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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The first tree – a Sitka spruce – in the second phase of Fort Langley’s Memory Grove was planted on the morning of Thursday, Jan. 21. (Kurt Alberts/Special to the Langley Advance Times)
Second phase of Memory Grove planted at Fort Langley

The first trees started going into the ground on Thursday, Jan. 21

B.C. MInisterial Order 425 and the list of permitted exemptions to wearing face masks in retail businesses and other public spaces. (B.C. Government website)
LETTER: Langley newspaper criticized for doing story on maskless encounter

Local letter writer shares opinion on video of unmasked man in grocery store

Two schools in the Langley School District have reported COVID-19 exposures. (Joti Grewal/Langley Advance Times)
Two Langley schools added to COVID-19 exposure list

Public Health will only contact those who were exposed

Jessica Simpson speaking to Langley Township council as a delegate in 2019. (Township of Langley/Special to the Langley Advance Times)
Health privacy breach claimed by controversial Langley woman

Jessica Simpson is suing Fraser Health over an alleged breach in her health info

Aaliyah Rosa. (Black Press Media file photo)
Langley child murder trial delayed until spring

It will be three months before testimony resumes

Businesses continue to struggle under COVID-19 restrictions as the pandemic reaches the one-year mark. (B.C. government)
Another 564 COVID-19 cases, mass vaccine plan coming Friday

15 more deaths, community cluster declared in Williams Lake

Premier John Horgan leaves the podium following his first press conference of the year as he comments on various questions from the media in the Press Gallery at B.C. Legislature in Victoria, B.C., on Monday, January 13, 2020. THE CANADIAN PRESS/Chad Hipolito
Interprovincial travel restrictions a no-go, Horgan says after reviewing legal options

The B.C. NDP government sought legal advice as concerns of travel continue

Gem Lake Top, at Big White Ski Resort, seen at Jan. 8. (Big White Ski Resort)
Big White cancels $7.3M in lift tickets, accommodations due to COVID-19 orders

Since November, the ski resort has been forced to make several changes

Jan. 21 marks the 21st day of the 21st year of the 21st century, according to some. (Black Press Media file photo)
The 21st day of the 21st year of the 21st century is upon us

Milestone won’t be back for another 100 years

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

Darlene Curylo scratched a $3M ticket, BCLC’s largest ever scratch and win prize. (BCLC)
Kelowna woman in shock after winning BCLC’s largest-ever instant-ticket prize

Darlene Curylo couldn’t believe her eyes when she saw the amount of money she’d won from a scratch ticket

While each person has different reasons for becoming homeless, a UBCO study shows they learn through their interactions with different services to perform ‘as homeless’ based on the expectations of service providers. (Contributed)
Kelowna homeless forced to ‘perform’ for resources, says UBCO study

One participant in the study said ‘It is about looking homeless, but not too homeless’

Gov. Gen. Julie Payette takes the royal salute from the Guard of Honour as she makes her way deliver the the throne speech, Wednesday, September 23, 2020 in Ottawa. THE CANADIAN PRESS/Fred Chartrand
Gov. Gen. Julie Payette resigns, apologizes for ‘tensions’ at Rideau Hall

Payette, who is the Queen’s representative in Canada, has been the governor general since 2017

Grounded WestJet Boeing 737 Max aircraft are shown at the airline’s facilities in Calgary, Alta., Tuesday, May 7, 2019. WestJet will operate the first commercial Boeing 737 Max flight in Canada today since the aircraft was grounded in 2019 following two deadly crashes. THE CANADIAN PRESS/Jeff McIntosh
Passengers unfazed as WestJet returns Boeing 737 Max to service on Vancouver flight

After a lengthy review process, Transport Canada cleared the plane to return to Canadian airspace

Most Read