Who Is Profiting from High Lumber Prices?

By Joan Janzen

How much wood would a woodchuck chuck if a woodchuck could afford to chuck wood? If the woodchuck needed to purchase wood at today’s prices, he would likely have completely stopped chucking wood in 2021.

In a similar fashion, most home owners are postponing any renovation projects until lumber prices go down, which some say may not happen until at least the fall. Contractors and home renovators are wanting to know when prices will drop, why prices increased so dramatically, and who is profiting from those high prices?

“It’s a perfect storm of very strong demand and a very slow supply response because of a decade of under-building and Covid-19,” said Paul Janine of Forest Economic Advisor. He noted many sawmills reduced production expecting demand to plunge, but instead were hit with a wave of renovation projects. Low interest rates combined with people moving to rural homes caused a substantial increase in home construction. Consequently saw mills and dealers were unable to replenish their inventories. Some wise contractors stocked up on lumber before the price increased.

In the U.S., The National Association of Home Builders suggested the administration reduce tariffs on imports from Canada, which is their top lumber exporter. The volume of imports from Canada, which supplies almost a third of the U.S. lumber supply, decreased due to those tariffs and a mountain pine beetle that devastated forests in B.C. A wood shortage caused by the mountain pine beetle and wildfire damage resulted in the closure of a mill at 100 Mile House.

A video blog by Tony’s Tractor Adventure addressed the subject of rising lumber prices. As an amateur sawyer and logger, he knows first hand that it takes a lot of work to turn logs into lumber. He receives repeated comments from truck drivers, factory workers in saw mills and sawyers who say they aren’t making any more money. The people who own and sell the logs say they are bringing in the same amount of money as they did twenty years ago. According to the Wall Street Journal, timber growers have gained nothing from the rising prices of lumber. When you take into consideration inflation, logs are selling for less now than in the 1980’s.

Sawmills were able to keep up with the demand that was needed, until the shut down when box stores were permitted to stay open as an essential service. Shut up at home, the entire population began renovating, wiping out the supply chain of lumber.

The sellers buy the product for a price and raise it up a margin. That margin is pretty well stabilized throughout all the box stores. Meanwhile, the large saw mills and wood product manufacturers are in control of a huge portion of the lumber supply chain.

The five major companies are Georgia-Pacific, Sierra Pacific Industries, Interfor, Weyerhaeuser and West Fraser. West Fraser bought mills across the regions of the U.S., and that company is now valued at $13 billion and its share price has jumped 250 per cent in the past year. According to the Wall Street Journal, Canadian firms that have bought up sawmills are harvesting profits.

In a news release, Weyerhaeuser reported a $681 million profit in their first quarter, which is a 220 percent increase over last year at the same time. West Fraser had an 81 percent sales increase over last year, bringing in a $9 million profit In the first quarter of 2020, compared to a $665 million profit in the first quarter of 2021.

Rising lumber prices are proving to be very profitable for big forestry companies. But will consumers continue buying lumber at such exorbitant prices?

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