Lumber prices have been very volatile since COVID began. Last year they peaked in May before sliding to a low in August. With the exception of a precipitous dip in November they’ve been climbing ever since. The question of the day: will things get back to normal or will the prices continue to climb in 2022?
A grain of salt
Every price prediction needs one. A reasonable forecast based on today’s information can be completely upended by exogenous events that no one anticipated. COVID is as good an example as any.
The best guess
The devastating November flooding in Western Canada has put enormous pressure on a supply chain that was already stressed from COVID. West Fraser is a large (+11B market cap) forestry company based in BC, Canada. Below is their operational update for November, 2021:
In recent weeks, severe weather and flooding in B.C. has caused transportation disruptions to rail and truck routes, including limiting access to ports for overseas shipments. In the second half of November, following the weather event that led to road and rail closures, the Company’s western Canadian lumber weekly shipments have declined by approximately 25%-30%. In addition, our pulp shipments to the port of Vancouver, from where the majority of our export pulp ships, have averaged less than 20% of normal volumes. While West Fraser is utilizing alternative transportation routes and methods to the extent they are available to continue servicing customers, the magnitude and duration of the impact from current weather events remains uncertain. Therefore, West Fraser has reduced operating schedules at multiple western Canadian locations and will continue to make such adjustments as necessary in order to manage inventory levels, raw material supplies and our integrated fibre supply chain. At the current time, it is not possible to estimate when full transportation services will resume or when the backlogs resulting from the interruptions will be cleared.
We’ll keep you posted
If there are any large price swings going into next year we’ll keep you apprised in this space. If you have any questions about prices or any other subjects we’re happy to answer them. Call 613-736-1122 or hit the chat button on the right during business hours.