U.S. tariffs

By Karen Graham     Jul 16, 2017 in Business
Vancouver - The conditions that led to the spike in wildfires in British Columbia's interior forced lumber and some mining operations to halt work because of safety concerns. However, the fires have also caused a supply-squeeze, forcing a jump in lumber prices.
A week ago, Digital Journal reported that a number of major lumber producers and several mines had halted operations due to safety concerns over the uncontrolled wildfires burning in the central and southern interior of the province.
With some sawmills halting production, CTV News is reporting a temporary supply-squeeze has been created, resulting in a jump in softwood prices, right at a time when forestry companies are being hit hard with duties on softwood exports to the U.S.
By Wednesday of last week, the Benchmark price of Western spruce-pine-fir lumber had risen 5.5 percent to US$400 per thousand board feet from US$379 the previous Friday, according to Random Lengths, a tracker of lumber and panel prices. It's a "major jump," said Shawn Church, Random Lengths editor.
Many homes in the U.S. are built using Canadian softwood lumber  like this home under construction i...
Many homes in the U.S. are built using Canadian softwood lumber, like this home under construction in Katy, Texas.
Jaksmata
As of Friday, July 14, the BC wildfires continued to fuel heavy trading in the framing lumber markets, with steep double-digit hikes in the prices of Western spruce-pine-fir. This forced many buyers to turn to Eastern Canadian mills for coverage and cleaning up those mills ahead of summer shutdowns.
Ketan Mamtora, an analyst with BMO Capital Markets, said he expects lumber prices to continue to rise by 6.0 to 8.0 percent over the next few weeks, partly because of the limited supply. There is some disagreement over the long-term impact on lumber prices should the wildfires continue and mills remain closed.
Should the fires persist for a long time, that will have "a much more meaningful impact on pricing," Mamtora added. The jump in lumber prices could increase by as much as 15 to 17 percent if mills were to stay closed for months or even if they sustained damage.
However, Harry Nelson, an assistant professor of forestry at the University of British Columbia, disagrees, saying the province's entire lumber production would have to be wiped out to see that kind of a spike in prices. "At the end of the day, whatever hole these wildfires create gets filled in somewhere else," Nelson said.
Nelson also points out that with lumber producers being hit so hard with the 27 percent tariff on lumber exported to the U.S., the short-term price increases have been good for the producers. But it won't last forever.
In the meantime, the wildfires still rage, with an additional 27,000 more people being told they may need to evacuate, adding to the thousands and thousands, including all the residents of Williams Lake, who have already fled the fires.
More about British columbia, Wildfires, lumber prices, us tariffs, Steel
 
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