Although the price of lumber rose sharply during this period, Canadian production capacity did not increase significantly.
According to statistics released by the Canadian Statistics Department, as of February 2021, the Canadian softwood lumber production capacity for the month was 4.5783 million cubic meters, which was basically the same as that of 4.5778 million cubic meters in the same period last year. Compared with the highest value in September 2020, it has dropped by 445,900 cubic meters.
The above data shows that the recovery of production capacity in the lumber industry is not as easy as imagined. It focuses on assets and has obvious long-term characteristics. On the other hand, due to the U.S. duties on imported lumber from Canada and the forest policy of Canada’s BC province, wood companies prefer to build their factories in the U.S. rather than investing in plants in Canada.
Not long ago, the world’s largest lumber producer (West Fraser Timber Co.) planned to expand the production capacity of its five timber mills in the southern United States. Interfor Corp. is rebuilding a sawmill in Georgia and is expected to be completed by the end of 2021. The decision shows the confidence of the companies in the future price of lumber. The demand for residential construction and decoration will continue to support the strong price of wood products in the future.
At present, the capacity expansion of Canadian lumber companies is mainly concentrated in the southern United States, where a large amount of timber is available for logging. Hopefully it helps to increase the overall inventory of wood and pull down wood prices from historical highs over time. But this is not enough to alleviate the tight supply during the current construction peak season.
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