Wildfire, trade spats send lumber prices up

Global Business

Wildfire, trade spats send lumber prices up

Wildfires have been burning across British Columbia for more than a month now. They’ve left many homeless and as the summer months continue, a mix of hot temperatures, parched land and lightning mean there could be more on the way.

That’s having a direct impact on one of the area’s major exports: timber.

CGTN’s Phil Lavelle investigates from Los Angeles.

Across the border, the United States is heavily reliant on Canadian lumber with some estimates saying a third of that used in building homes comes directly from British Columbia.

Lumber prices were already high – a trade spat between President Trump’s administration and Canadian officials has seen prices rocket over recent months. And now, the shortage caused by the fire is adding extra stress to the situation.

Rick White is a homebuilding expert and works at Larrabure Framing in Los Angeles. He says things are pretty bad right now, “lumber prices have reached an all-time high, in terms of cost.”

And he points out that the U.S. is in its own precarious situation, with fire a big concern here too.

“It’s a big issue because when the mills shut down in Canada, then our lumber mills here are trying to ramp up to make the difference. But we’re also in a fire season here and the North West as well so there are some issues there when it comes to try to meet that supply.”

William Yu is an Economist at UCLA’s Anderson School of Management and he highlights the fact that even though prices have hit an all time high, demand has not.

“It’s much less than what we saw at the height of the housing boom,” he said. “We saw a price spike from April to May however, later, it kind of declined back. You may say ‘why’s that?’ Well the answer is in the short-term, supply impacts the price rising. However, the long run, the demand is still not as high as it was before.”

The question is where do these costs end up being absorbed?

“That price has to be passed on. There is no way of hiding that margin. Sometimes, there may be a little absorption by the mills or by the framers or by the builders, but nobody’s working on any margins that will allow for much of that absorption. Everybody’s trying to play the game as tight as possible,” White said.

But realtors aren’t convinced. In fact, Los Angeles-based Real Estate Agent, Richard Schulman said home-buyers have nothing to worry about.

“The builder is going to end up absorbing the cost of increased construction costs. It’s not passed onto the buyer because ultimately, the cost of the home is determined by the open market and not the cost to build the home. So if construction costs went up dramatically, it may limit the ability of builders to build homes. But until that happens, there may not be any change at your end.”

Solving the trade spat could help bring prices down, but while politicians can control that, only nature can control the weather in British Columbia.