Lumber prices growth has led to a $30,000 increase of a new home cost

The recent recovery of wood product prices is raising profits for Canadian forestry companies, while making it more expensive for homeowners and buyers to start a renovation next year.

According to RBC analyst Paul Quinn, lumber prices are growing in December supported by strong real estate markets and restrained capacity to raise North American production after a seasonal prices slowdown seen in October and November.

He says 2021 may be even better for producers than 2020. In his opinion, the record high prices of last summer, pushed by the COVID-19 forced working from home, may stay unchanged or even go up next year.

Kevin Lee, CEO of the Canadian Home Builders’ Association, believes the price volatility and lack of supply in the sector of certain wood products mean it’s too difficult for builders to benefit from today’s strong housing markets which are expected to continue in 2021.

Lee says growing lumber prices in 2020 have added about $30,000 to the construction cost of a typical 2,500-square-foot property in Canada.

RBC expects higher mergers and acquisition volume in the forest products industry in 2021, following the $4-billion takeover of Norbord Inc. by West Fraser Timber Co. Ltd.

“We’ve seen unprecedented prices at the end of 2020 with lumber prices going up after a slowdown reported in October-November,” – noted Quinn.

“As demand is expected to get stronger with dealers being ready for a possibly very strong spring building season, we predict high prices over the first half of 2021.”