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Lumber prices stay strong amid tough trade talks

Lumber prices stay strong amid tough trade talks

Posted on: 2/28/2018 | Author: ATB Financial's Economics + Research Team

​​When the softwood lumber agreement between the United States and Canada expired in 2015, the U.S. Department of Commerce levied duties on all Canadian lumber imports. Perhaps as a means of promoting American products, the duties averaged around 20 per cent. Canadian forestry looked like it was in trouble. However, despite the steep tariffs, recent lumber pricing suggests the forestry sector may be performing better than many expected.

In February, the average benchmark price for North American framing lumber approached new highs. According to Random Lengths, the average price in February was US$496 per thousand board feet (based on the average price of 15 key framing lumbers), the highest price since the company began tracking prices. February’s price was up 10 per cent from January and was 26 per cent higher than the same month a year earlier.

There are a couple of forces working to help keep pricing strong. Last summer’s forest fires in British Columbia resulted in a lack of supply and production, thus helping to raise prices. At the same time, natural disasters like Hurricanes Harvey and Irma stimulated rebuilding efforts and a higher demand for lumber in the U.S. Lastly, U.S. home building has remained strong over the past year, causing an increase in the demand for framing lumber.

Even though forestry prices have been strong for quite some time, these prices may not last. Lumber production in the U.S. is on the rise and, once supplies return in the BC interior, production in Canada will also pick up. What’s more, free trade negotiations with the U.S. are bumpy at best, leaving no new softwood lumber agreement on the horizon.

Lumber prices, graph​ ​ ​

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