By Ethan Lou - July 11, 2017 - ca.reuters.com
CALGARY, Alberta (Reuters) - Rapidly spreading wildfires in British Columbia are set to tighten the supply of wood products and raise prices as they disrupt timber operations during the year's peak building season, industry and analysts said on Tuesday.
Forestry products are a significant driver of the economy of British Columbia, which bills itself as the world's biggest exporter of softwood lumber, a product targeted by U.S. tariffs in April as a trade dispute escalated.
Fires across the western province intensified last Friday and have since covered more than 38,000 hectares (93,900 acres). They have forced more than 14,000 people from their homes, disrupted mining and forestry operations and damaged public utilities.
Wood prices can rise as high as 6 percent if operations remain shut for weeks, but the higher cost, a small part of construction budgets, will be absorbed by builders and is unlikely to affect home buyers, Bank of Montreal analyst Ketan Mamtora said in an interview.
Walter ?Bramsleven, an official of the BC Log and Timber Building Industry Association?, said he expects higher prices, but said the fires could also represent an opportunity if the province grants access to the burned wood in the region before it starts rotting.
Forestry companies that have suspended production include West Fraser Timber Co and privately held Tolko, among the largest Canadian producers, and Norbord Inc, the world's largest maker of oriented strand board, a plywood-like material used in house building.
Mamtora said West Fraser's shutdown represents a loss of about 6.7 percent of interior British Columbia's lumber production and 13.8 percent of Canada's plywood production, while Norbord's shut mill represents 5.6 percent of Canadian production of oriented strand board.
The companies said the facilities were shut due to evacuation orders and nearby fires, although the sites themselves were not burned.
James Armstrong of Armstrong Investment Research said the shutdowns will exacerbate the low supply for an already tight market.
"The question is what happens longer term," he said. "We don't know what happens with the fire yet. Longer term, if it misses the mill ... it probably won't have a huge impact."
Mamtora said prices could increase up to 14 percent if the sites remain shut for months.
The fires broke out some 14 months after a wildfire in Fort McMurray in neighboring Alberta province displaced 88,000 people and burned 590,000 hectares. British Columbia on Friday declared its first state of emergency since 2003.