By Greg Fry

High lumber prices keeping forestry sector strong – for now

Jul 5, 2018 | 2:06 PM

KAMLOOPS — Interior communities dependent on the forestry sector continue to benefit from the high price of Canadian lumber.

Associate Professor Harry Nelson with UBC’s Faculty of Forestry notes we’ve seen record prices in the last three months.

“And even now prices at $560 (US dollars) a thousand board feet are exceptional. And that has – pardon the pun – trumped any kind of tariffs.”

U.S. President Donald Trump’s administration implemented 20 per cent tariffs on imported Canadian lumber last November after both Canada and the U.S. failed to reach common ground on a new softwood lumber agreement.

So, what’s driving these high prices?

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“I think what we’re really seeing is a supply crunch,” says Nelson. “U.S. housing starts have been steadily rebuilding and they’re respectable. But it’s more the supply – whether it’s curtailment back east or the pine beetle here in B.C. – there’s just not enough out there and the U.S. South can’t fill that gap. And classic economics – prices rise in those circumstances.”

Nelson expects the high prices to continue as long as U.S. housing starts stay where they are.

“Over time, prices have drifted off. They peaked at $650 back in May and over time the U.S. South has been investing in building capacity,” he says.

“I imagine more wood will be trickling in from other parts of the world and prices will slowly erode but that will take a while.”

If we have another wildfire season last year Nelson says that could limit supply and drive prices even higher.

In the meantime Interior communities will continue to benefit but not forever he says.

“Markets have been so good we’ve been able to keep production levels up. But when we return to where that trend is there won’t be enough wood around and not all mills will still be able to operate. Essentially that problem has been postponed because of the markets for the time being but it’s not going away.”