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IPFS News Link • Economy - Economics USA

Lumber Industry Has No Interest In New Mills As They Reap Rewards Of Record Prices

•, by Tyler Durden

For instance, WSJ reports lumber mills are in no rush to bring on additional capacity as they reap the rewards of consumers paying four times the average price. 

North America's sawmills, such as Weyerhaeuser Co., West Fraser Timber Co., Canfor Corporation, Interfor Corporation, and PotlatchDeltic, are in no hurry to boost new capacity as they rake in the cash as lumber prices soar. Consumers have been on the opposite side of the stick, and soaring lumber prices added nearly $36k to the cost of building a new home in less than one year. 

Lumber executives told WSJ they "aren't racing out to build new mills" as they are contempt with elevated prices boosting their quarterly net incomes. Usually, when commodity prices soar, new supplies flood the market, but that doesn't seem to be the case here. 

By now, readers know soaring lumber prices have been due to a combination of factors, including record-low mortgage rates sparking a housing frenzy, home renovations, and, of course, sawmills reduced capacity at the beginning of the pandemic anticipating lower demand. 

Executives at Weyerhaeuser Co. and West Fraser Timber Co. said they would increase budgets to boost efficiency and output at their existing mills in the South, where a glut of cheap timber resides. Some executives don't mind accumulating a surplus amount of cash as the times are good but aren't using the money to construct new mills. 

"We are going to be ultra-cautious on what we do in those regards," Canfor Corp. Chief Executive Don Kayne told investors last month when he announced record quarterly profits.

"We don't mind at all having a little extra cash around for sure, considering what this industry goes through."