September 6, 2005

Construction lumber costs spike post-Katrina

Canadians poised to meet demands of massive rebuild

MONTREAL

Prices for construction lumber and panels have spiked in anticipation of the massive rebuilding program facing the southern United States in the wake of hurricane Katrina.

Canadian forest companies, already big exporters to the U.S., are well positioned to take advantage of a long demand in the months ahead, analysts say.

Besides the anticipated demand for new lumber, the supply in the southern states has also been directly affected by the hurricane and floods, forcing up prices for lumber and oriented strand board (OSB) construction panels.

Up to 18 southern yellow pine mills in the affected region have been shut down by floods, a lack of power or blocked access roads. In addition, sections of forest were blown down, local lumber stockpiles destroyed, including a reported one million board feet on the docks in the New Orleans region and there is now a lack of diesel fuel for trucks.

Lumber prices began to spike Wednesday as news filtered out of the region. As of Thursday, prices for standard two-by-four studs cost $330 US per 1,000 board feet, up $41 from last week.

“The yellow southern pine market went crazy and, as that happens, it affects other species like spruce,” said Keta Kosman, a spokesperson for Madison Canadian Lumber Reporter, an industry newsletter

“It’s all panic buying, there’s no wood shortage at all,” said Kosman, who believes prices may moderate this week.

Prices for 7-16th-inch OSB, the preferred construction panel, stood at $420 Thursday Madison’s reported and was still climbing due to a lack of inventory. A week ago OSB cost $322.

Analyst Mike Alexander, with KPMG Canada’s forestry practice in Vancouver, believes mills located far from the disaster will in fact be in a better position to supply the needs.

“I suspect that as they move from the phase they’re in now, trying to rescue people and provide for displaced people, into the reconstruction phase, there will be a positive upswing in building materials generally, in particular lumber, plywood and OSB,” Alexander said.

“Over the medium term I don’t see any reason why Canadian companies couldn’t take advantage of this.”

Alexander said the extra products for Alabama, Mississippi and Louisiana will not start to flow for a few months when re-construction starts up because it will take time to repair washed out highways, railway lines and damaged ports.

Orders, however, are already flowing in to Canadian producers, concentrated in British Columbia and Quebec.

Canada shipped 1.5 billion board feet of softwood lumber, typically used in new housing construction, to the United States in 2004, worth $7.5 billion US, while the value for the first five months this year was about $3 billion.

Canadian Press

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