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Lumber prices smashing records

Lumber prices smashing records

Posted on: 7/13/2018 | Author: ATB Financial's Economics + Research Team

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Amidst the business page clamour about oil pipelines, tech companies and the NAFTA rug being pulled out from under us, one of Alberta’s major resource sectors is seeing record-setting prices.

In July, the composite price of framing lumber in North America hit US$564 per thousand board feet. (The composite price is a weighted average of 15 key framing lumber prices tracked by Random Lengths, a U.S.-based forest industry association). That’s the highest price on record and more than double the price at the start of the decade.

Even better for Alberta producers is the price they’re receiving in Canadian dollars. Converting the U.S. benchmark price into loonies, producers are receiving nearly C$750 per thousand board feet. The red line in the graph below shows the exponential increase in lumber prices in Canadian dollars.

North American lumber prices are being driven higher by strong economic growth in the U.S. and a corresponding boom in housing starts. It’s taken nearly a decade for American home builders to recover from the housing market collapse in 2009, but they’re finally firing on all cylinders.

The record-setting lumber prices are welcome news for Canadian mills because other operating costs have risen. Trucking transportation costs are higher, and many are facing higher energy and carbon prices. As well, in the absence of a renewed softwood lumber agreement with the Americans, the U.S. government has slapped duties on Canadian lumber. The higher price easily compensates for the trade penalties.

Lumber prices, graph

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