Dakeryn Industries in North Vancouver, B.C.
Dakeryn Industries in North Vancouver, B.C.

NORTH VANCOUVER, B.C. - With the Softwood Lumber Agreement in tatters and inventories shrunk, U.S. lumber futures prices are spiking, threatening the U.S. homebuilders' business momentum. 

Fires spread across the province this month, and lumber wholesalers had to rely on inventory, say analysts - a supply already being tapped as a result of the trade spat over softwood lumber trade between the U.S. and Canada. The Softwood Lumber Agreement between the countries expired in 2015, and a one year grace period ended in October 2016.

The U.S. Commerce Department made a formal determination in June that Canada subsidizes softwood exports to the U.S., and announced tariffs of 17 percent or more on softwood wood imports. Lumber dealers began running down inventories to use the less expensive stock on hand. The B.C. fires then crimped additional supplies. 

ARTICLE

Canada forest fires force lumber mill closures; prompt state of emergency

As wildfires continue to rage across British Columbia, several big Canadian lumber mills have been forced to temporarily close.


The U.S. construction industry, which objected to the lumber tariffs, is heavily reliant on Canada for softwood lumber's use in 2x4's, a principal ingredient in home construction. The tariffs will add $1,700 to the price of a home, according to the U.S.-based National Association of Homebuilders, which says 20 percent of builders were already experiencing lumber shortages in May. 

 
"People need wood now; little lumber is being offered out there," says Paul Harder, who trades lumber for Dakeryn Industries in North Vancouver, B.C., according to a report by Dow Jones.  
 
The fires wreaked havoc on lumber supply, and will also drive up costs for engineered panel made in mills in British Columbia.
 
West Fraser, one of Canada’s largest producers of lumber, LVL, MDF, plywood, and other wood products, closed three locations in British Columbia, a loss of nearly 7 percent to British Columbia's overall lumber production, and a loss of nearly 14 percent to Canada's overall plywood production, according to Bank of Montreal analyst Ketan Mamora.
 
Norbord Inc., the world’s largest producer of oriented strand board or OSB - used in construction and furniture - suspended all production at its mill in central British Columbia. The shutdown represents a 5.6 percent loss of Canada's OSB production.
 
Tolko Industries, headquartered in Vernon, B.C., experienced more than 60 fires burning in the Cariboo area, several of which are threatening the community of Williams Lake and surrounding rural communities. As a result, it closed its Lakeview and Soda Creek divisions earlier this month.