Lumber Prices Should Emerge Relatively Unscathed From Canadian Wildfires
But there could still be impacts on logging in non-burned areas from equipment usage.
By Erik Sherman | June 13, 2023
As amber waves of charred air settled over stretches of eastern North America, with respect to the vast damage that has settled in, it could be understood how many in CRE might have a secondary concern. Would the industry find significant blows to construction supply chains beyond what the pandemic saw?
Probably not, according to multiple experts. However, that’s not the same as no impact. As June 13 closed, lumber prices were $529 per thousand boardfeet, up 10.3% from a recent low of $478.50 on May 31.
“Currently the Canadian fires have created a short-term uptick in pricing when purchasing lumber products which as of recent has been a flat and slow market,” Mickey’s Vice President of Trading, Jeffrey Crouse, tells GlobeSt.com. He added, “It doesn’t appear that the fires will have a lasting effect on the lumber supply and production in the long term.”
Every perturbation can rake CRE nerves these days. Just a few weeks ago, reports of logging problems in Maine raised the question of possible lumber shortages. At the time, Ashley Boeckholt, chief revenue officer at MaterialsXchange, told GlobeSt.com that he didn’t think it would be much. He said that Maine’s production is largely hardwoods, like the maple from Maine Woods Company. While they can be important for trim, doors, cabinets, and other uses, framing for homes and other structures depends on softwoods.
Canada is different. In 2020, the U.S. imported $44.6 billion in forest products, according to government figures. Of that, 42.4% came from Canada. According to the Associated General Contractors of America (AGC), nearly 30% of U.S. software lumber consumption came from its northern neighbor.
The two countries had been fighting over software lumber for decades. In 2021, the U.S. moved to double tariffs on Canadian software to 17.9%. However, they dropped to 11.6% in 2022, making the use more economically viable.
The wildfires had been on course for the worst Canada has ever seen, with 4 million hectacres already burned, or 1% of Canada’s forests, according to Reuters.
But according to Domain Timber Advisors, that doesn’t necessarily mean all, or even most, areas were sources of lumber.
“Like most of the industry, Domain Capital Group is taking a wait-and-see approach regarding market impact of the Canadian wildfires,” Scott Reaves, director of natural sources of Domain Timber Advisors, tells GlobeSt.com. “While we may see a small ripple effect, we don’t believe it will be extremely consequential. Canada’s allowable cut had already been diminished by other forest health issues over the past several years and a portion of the burned trees were already dead and no longer merchantable. Additionally, some of the burned areas were not available for harvest for other reasons like maturity or accessibility.”
That still leaves open the possibility of impact because current conditions could have an impact on logging in some areas.
“High fire danger conditions could curtail logging efforts in non-burned areas due to fire risk from equipment usage, which could further reduce wood supply to some degree,” Reaves says.