B.C.’s forestry industry has a head start over other regions to make the most of rising lumber prices, say industry experts.
The steady rebound in the U.S housing market has caused softwood lumber prices to follow suit, rising 40% over the past six months, according to data compiled by Natural Resources Canada.
“We’re positioned to make profit now, where [other provinces and U.S. states] won’t make it until they open [mills] up,” Dave Cohen, a forestry professor at UBC, told Business in Vancouver. “We’re in a good competitive position.”
Data released by the U.S. Department of Commerce shows U.S. housing starts are up 23% above last January’s numbers, putting the U.S. market on track to build just under one million houses this year.
It’s a far cry from the 2.1 million starts seen in 2005 before the U.S. housing bubble burst, and the market still has a ways to go before it can be considered stable, said Cohen.
“What they consider steady state is somewhere between 1.5 and 1.8 [million],” he said.
Softwood lumber prices have risen along with rising construction and steadily climbing U.S. home prices. Last week, softwood lumber had risen to around $420 per thousand board feet, up from below $300 six months ago, according to data compiled by Natural Resources Canada.
The effect on the forest sector has been immediate, with companies now rushing to open shuttered mills in eastern Canada and the U.S.
“Some of them have been closed for many years,” said Cohen. “They don’t have workers, they don’t have lumber in the yard.”
In contrast, many of B.C.’s mills continued to operate throughout the downturn, fed by a supply of pine beetle-killed wood and new orders from China.
Cohen warned that prices may start to level off through the summer of 2013, as more mills come online and start to increase lumber supply.
Canfor (TSX:CFP) and Interfor (TSX: IFP.A) announced new investment in B.C. Interior mills in 2012 fourth-quarter reports. Canfor will make capital investments in their Radium, Elko and Mackenzie sawmills, while Interfor plans upgrades to mills in Grand Forks and Castlegar.
