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Rubber and Wood February 20, 2018 03:30:23 PM

Softwood Lumber Sector Riding High Despite Duty Risks

Paul Ploumis
ScrapMonster Author
The elevated demand levels along with duties on lumber exported from Canada are likely to keep lumber prices at high levels throughout 2018, although volatility to a certain extent cannot be ruled out completely.
Softwood Lumber Sector Riding High Despite Duty Risks

SEATTLE (Scrap Monster): The high softwood lumber duties imposed by the US administration have had minimal impact on the Canadian lumber industry. The anticipated high demand levels from US housing market coupled with tight supply is expected to keep lumber prices at high levels throughout the current year.

According to latest figures, the number of US housing starts surged higher significantly to surpass 1.33 million in January this year, on a seasonally adjusted basis. The single family starts edged higher by almost 8% during the month. The US Census Bureau data indicates that housing permits totaled nearly 1.4 million.

Kenneth Shields, Chairman and CEO, Conifex Timber Inc. noted that the company reported 15% jump in revenues during 2017. Also, the earnings per share (EPS) more than doubled during the year. Over the next 2-3 years, the growth in lumber demand is most likely to surpass the increase in lumber supply. The demand growth will gain further momentum on account of increased demand from repair and remodeling markets, noted Shields. The elevated demand levels along with duties on lumber exported from Canada are likely to keep lumber prices at high levels throughout 2018, although volatility to a certain extent cannot be ruled out completely, Shields added.

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Ted Seraphim, CEO, West Fraser Timber Company Ltd., expects lumber demand to grow by 2 billion board feet per year. At the same time, the US lumber production is expected to increase only by 750 million to 1 billion board feet per year. The improving supply-demand fundamentals present a positive longer-term view for the sector, Seraphim said.

Don Demens, CEO of Western Forest Products Inc. noted that impact of US lumber duties was largely offset by record lumber prices. The company had reported 15% surge in adjusted EBITDA in Q4 last year, mainly on the back of 8% jump in average lumber price realization.

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