BC Lumber producers are accustomed to boom and bust cycles, but the past two years have been surprisingly volatile for the industry.<\/p>\n
Lumber prices fell at the start of the COVID-19 pandemic, then hit record highs, only to fall again and rebound.<\/p>\n
The protests against old-growth logging on Vancouver Island that began in 2020 by environmentalists have attracted international attention. In 2021, the B.C. government announced plans to restrict logging in old-growth forests, nearly three decades after the Clinton administration banned timber harvesting in the US Pacific Northwest.<\/p>\n
North American lumber markets are headed for wild price volatility for the third year in a row, amid tightening supplies from British Columbia, although forecasters don\u2019t expect record highs in 2021.<\/p>\n
Cash prices \u2014 what sawmills are charging wholesalers to sell \u2014 hit a record high of US$1,630 for 1,000 board feet made of western spruce, pine and fir (SPF), according to Random Lengths. -based company that oversees timber markets.<\/p>\n
After peaking during the market itself boom when consumers bought materials for decks and repairs last May, prices fell 75 percent over the next three months, then staged a rebound.<\/p>\n
Lumber prices rose by US$75 last week to reach US$1,120 \u2013 nearly three times as much in the past five months. During the latest surge in the commodity\u2019s roller-coaster ride, lumber prices have more than doubled in the past two months after supply chains were disrupted by the B.C. floods in mid-November, and U.S. tariff rates on most Canadian softwood producers exceeded those of December. Doubled in the beginning.<\/p>\n
Investors have been cautious as it is unclear how long this current phase of the lumber frenzy will last. Share prices of B.C.-based growers have risen relatively modestly since mid-November during the latest lumber rally, with West Fraser Timber Co Ltd up 11 percent, Canfor Corp up 17 percent and Interfor Corp up 36 percent . All three companies are major producers within BC, but they have also operated in other parts of North America over the years, including the US South.<\/p>\n
Lumber prices in 2022 are projected to be much higher than pandemic levels in 2019, when they averaged US$360 for 1,000 board feet of Western SPF.<\/p>\n
On the demand side, analysts suspect a strong US housing launch will be on pace in 2022, given the prospect of rising interest rates eroding the purchasing power of home buyers. On the supply side, a key factor is the B.C. government\u2019s November announcement that it plans to suspend logging on 2.6 million hectares of public land in the most at-risk old-growth forests.<\/p>\n
\u201cThere\u2019s enough going on that there\u2019s room for price volatility \u2014 wild price swings,\u201d said Peter Barrinin, lead economist for lumber at FastMarkets, which publishes Random Length.<\/p>\n
In B.C., where the provincial government estimates that logging in old-growth forests accounts for 27 percent of the annual crop on Crown Timberland, uncertainty hangs over how much of the timber supply will be returned.<\/p>\n
Mr Barrin estimates that the effects of harvesting restrictions in old-growth forests could result in a 12 percent reduction in BC timber production on Crown lands.<\/p>\n
Lumber production has been on a declining trend in BC since peaking in 1987, long before the provincial government\u2019s recent proposals, including greater harvesting rights for First Nations.<\/p>\n
However, higher prices have driven an increase in production capacity outside BC, including new supplies from the US South that could help send prices back down, analysts say.<\/p>\n
On Sunday night, CIBC World Markets Inc. US analyst Hamir Patel raised his forecast for the average price for 1,000 board feet in 2022 for Western SPF to US$725 from his previous estimate of US$600. This will be below the average of US$870 in 2021, but more than US$550 in 2020. Raymond Gems Ltd analyst Daryl Swetlishoff envisages an average price of US$585 in 2022, while RBC Dominion Securities Inc. analyst Paul Quinn has an estimate of US$675.<\/p>\n
