An unexpected rebound in wood product prices this month is boosting profits for Canadian forest companies, but leaves homeowners and buyers the prospect of higher house and renovation costs in 2021.
Sawn and wood panel prices rose in December due to strong real estate markets and limited capacity to increase North American production after prices fell seasonally in October and November, said Paul Quinn, an analyst at RBC Capital Markets.
“As we head into 2021, we’ve seen unprecedented price levels to close in 2020, with (lumber) prices rising after falling in October / November,” Quinn said in a report.
“With demand likely to grow as dealers prepare for what is likely to be a very strong spring construction season, we expect prices to remain high in the first half of the year.”
The next year could be even better for producers than 2020, he said, adding that the record prices noted last summer when COVID-19 forced people to work from home – adding to interest in renovations or buying of a bigger house – likely to stop or be dwarfed in 2021.
Price volatility and shortages of some wood products are a headache for home builders as they try to capitalize on the current strong new home market that is expected to continue in 2021, said Kevin Lee, CEO of the Canadian Home Builders’ Association.
“Our members rate houses based on expected short-term timber prices and when they go up it becomes very difficult to operate,” he said.
“You went down a bit until October, but you’re still talking about timber prices three or four times what they were a year ago. And now they did it again. “
He says higher timber prices this year increased the cost of building a typical 232 square foot home in Canada by as much as $ 30,000.
Higher cost of wood products has not affected the volume of work at Shamrock Mountain Building Ltd., a construction and renovation company that, according to owner Dale Higgins, employs 14 people between Calgary and the ski resort town of Golden, BC.
“You can only pass it on. Obviously the prices are increasing, you just have to be honest, ”he said on Wednesday.
“Some people complain a little more about it … (but) when they get multiple quotes they all say the same thing. It is not that just one person charges 20 percent more for wood. “
Higher prices encourage Western Forest Products Inc. of Vancouver to redirect logs harvested on the west coast that may previously have been exported to Asia to its Canadian plants to create value-added products, said CEO Don Demens.
“The chance we have is to really improve the value chain of the products and to increase our production,” he said in an interview on Wednesday.
“Some of the tribes on the coast were exported to China. We can return these logs to our sawmills and manufacture sawn timber products for customers in North America. “
However, he said the company continues to be cautious when it comes to increasing spending as the ongoing COVID-19 pandemic is unknown.
Western Forest Products shares closed 7.5 percent at $ 1.29 on Wednesday after RBC analysts increased their price target by 50 cents to $ 1.50 per share.
In a report, RBC cited strong demand for wood products and lower import tariffs on wood in the US for its bullish rating.
In a new forecast on Tuesday, RBC raised its composite price estimate for sawn timber in 2021 from $ 475 to an average of $ 575 per thousand board feet. The average price for this year is $ 560.
It’s said that West Canadian-oriented beach board, a type of cladding commonly used to clad new homes, will average $ 430 per thousand square feet in 2021, compared to a previous estimate of $ 305 and an average of 420 US dollars in 2020.
Dan Healing, the Canadian press
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