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Lumber futures are rising due to fires in Canada

(Bloomberg) – Timber futures have risen, accounting for the highest profit margins in more than a year due to fears that forest fires in Western Canada will reduce supply and cause more cuts in sawmills.


<<> British Columbia, Canada’s largest timber exporter to the United States, has declared a state of emergency, and Canfor Corp. said it would reduce production as fires are holding back transport and supply chains. Lumber jumped 7.7% in Chicago, the largest contract advance since April 2020. The price is still more than 60% below the high reached in May.


Futures rose last year from the construction boom driven by the pandemic, only to reach an eight-month low earlier this week after demand fell and supply replenished. Further price increases can be controlled by restored stocks and delays in orders, analysts say.

Timber for September delivery won $ 42 to settle at $ 584 on the Chicago Board of Trade.

Rail transport in British Columbia has been disrupted because a fire on June 30 damaged the tracks of the two main railways, which carry goods to Vancouver for export, causing congestion in the port. The lines have since been repaired, but the rails have been slow and sporadically stopped due to fires.

Not everyone is a Bull


Forest fires are not entirely on the rise in the timber market, said Westline Capital Strategies Inc. CEO. Greg Kuta, whose Ohio-based company specializes in timber trading strategies.


“All the mills are already floating in their wood,” Kuta said. “We need to see a dramatic increase in imports to secondary end-user markets and export markets in order to ship,” he said, referring to the need for timber to be transported from timber to producers.

Sawmills will have difficulty selling timber they can’t transport and need sales and shipments to clear existing high-value inventory, which is currently in the industry’s books.

We expect further cuts in the next two weeks, “said Mark Wilde, timber and timber analyst at BMO Capital Markets, in a report.

Falling timber prices are also “parts of Canfor’s equation,” Wilde said, noting a steep two-month collapse in pricing as demand for home repairs fell by 40 percent at large retailers.


“After a year of ‘inventory boosting,’ the market is now struggling with overstocking in many mills in the United States and Canada,” he said.

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 Junior Trader Nikolay Yordanov

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