Logs are seen in an aerial view stacked at the Interfor sawmill, in Grand Forks, B.C., Saturday, May 12, 2018. An unexpected rebound in wood product prices this month is boosting profits for Canadian forestry companies but leaving homeowners and buyers with the prospect of higher home and renovation costs in 2021. THE CANADIAN PRESS/Darryl Dyck

Logs are seen in an aerial view stacked at the Interfor sawmill, in Grand Forks, B.C., Saturday, May 12, 2018. An unexpected rebound in wood product prices this month is boosting profits for Canadian forestry companies but leaving homeowners and buyers with the prospect of higher home and renovation costs in 2021. THE CANADIAN PRESS/Darryl Dyck

Wood products pricing surge expected to persist, raising 2021 house, renovation costs

Lumber prices have added as much as $30K to the construction cost of a typical 2,500-square-foot house

An unexpected rebound in wood product prices this month is boosting profits for Canadian forestry companies but leaving homeowners and buyers with the prospect of higher home and renovation costs in 2021.

Prices for lumber and wood panels are up in December due to strong housing markets and limited capacity to increase North American production following a seasonal softening of prices in October and November, said RBC Capital Markets analyst Paul Quinn.

“As we head into 2021, we have seen unprecedented pricing levels to close out 2020 with (lumber) prices moving higher following a pullback in October/November,” said Quinn in a report.

“With demand likely to get stronger as dealers get ready for what should be a very strong spring building season, we expect that prices will remain at a high level during the first half of the year.”

Next year could be even brighter for producers than 2020, he said, adding that record high prices set last summer as COVID-19 forced people to work from home — thus sparking interest in renovations or buying a bigger house — will likely continue or be eclipsed in 2021.

The price volatility and shortage of supply of some wood products means headaches for homebuilders trying to take advantage of the current strong market for new houses that is expected to continue in 2021, said Kevin Lee, CEO of the Canadian Home Builders’ Association.

“Our members price houses based on expected near-term prices for lumber and then, when they go up, it becomes very hard to operate,” he said.

“They went down a little bit through October but you’re still talking about lumber prices three or four times the prices from a year ago. And now they’ve escalated right back up again.”

He says higher lumber prices this year have added as much as $30,000 to the construction cost of a typical 2,500-square-foot (232-square-metre) house in Canada.

Higher wood product costs haven’t affected the work volume for Shamrock Mountain Building Ltd., a home and renovation contractor that employs 14 staff split between Calgary and the ski resort community of Golden, B.C., according to owner Dale Higgins.

“All you can do is pass it along. Obviously prices are going up, you just have to be honest about it,” he said on Wednesday.

“Some people complain a little bit more about it … (but) if they’re getting multiple quotes, everyone’s saying the same thing. It’s not like just one person is charging 20 per cent more for lumber.”

Higher prices are encouraging Western Forest Products Inc. of Vancouver to redirect logs harvested on the West Coast that might have previously been exported to Asia into its Canadian mills to make value-added products, said CEO Don Demens.

“The opportunity we have is to really move up the product value chain and increase our production,” he said in an interview on Wednesday.

“Some of the logs on the coast were being exported into China. We can repatriate those logs into our sawmills and manufacture lumber products for customers in North America.”

He said the company remains cautious about increasing spending, however, because of unknowns posed by the ongoing COVID-19 pandemic.

Shares in Western Forest Products closed up 7.5 per cent at $1.29 on Wednesday after RBC analysts raised their target price by 50 cents to $1.50 per share.

In a report, RBC cited strong wood product demand and the lower U.S. lumber import duties for its bullish rating.

In a new forecast out Tuesday, RBC raised its composite price estimate for lumber in 2021 to an average of US$575 per thousand board feet, up from US$475. Its average price is US$560 for this year.

It says western Canadian oriented strandboard, a type of panelling often used to clad new houses, is expected to average US$430 per thousand square feet in 2021, up from a previous estimate of US$305 and an average of US$420 in 2020.

Dan Healing, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Housing

Just Posted

The first Pfizer-BioNTech COVID-19 vaccine dose in Canada is prepared at The Michener Institute in Toronto on Monday, Dec. 14, 2020. THE CANADIAN PRESS/Frank Gunn
One death, 39 new cases of COVID-19 in Interior Health

There are 484 active cases of the virus in the region currently

Pictured is Britany Bignham, a Cranbrook hairstylist who is one of 16 top stylists in the running for the Ultimate Stylist competition - an online international hair and beauty competition. She is pictured behind her chair at the Hair Mob. (Corey Bullock/Cranbrook Townsman file)
Cranbrook hairstylist vies for top prize in international competition

Britany Bingham is one of 16 finalists in the Ultimate Stylist competition

Kimberley RCMP detachment seeking information after female teenager grabbed by masked man.
Teenaged female grabbed by masked man on Kimberley trail

RCMP seeking witnesses or information

Brenda Ware. (RCMP)
Murder charge laid against man in Kootenay National Park homicide

Philip Toner was located in Lake Country on May 11

City staff has passed an order requiring remedial action on a building that was severely damaged by fire last fall. Trevor Crawley photo.
City council orders remedial action on vacant buildings damaged by fire

City council has issued a remedial action order relating to vacant buildings… Continue reading

B.C. Labour Minister Harry Bains in the B.C. legislature, May 13, 2019. (Hansard TV)
VIDEO: B.C. to provide 3 days of sick pay for COVID-19 absences

Province will support employers on cost, labour minister says

Provincial health officer Dr. Bonnie Henry updates B.C.’s COVID-19 situation at the B.C. legislature, April 29, 2021. (B.C. government)
B.C.’s COVID-19 rate creeps up again, 600 new cases Wednesday

One more death, 423 people in hospital with virus

B.C. Agriculture Minister Lana Popham takes questions in the B.C. legislature in 2017. (Hansard TV)
UPDATE: B.C. will fund another year of fresh fruit, vegetables, milk in schools

John Horgan government working on school meal program

Surrey RCMP is releasing sketches of a suspect in an “indecent act” at the Coyote Creek Elementary playground on April 30, 2021. Police said the suspect was clean-shaven “during some interactions” and on “other occasions had stubble outlining a goatee and mustache.” (Images: Surrey RCMP handout)
Vancouver mayor-elect Kennedy Stewart addresses supporters in Vancouver on Sunday, Oct. 21, 2018. THE CANADIAN PRESS/Darryl Dyck
Vancouver mayor says there’s no time to redo details of drug decriminalization plan

Kennedy Stewart says a federal election could see the small window of opportunity close on the city’s bid for an exemption from criminal provisions on simple possession of small amounts of drugs

Premier Mike Horgan received his first dose of a COVID-19 vaccine. (Facebook/John Horgan)
More than 50% of people eligible in B.C. have received 1st vaccine dose

‘We’ve made extraordinary progress together over the past few weeks,’ says Premier Horgan

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Join Black Press Media and Do Some Good
Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Most Read