Lumber futures jumped to a six-month high as two producers plan to close mills in British Columbia, fueling supply concerns as a beetle infestation decimates forests in the region. Source: Business Week
West Fraser Timber Co said it planned to shut its mill in Houston, British Columbia, and Canfor Corporation will close its Quesnel site in the province.
The Vancouver-based companies cited a timber shortage after forests were ravaged by the mountain pine beetle.
Lumber futures have surged 22% since the end of May.
The shutdowns will aggravate supply concerns already heightened by low inventories, said Paul Jannke, an analyst at Forest Economic Advisors LLC, an industry consultant in Westford, Massachusetts.
The announcements marked the first major closures linked to the beetle scourge, which has destroyed an estimated 710 million cubic meters of timber, he said.
“This is definitely going to bolster prices going into next year,” Jannke said. “It’s also coming at a time when you typically start to see mills going down for maintenance.”
Prices are 18% higher than they were a year ago. The mills that are closing account for more than half a million board feet of lumber, Jannke said.
The beetle “infestation has killed vast portions of the interior pine forest, resulting in a continuing deterioration and loss of merchantable timber available to wood-products producers in the interior” of British Columbia, West Fraser said in a statement.
