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Sweeping Wildfires Burn Canada’s Timber as Lumber Prices Surge

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“Forests are getting burnt, so that has a supply impact…”

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Sweeping wildfires across Canada’s British Columbia are threatening timber supplies and sending lumber prices surging.

More than 375 fires have swept across the province, burning forests and forcing sawmills to shut down or evacuate. While the impact on supplies is minimal so far, there are concerns that the blazes will continue to spread amid hot, dry conditions, according to Paul Quinn, an analyst at RBC Capital Markets in Vancouver. Lumber futures on Monday jumped by the exchange limit in Chicago to the highest in more than two months.

“Forests are getting burnt, so that has a supply impact,” Quinn said by telephone. “The worry is they’ll continue to grow and get bigger,” he said, referring to the fires.

Last week, West Fraser Timber Co. suspended operations at three lumber mills that represent annual production capacity of 800 million board feet of lumber and 270 million square feet of plywood. Norbord Inc., the largest North American producer of oriented strand board used in residential construction, has also suspended production at its mill in 100 Mile House in central B.C.

Canada Wildfires Shut Lumber Mills, Enbridge Gas Compressor

On the Chicago Mercantile Exchange, lumber futures for September delivery rose by the $10 trading limit to $387.30 per 1,000 board feet at 11:37 a.m. local time. That’s the highest price for a most-active contract since May 9. Aggregate trading for this time is 44 percent above the 100-day average, according to data compiled by Bloomberg.

Cash prices for some grades of lumber rose 7 percent last week, Quinn of RBC said.

“We’re at the seasonal peak in construction activity, so anything that reduces supply will create some pricing tension,” Mark Wilde, an analyst at BMO Capital Markets in New York, said in an email.

Shares of lumber producers have also climbed in Canada trading. West Fraser Timber rose 6.3 percent last week and reached the highest since July 2015 on Monday. Canfor Corp. was little changed after increasing 7.4 percent last week.

More fire impact:

  • Kinder Morgan Inc. said Sunday it continues to closely monitor the fires and is taking preventative measures particularly around its Blackpool pump station near Little Fort, B.C., including setting up a sprinkler system around the perimeter fencing and the pump building.
  • Tolko Industries Ltd. shut down its Soda Creek and Lakeview mills, the company said Saturday in a Facebook post, adding that“they will not be operational for the foreseeable future.”
  • Taseko Mines has temporarily idled its Gibraltar mine as the wildfires have hindered employee travel to the site, the company said Monday. It’s unclear when milling and mining operations will resume, and there are no fires in the immediate area of the mine, the company said in a statement.

–With assistance from Natalie Obiko Pearson and Sandrine Rastello

To contact the reporter on this story: Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Patrick McKiernan

©2017 Bloomberg L.P.

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