Despite wildfires in 2017 and 2018 depleting supplies of available wood fiber in BC, the province remains Canada\u2019s largest softwood timber producer, accounting for 40 percent of the country\u2019s production and 14 percent of North American production.<\/p>\n
The BC Forest Ministry estimates that the old-growth forests of the province formerly spanning an area of \u200b\u200b25 million hectares date back to about four centuries ago. Old-growth areas have fallen to 11.1 million hectares, or 20 percent of BC\u2019s 56.2 million hectares of public forest. The ministry said that 35 lakh hectares are already protected.<\/p>\n
The B.C. government has warned that 4,500 direct forestry jobs could be at risk from proposed harvesting restrictions, or 9 percent of total direct employment in the provincial sector. The BC Council of Forest Industries, or COFI, believes 8,600 direct jobs are at risk. COFI argues that more than 18,000 forestry-related jobs \u2013 or what economists call direct, indirect and induced jobs \u2013 could be lost, or 18 percent of forestry-related jobs in the province could be lost.<\/p>\n
Forestry consultant David Alston, managing director of Spar Tree Group Inc., paints a bleak picture for B.C.\u2019s lumber industry, with ripple effects such as fewer wood chips for pulp and paper. He warns that employment in B.C.\u2019s forestry sector could drop by up to 44 percent.<\/p>\n
COFI President Susan Yurkovich said timber producers are harvesting at a sustainable level, although the B.C. government\u2019s efforts to overhaul a series of forestry policies are already impacting investments in the province. \u201cIt\u2019s really created a lot of uncertainty in this area,\u201d Ms Yurkovich said during a podcast interview with Brigitte Anderson, chairman of the Greater Vancouver Board of Trade.<\/p>\n
COFI estimates that 20 lumber mills could be closed, or 16 percent of the total in B.C. \u201cThis is very difficult for families, workers and communities,\u201d Ms Yurkovich said.<\/p>\n
Environmentalists say the B.C. government is not acting fast enough to protect old-growth trees, which vary widely in size and characteristics depending on age and location.<\/p>\n
In 1994, then-U.S. President Bill Clinton introduced the Northwest Forest Plan, which aimed to protect federal public lands and northern spotted owls in Oregon, Washington state, and northern California.<\/p>\n
After companies had extensively logged the region for five decades, the US Pacific Northwest grew from 13.3 million hectares of old-growth forests in the early 1940s to 4.2 million hectares in 1992. \u201cUnder the Northwest Forest Plan, much of the remaining old growth was originally removed from the range in 1994,\u201d said Ken Wu, founder of the Vancouver-based Endangered Ecosystems Coalition.<\/p>\n
The best grades of old growth wood from BC are coveted by niche buyers willing to pay premium prices for cedar from natural forests. Cedar wood classified as \u201cclean\u201d \u2014 free of knots \u2014 goes into the manufacturing of high-end wood products, including specialty doors, indoor paneling and outdoor furniture.<\/p>\n
BC \u201cends\u201d western red cedar for export to the US, achieving a price in mid-2021 that was four times the value of western SPF for house framing.<\/p>\n
Mr. Wu said BC needs to do more value-added processing with second-growth lumber, and he supports protesters who want companies to build public timberlands such as the Fairy Creek watershed and on central Walbran on Vancouver Island. Stop old-development logging. \u201cWe need strong forestry practices codes to end old growth logging as these are endangered ecosystems,\u201d Mr. Wu said. \u201cPrivate land remains less regulated than public land.\u201d<\/p>\n
Crown timber accounts for 95 percent of BC\u2019s forest land, while only 5 percent is private. But analysis by Mr Barinin and economist Sima Ghasemi of Fastmarkets shows private timberland is supplying a large percentage of BC\u2019s annual tree crop, which is expected to reach 16 percent in 2021.<\/p>","protected":false},"excerpt":{"rendered":"
BC Lumber producers are accustomed to boom and bust cycles, but the past two years have been surprisingly volatile for the industry. Lumber prices fell at the start of the COVID-19 pandemic, then hit record highs, only to fall again … Continue reading