Sawmills received something of an early Christmas gift this week courtesy of the lumber futures market, according to a forest industry observer.
In a single week, the price of the November contract for benchmark 2x4 western spruce, pine and fir jumped $22 to settle at $240 per thousand board feet on Nov. 15.
The outcome prompted Madison's Lumber Reporter publisher Keta Kosman to say the price is going to remain steady or increase for at least the rest of the month.
The price had peaked at $260 on Sept. 23 but bottomed out at $218 as of Nov. 8.
"A reversal like this in one week is pretty astonishing," Kosman said Friday, who added usually a catastrophic event, like a sawmill fire or a rail derailment, that threatened supply would be the only reason for such a jump.
"Well, this is purely due to market conditions," she said.
Specifically, permits to build apartments in the United States reached a three-year high in October and building permits in general for the month rose 10.9 per cent from the months before, to a seasonally-adjusted rate of 653,000 units. Analysts expected starts to come in at 608,000.
With the Canadian dollar near par with the U.S., Kosman said $240 is still not a great price but a big improvement nonetheless.
"The price of lumber will stay firm until December, which is completely opposite of what everybody thought," Kosman said.
RBC Dominion analyst Paul Quinn cautioned that the cash price has increased by only half as much and still remains low.
"It's bumping along the bottom," Quinn said and added there is now excess inventory in China, B.C.'s other major market.
"I think what we're going to see is lots of volatility in the price until we get a sustained improvement in the market and I think it's going to be a couple of months before China gets back on track," Quinn said.
