Forest Wildfire Smoke Signals Bigger Issues for Lumber Industry

Smoke from those Canadian forest wildfires is not only wreaking havoc with outdoor activities in the U.S. but also driving up lumber prices and shutting down sawmills north of the border.

The fires were an inconvenience and health hazard to those going outside and even resulted in some Major League Baseball games being canceled but to the lumber and timber industry, the consequences are much more serious…and longer lasting.

The wildfires that started in Canada this spring and have continued into the summer months have consumed an estimated 4 million hectares – about 1% – of the country’s forest land, according to the Forest Products Association of Canada (FPAC). The fires have closed sawmills around the country and driven up prices, Reuters reports, adding that they have backed up production cycles for months. Chicago lumber futures for July delivery have climbed 7% since June 1, it said.

The news service reported that “Canada has the world’s third-largest forest area and is the second-largest softwood lumber producer, according to Canadian government estimates.”

Paul Quinn, an analyst with RBC Capital Markets, told Reuters that while forest fires are partly a natural phenomenon and can clear out areas and foster new growth, “Big blazes can also reduce timber supply for the long term. Wildfires can temporarily boost lumber prices as supplies are constrained and buyers increase inventories, although prices tend to revert later in the year,“ Reuters reported him saying.

The fires, which began in the western provinces of British Columbia and Alberta, are now spreading east to Quebec according to FPAC head Derek Nighbor. “It’s significant,” he told Reuters. “Closing mills and having to restart them is a lot of work and that’s people who have to be laid off temporarily.” Nighbor did not have an overall estimate of lost production.

“Long-term damage to forests will require up to eight weeks to assess once the fires abate,” he said. “Is there anything that’s salvageable? Is it younger trees that have been taken out or is it 60-to-80-year-old trees, because that will impact future operations.”

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