Slow US housing market affecting Canadian lumber producers

Source:
Bloomberg/Fordaq
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The US housing market is stumbling, which makes two of Canada’s top lumber producers, West Fraser Timber Co. and Canfor Corp., to suffer from a lower demand from the US.

According to Bloomberg, the US housing starts dropped 8.8% in March and its weakness can’t support the lumber prices at its current levels. The US is the biggest market for Vancouver-based Canfor and West Fraser, which manage timberlands in British Columbia that supply softwood such as Spruce-Pine-Fir, a widely used material used to construct house walls and roofs.

Moreover, the south Canadian producers are already facing lower demand from China and suffer from the impact of the mountain pine beetle on the forests in BC. Thus, West Fraser declined by 15% in Toronto this year and Canfor was affected by a 24% drop. None of the companies commented on the lumber outlook, but are due to report Q1 earning next week.

As Bloomberg reported, Canfor Chief Executive Officer Don Kayne, said in February that there would be an 8% growth in US’s demand for 2016 thanks to the housing improvements. Yet, Chris McIver, sales and marketing vice president of West Fraser, said that the US housing recovery won’t be as good as expected.

The low supply of available land and the prices that rose faster than the wages affected the American, causing the US housing market to drop. The residential housing starts from March dropped to an annual rate of 1.09 million, which is poorer than economists’ estimates. Also the issuance of private housing permits declined in March.

Moreover, lumber May delivery closed at $282.60 per 1,000 board feet in Chicago and it will remain unstable for the rest of 2016, according to Bloomberg. American companies will be able to file trade cases against the Canadian importers only once with a trade agreement between the two nations, after the 2006 SLA expired in October last year and holds a standstill period until October 2016.

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