Key Takeaways:
Lumber prices reached a four-year high this summer, as steep duties on Canadian imports, wildfires and sawmill closures tightened supply.
Home sales are slumping and renovation spending is losing steam, yet the price of two-by-fours has climbed to levels not seen since 2022, when a record-setting Covid-era spike began to unwind, according to the Wall Street Journal. Back then, a suburban building boom and a do-it-yourself frenzy among stuck-at-home Americans sent lumber prices to record highs before they fell back to earth.
The rally is supply-driven. Steep duties on Canadian softwood lumber shipped to the United States, wildfires that have damaged timberland, and a wave of sawmill closures have all reduced available supply even as construction demand cools.
Canfor Corp., one of North America's largest lumber producers, said its lumber segment generated C$145 million in adjusted EBITDA in the second quarter, up C$116 million from the prior quarter, supported by better pricing, higher shipments and cost improvements. The Vancouver-based company is closing its Northwood pulp mill, Fox Creek sawmill in Alberta and two Swedish sawmills, expecting about C$65 million in third-quarter restructuring and impairment charges.
Canfor's Lumber EBITDA Jumps C$116 Million to C$145 Million
Canfor's European lumber operations contributed C$37 million in adjusted EBITDA, helped by moderately higher prices and increased shipments. In North America, improved pricing was especially evident in wider dimensions including six-inch, 10-inch and 12-inch products, according to Senior Vice President of Sales and Marketing Kevin Pankratz. Tight trucking capacity and elevated fuel surcharges supported southern yellow pine pricing, while increased rail shipments let Canfor reach additional markets.
Mill Closures Reshape North American Supply
The supply cuts extend beyond Canfor. GreenFirst Forest Products Inc., an Ontario-based lumber producer, said it secured a term loan under the Canadian government's softwood lumber support program as it manages industry volatility. Its shares rose 3.87 percent on July 31 as improved realized lumber pricing and a narrower operating loss lifted sentiment. Canadian producers have announced curtailments and mill closures in response to poor economics, which can eventually help rebalance supply.
Rising lumber prices pressure homebuilder margins and raise construction costs, potentially dampening housing activity further. With supply constrained by duties, wildfires and closures, prices may stay elevated even as demand weakens, squeezing builders who pass higher costs to buyers already facing affordability pressures.
This article is for informational purposes only and does not constitute investment advice.
