Lumber, panel prices expected to remain elevated despite recent declines

Lumber, panel prices expected to remain elevated despite recent declines

Lumber, panel prices expected to remain elevated despite recent declines

CALGARY — Forest product market analysts expect prices for lumber and building panels in North America will remain strong for several years despite recent price declines after an unprecedented surge to record high levels over the summer.

Ongoing robust demand for building products from both new housing and home renovation will be driven by the tight inventory and advanced age of existing homes for sale in the United States, along with low interest rates and untapped home equity, analysts from Forest Economic Advisers said Tuesday on a conference call discussion organized by CIBC.

Meanwhile, they say there’s limited ability to increase North American production of lumber and panels because of wood fibre shortages in British Columbia, the as-yet-undetermined impact of recent forest fires in the western United States and COVID-19-related labour shortages in the U.S. South.

“We did expect to see lumber prices drop … (but) we’re going to continue to see mills produce lumber even as prices come down and that’s because mills are making a significant amount of money right now,” said FEA principal Paul Jannke.

“We don’t think prices are going to retest the lows that we saw in 2019; in fact, if we’re looking out over the next couple of years, we’re looking for prices to balance between US$400 and $500 (per thousand board feet) so that’s a bit higher than we saw through the second half of 2018 and through most of 2019.”

Western SPF (spruce, pine, fir) lumber prices declined by 6.1 per cent over the past week after a nearly unbroken string of increases since April, said CIBC analyst Hamir Patel, quoting industry watcher Random Lengths in a report.

He predicts average prices in the fourth quarter will decline to about US$500 per thousand board feet, down from about US$751 in the third quarter, but still well above the average of US$359 in 2019.

Homebuilders estimate higher prices for forest products have added about $10,000 to the cost of building a typical Canadian home so far this year.

Panel products such as oriented strand board (OSB), commonly used to sheath new homes, have had a similar increase in prices this year thanks to stalled inventory build from the pandemic lockdowns early in 2020 followed by an unexpectedly rapid increase in demand as home building and renovation work boomed, said FEA vice-president Greg Lewis.

“Going forward, in 2021 and again in 2022, we expect production will be able to get ahead of consumption early in the year and we’re looking for a more typical inventory build in early 2021,” he said, adding there are signs that previously closed OSB mills may be restarted.

“The fact that inventory is so low right now and will stay low basically through the end of the year, is a big reason why pricing has been where it’s been.”

Western Canada OSB prices were flat last week compared to the previous week at US$710 per thousand square feet, compared with an average of US166 per mcf in 2019.

Provincial stumpage fees for Crown timber harvested in B.C. and Alberta are expected to continue to add to wood costs for forest product producers this year, Jannke said.

Alberta’s October stumpage fee was recently set at C$85.76 per cubic metre, up from $67.31 in September and $10.67 in October 2019.

This report by The Canadian Press was first published Oct. 6, 2020.

Dan Healing, The Canadian Press

softwood lumber

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Alberta identifies 573 new COVID-19 cases, 13 deaths on Saturday

There are currently 9,727 active cases of the virus in the province

A firetruck sits in front of a home on Harvey Close in Red Deer Saturday afternoon. (Photo by Sean McIntosh/Advocate staff)
Firefighters respond to Red Deer fire

Red Deer firefighters responded to a blaze in the north part of… Continue reading

(Courtesy photo)
Red Deer rental prices drop slightly

Renting an apartment in Red Deer became slightly cheaper last month. Rentals.ca… Continue reading

Rylee Trippel was last seen Friday. (Photo contributed by RCMP)
Red Deer RCMP looking for missing teen

Police are looking for a teen who was last seen in the… Continue reading

The Red Deer Outreach Centre’s Adopt a Family program raised $60,000 in 2020. (Photo courtesy Red Deer Outreach Centre’s Facebook)
Red Deer Outreach Centre’s Adopt a Family program raised $60K in 2020

The executive director of the Red Deer Outreach Centre says she is… Continue reading

Former Alberta Premier Rachel Notley shakes hands with Joel Ward, former Red Deer College President and CEO, as Notley announces that the college is on the path to grant degrees. Red Deer-South MLA Jason Stephan says university status is not a necessary condition for offering degrees. (File photo by Advocate staff)
Future of Red Deer University increasingly uncertain

MLA’s college update says RDC more like SAIT and NAIT than a university

RCMP say missing teen Hope Tivendale has been found. (File photo by Advocate staff)
No foul play suspected after burned body of homeless person found in North Vancouver

VANCOUVER — A burned body, believed to be of a homeless person,… Continue reading

The central zone experienced a spike in the number of COVID-19 cases Thursday, rising from 454 to 508 active cases over the past 24 hours, with 10 people in hospital. (THE CANADIAN PRESS/Darryl Dyck)
Spartan Bioscience says Health Canada has approved its rapid COVID-19 test

TORONTO — An Ottawa company says it’s received approval from Health Canada… Continue reading

Conservative Leader Erin O'Toole holds a press conference on Parliament Hill, in Ottawa, Thursday, Dec. 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Conservative Leader Erin O’Toole defends decision to back, then oust, Sloan

OTTAWA — Conservative Leader Erin O’Toole says he was once willing to… Continue reading

Quebec Premier Francois Legault pauses as he speaks during a news conference on the COVID-19 pandemic, Thursday, Jan. 21, 2021 at the legislature in Quebec City. THE CANADIAN PRESS/Jacques Boissinot
Non-essential travel ban would violate Constitution but courts might allow it: expert

MONTREAL — Fear that Quebecers will catch a new variant of COVID-19… Continue reading

A woman walks outside the Roberta Place Long Term Care home in Barrie, Ont. on Monday, January 18, 2021. The devastating toll of COVID-19 on long-term care residents in Canada has underscored the need for increased public funding for home care, advocates say. THE CANADIAN PRESS/Frank Gunn
COVID-19 deaths in long-term care reveal need for home supports: advocates

VANCOUVER — The devastating toll of COVID-19 on long-term care residents in… Continue reading

A Chinese flag is illuminated by sunshine in the Hall of Honour on Parliament Hill in Ottawa, Thursday, September 22, 2016. China is threatening retaliation against Canada after Prime Minister Justin Trudeau condemned a new security law giving Beijing more control over Hong Kong.. THE CANADIAN PRESS/Adrian Wyld
Diplomats contact Canadian held for over 2 years in China

BEIJING — Canadian officials have met online with former diplomat Michael Kovrig,… Continue reading

Marc Gold (centre) stands with senators André Pratte (left) and Peter Harder before being sworn in during a ceremony in the Senate on Parliament Hill, Thursday, Dec. 1, 2016 in Ottawa. THE CANADIAN PRESS/Justin Tang
Senator urges study of vexing barriers to using secret information in court cases

OTTAWA — A Senate committee should examine the hurdles that make it… Continue reading

In this file photo, a lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018. (By THE CANADIAN PRESS)
Winnipeg ticket holder wins Friday night’s $60 million Lotto Max jackpot

TORONTO — A ticket holder from Winnipeg won Friday night’s whopping $60… Continue reading

Most Read