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

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

Just Posted

Undated Google photo of Safeway (20871 Fraser Hwy.).
Safeway, FreshCo, Shoppers and three Langley schools record COVID-19 cases

Two COVID-positive staff reported at same Safeway within days

Google Maps screenshot taken at 7:30 a.m.
TRAFFIC: Westbound Highway 1 crash blocking left lane in Langley

Incident at 264th Street slowing morning commuters

Aldergrove legion branch #265. (Aldergrove Star files)
Final phase of $14 million federal support fund rolls out to legion branches

Branches still reeling from pandemic receive remaining $3.8 million in emergency funds

Italian flat leaf parsley can be used in pesto, replacing fresh basil. (Heather Colpitts/Black Press Media)
ON COOKING: Chef Dez does parsley pesto

Pesto traditionally has fresh basil but it can also be made with another fresh herb

A bullet hole is seen in the windshield of an RCMP vehicle approximately 4 km from Vancouver International Airport after a one person was killed during a shooting outside the international departures terminal at the airport, in Richmond, B.C., Sunday, May 9, 2021. THE CANADIAN PRESS/Darryl Dyck
Homicide team IDs man in fatal YVR shooting as police grapple with spate of gang violence

Man, 20, charged in separate fatal shooting Burnaby over the weekend

Minister of Health Patty Hajdu responds to a question during question period in the House of Commons on Parliament Hill in Ottawa. THE CANADIAN PRESS/Sean Kilpatrick
Drug users were shut out of Vancouver’s decriminalization proposal, critics say, demanding redo

The coalition is asking the city to raise the proposed drug thresholds from a 3-day supply

David and Julie Kaplan with their children Estelle and Justin. (Special to The News)
COVID-19 border closure stops B.C. family’s cross-country move

Maple Ridge couple, two kids, turned away at New Brunswick border

Kelowna RCMP precinct. (Michael Rodriguez - Capital News)
Kelowna RCMP reviewing rough arrest after video shared on social media

The video shows an officer punching a man while arresting him for allegedly driving a stolen car

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

Michael Bublé in video posted to Arts Club Theatre Company’s Youtube channel.
VIDEO: Arts Club alum Michael Bublé backs theatre company’s re-opening campaign

Pandemic has caused 15 months of suspended operations for Arts Club, founded in 1964

Football player Christian Covington in photo posted to twitter.com/Chargers.
Surrey-raised NFLer Covington charged up to join Los Angeles team

Christian Covington, son of CFL Hall-of-Famer Grover Covington, grew up in the Sullivan Heights area

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

Province will support employers on cost, labour minister says

(Pixabay)
B.C. doctors could face consequences for spreading COVID misinformation: college

College says doctors have a higher level of responsibility to not spread incorrect information

Most Read