Canadian lumber prices see unseasonal spike as U.S. wholesales, retailers begin buying ahead of next year's construction season

VANCOUVER, B.C. , November 19, 2011 () – Lumber prices have taken an unseasonal price spike as U.S. wholesalers and retailers start buying well ahead of the expected construction season next year.

Spurred by low inventories, strong apartment construction and a surprise jump in building permits in the United States, the price of spruce, pine and fir construction lumber closed the week at $240 US a thousand board feet, a $22 jump from the week before when it was at $218 US. The price hike is being viewed by B.C. lumber companies as one of the first pieces of positive news out of the U.S. in five years of dismal lumber pricing, said Keta Kosman, publisher of the lumber research journal Madison's Lumber Reporter.

Apartment construction is on the rise in the U.S., she said, fuelled by the need of so many people who have lost their homes to find an apartment to rent.

Further, October building permits, an indicator of future construction, came in at a seasonally-adjusted rate of 653,000 units, a 10.9 per cent increase over the month before. Analysts expected starts to come in at 608,000.

One week doesn't make a turnaround, Kosman said, but with the U.S. holiday season approaching and mill order books filled for the next two to three weeks, she forecast that prices will remain where they are or go up between now and next January.

"This spurt in lumber prices is coming from the U.S.," she said. "But it's more of a function of a lack of supply rather than any remarkable increase in demand."

U.S. buyers and sawmills have both let their inventories fall so low that any good news on the construction front can lead to a frenzy of buying. Demand normally picks up in advance of the spring building season but this year it is coming early Kosman sai d.

"Demand will be going up in the spring. It's just that it's not going to be some huge bonanza. For it to be happening now means that even for the little bit of hammering that is going on, there's no wood."

The current price of $240 US a thousand board feet is still low, she said, but lumber futures are on a strong upswing as well, another sign that the five-year-long lumber slump may be coming to an end.

"I am pretty confident that we are in the turn now (towards stronger lumber prices and sales in 2012). There are still going to be some bumpy times ahead, but barring some disaster like a country in Europe going bankrupt, we have passed through the worst. "

Lumber prices started to collapse in the last quarter 2006, a record year for U.S. housing starts, signalling that the homebuilding boom was over.

Recovery never came, however, as the U.S. housing binge, fuelled by low interest rates, turned into a financial crisis in 2008, when many of those mortgages came due and homeowners could not afford to pay higher interest rates.

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