Photo by Malachi Brooks on Unsplash

Futures prices for lumber have come crashing down in recent weeks, but hundreds of active wildfires burning throughout the western United States and Canada are threatening to slow down sawmill production and send prices higher once again. 

At the time of publishing, there were reports of 83 large fires throughout 13 US states, according to the National Interagency Fire Center. The blazes have scorched more than 1.36 million acres and nearly 22,000 firefighters have been dispatched in response. British Columbia declared a state of emergency this week as 277 active wildfires raged across the province, which has faced record-breaking temperatures in July.

On Tuesday, Vancouver-based lumber producer Canfor announced it would be cutting back production by approximately 115 million board feet during the third quarter of 2021 due to the extreme wildfire conditions.

“The wildfires burning in Western Canada are significantly impacting the supply chain and our ability to transport product to market,” said Stephen Mackie, Executive Vice President, North American Operations, Canfor, in a press release.

“As a result, we are implementing short-term production curtailments at our Canadian sawmills beginning July 26. We are developing site specific plans to minimize the impacts to our employees and contractors.”

Lumber futures for September have climbed over 20 percent during the past five days as the West Coast wildfires intensified, closing at $648.20 per thousand board feet on Friday, July 23rd.

Traders have already propped up futures prices into early next year as the production slowdown is expected to have a months-long impact. At this point, we’re only about a third of the way through fire season, putting a question mark on just how high lumber prices could climb.

Despite the recent rise in lumber futures, prices are still down by more than 40 percent compared to May when an all-time high of $1,670.50 per thousand board feet was reached. To put that into perspective, lumber cost $350 to $500 per thousand board feet prior to the pandemic.

June’s new residential construction report from the US Census Bureau indicates that building permits for single-family homes are falling as homebuilders address their current backlogs of pre-sold homes and wait for material prices to stabilize. These construction delays could grow even longer if wildfires keep lumber prices elevated. 

Although Canadian softwood lumber is the preferred building material among homebuilders thanks to its high strength and light weight, a number of recent issues facing Canada’s forest industry — among them a beetle infestation, Trump-era tariffs and COVID-19 related sawmill closures — could lead to increased demand for Southern Yellow Pine, which is grown in the Southern United States.

Alternative wood products may help to ease some of the high-price pain, but the overall effect of wildfires on the lumber market could exacerbate the country’s ongoing housing shortage and make homeownership less affordable for a growing number of Americans.

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