Lumber producers are cutting back, a signal that higher interest rates are taking root

By Gabriel Friedman
The Financial Post
September 20, 2022
Category: Finance & Economics
Region: Canada, Canada West

If lumber was an early indicator of where prices are headed, then the central bankers who are now trying to beat back the hottest inflation since the 1980s may take heart in recent signals coming from the lumber market. A growing number of Canada’s largest producers, including Canfor and West Fraser Timber recently announced plans to scale back production in BC, citing softening demand among other factors. Both announcements tie into a multi-year trend in which B.C. lumber companies have been reinvesting their profits in new operations in the southern US. …As West Fraser said in August, “access to available timber is an increasing challenge in BC and ongoing transportation constraints have impaired the company’s ability to reliably access markets.” Canfor’s statement about softening lumber demand may signal that rising interest rates are beginning to have the desired effect of cooling demand. …Paul Quinn, RBC analyst, predicted Canfor’s announcement of curtailed production would “definitely raise prices.”

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