B.C. lumber industry ‘poised to take off: report

Posted by Rumin Mann
January 14th, 2011

A new forecast is projecting West Coast lumber prices will swing from recessionary lows of $150 US per-thousand-board feet to peaks of $500 US within five years thanks to new market dynamics that have never converged before.

It won’t happen soon, Russ Taylor, president of the consulting firm International Wood Markets said in an interview, since the lumber industry is still emerging from the worst market conditions it has faced in more than seven decades.

However, going into 2013 and 2014, Taylor said a steady uptick of housing construction in the battered United States market on top of the new markets still emerging in China and the rest of Asia, will boost demand.

At the same time, the ravages of the mountain pine beetle in British Columbia’s forests and the limitations of an industry shrunk dramatically by the recession will squeeze supply.

“I’ve never seen, in my career, so many supply constraints looming,” Taylor said in an interview.

“It is really an unprecedented sort of situation as we get farther into the next cycle, we’re going to see a whole different dynamic we’ve never seen before.”

Taylor added that his firm has been predicting that the North American industry would take off, but the recession of 2008/09 delivered a “huge delay along the way.”

In the post-recession period, however, Taylor said China has become the big new factor that forecasters hadn’t predicted would become such a significant influence.

China became such a big buyer of B.C. wood in 2010 that the province’s lumber exports to Asia (primarily China and Japan) exceeded exports to the U.S. for a period last fall for the first time ever.

Taylor said Chinese buyers prefer to buy logs for their own mills, but were drawn to North American lumber because of the recession-driven prices, but now seem to have become hooked.

“When North American lumber prices were low, [Chinese buyers] started to use it, but they’ve switched hard and have really picked up volumes.”

The market will stretch, and prices will start to spike into that $500 US per-thousand-board-feet range when U.S. housing demand picks up in conjunction with China’s growing demand.

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