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

Vehicles line up for the Greater Vancouver Drive-Thru Food Truck Festival at the Chilliwack Coliseum parking lot on March 27. The touring event comes to Abbotsford this weekend, May 15 and 16. (Photo: Jenna Hauck/Chilliwack Progress)
Drive-Thru Food Truck Festival takes place in Abbotsford

Event runs May 15 and 16 at Tradex, featuring 12 trucks each day

Mandarin Garden in Abbotsford had two event tents set up for outdoor dining. One of the tents, valued at more than $5,000, was stolen early Friday morning (May 14). (Submitted photo)
UPDATE: Dining tent stolen from Abbotsford restaurant is located

Owner says it would have cost more than $5,000 to replace the rented event tent

Chilliwack prolific offender Brian Stephan was wanted in late April 2021, but was arrested and charged after allegedly stealing a vehicle in Mission on May 5 and resisting arrest in Chilliwack. (RCMP file)
Wanted Chilliwack prolific offender arrested yet again

Brian Stephan allegedly stole a vehicle in Mission, committed a B&E, resisted arrest in Chilliwack on May 5

Trina Hunt's remains were found in the Hope area on March 29. Her family is asking the public to think back to the weekend prior to when she went missing. (Photo courtesy of IHIT.)
Cousin of missing woman found in Hope says she won’t have closure until death is solved

Trina Hunt’s family urges Hope residents to check dashcam, photos to help find her killer

The new emergency department at Abbotsford Regional Hospital and Cancer Centre is slated to open June 8. (Screenshot from Province of BC video)
Expanded emergency department slated to open in June at Abbotsford Regional Hospital

Project cost $15 million with an additional $1.25 million donated for equipment

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

Bradley Priestap in an undated photo provided to the media some time in 2012 by the London Police Service.
Serial sex-offender acquitted of duct tape possession in B.C. provincial court

Ontario sex offender on long-term supervision order was found with one of many ‘rape kit’ items

Rich Coleman, who was responsible for the gaming file off and on from 2001 to 2013, was recalled after his initial testimony to the Cullen Commission last month. (Screenshot)
Coleman questioned over $460K transaction at River Rock during B.C. casinos inquiry

The longtime former Langley MLA was asked about 2011 interview on BC Almanac program

Steven Shearer, <em>Untitled. </em>(Dennis Ha/Courtesy of Steven Shearer)
Vancouver photographer’s billboards taken down after complaints about being ‘disturbing’

‘Context is everything’ when it comes to understanding these images, says visual art professor Catherine Heard

Chief Public Health Officer Theresa Tam listens to a question during a news conference, in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Restrictions will lift once 75% of Canadians get 1 shot and 20% are fully immunized, feds say

Federal health officials are laying out their vision of what life could look like after most Canadians are vaccinated against COVID-19

Mike Farnworth, pre-pandemic. (File photo)
Surrey Police recruitment not distracting cops from shootings, Farnworth says

‘That’s simply not the case,’ Public Safety Minister Mike Farnworth told the Now-Leader on Friday

Police are at Ecole Mount Prevost Elementary but the students have been evacuated. (Kevin Rothbauer/Citizen)
Gardener finds buried explosives, sparking evacuation of Cowichan school

Students removed from school in an ‘abundance of caution’

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

Most Read