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BNN BLOOMBERG — Canadian lumber companies that pulled in record earnings are optimistic about next year despite lower wood prices, as they see the wave of home building and renovations continuing.
Norbord Inc., North America’s biggest producer of oriented strand board (OSB), reported record third-quarter revenue while Resolute Forest Products Inc.’s wood segment saw record-high income, boosted by soaring lumber prices and strong demand from home building and do-it-yourself renovations amid the COVID-19 pandemic.
The long-term growth prospects Norbord sees for the wood-chip panels used in walls and floors could keep costs high for home buyers. In October, the National Association of Home Builders said higher wood costs lifted the selling price of an average, new single-family home in the U.S. by US$15,841 since mid-April and that one-third of this increase was due to higher prices for the plywood substitute.
Demand was so strong that in August, Norbord brought back some production at its mill in Cordele, Georgia. That brought the company’s total output to 86 percent of capacity, though it’s still down from 92 percent in the same period of 2019.
U.S. lumber futures are now nearly 30 percent below record highs reached in August when strong demand took the industry by surprise and supplies quickly tightened. But Resolute’s Chief Executive Officer Yves Laflamme expects they will stay around profitable levels.
“We’re optimistic for lumber,” said Laflamme in a phone interview. “The demand is going to stay. Pipeline and inventory are still low as well.”
Despite strong demand, Norbord said Thursday that a wood shortage due to mountain pine beetle and wildfire damage in Western Canada’s province of British Columbia means it will permanently close its OSB mill in the interior B.C. town of 100 Mile House.
Montreal-based Resolute reported record operating income for its wood products in the third quarter at US$128 million in sales, up from US$113 the prior quarter, due to a 57 percent increase in the average transaction price.
Despite its optimism, Norbord cautioned in its earnings report that the ongoing pandemic brings “considerable uncertainty in the broader economic environment.”
In the midst of a flourishing home renovation craze, lumber sellers have quietly reaped unprecedented profits. Demand for lumber has skyrocketed as individuals embark on ambitious home improvement projects.
Canadian lumber companies, including Norbord Inc. and Resolute Forest Products Inc., have reported record earnings for the third quarter of this year. This surge in income can be attributed to robust demand from the home building and renovation sector, coupled with soaring lumber prices.
Despite cautious optimism due to the ongoing pandemic, the future outlook for the lumber market remains promising.
Key Takeaways
- Canadian lumber companies are reporting record third-quarter revenue, driven by soaring lumber prices and strong demand from home building and renovations.
- Norbord Inc. and Resolute Forest Products Inc. have seen high income, with Norbord bringing back production at its mill in Georgia to meet the strong demand.
- Lumber prices, although nearly 30% below their record highs reached in August, are expected to remain profitable.
- The ongoing pandemic brings uncertainty to the broader economic environment, and Norbord cautions about its potential impact on the industry.
Surge in Home Renovations Drives Lumber Sales
The surge in home renovations has led to a significant increase in lumber sales, driving record profits for lumber sellers.
As more people are spending time at home due to the ongoing pandemic, there has been a notable increase in home improvement projects. This surge in demand for lumber has created challenges for lumber sellers in meeting the growing demand.
The increased consumption of lumber raises concerns about its impact on environmental sustainability. The logging industry plays a significant role in deforestation and loss of biodiversity, and the high demand for lumber exacerbates these issues.
Lumber sellers are facing the challenge of balancing the need to meet growing demand with the responsibility of promoting sustainable practices. They must find ways to source lumber sustainably and ensure responsible forest management practices are in place to minimize the environmental impact of increased lumber sales.
Unprecedented Profits for Lumber Sellers
Lumber sellers’ profits have reached unprecedented levels as they benefit from the current home renovation binge. The surge in home renovations, driven by the COVID-19 pandemic and the desire for comfortable living spaces, has led to a significant increase in demand for lumber. This surge in demand, coupled with limited supply, has resulted in soaring lumber prices and record earnings for lumber sellers.
The lumber market trends reflect this unprecedented profitability. Lumber prices have reached record highs, with U.S. lumber futures nearly 30% below the peak prices reached in August. Despite this slight decline, lumber prices are expected to remain profitable in the foreseeable future.
The impact on the construction industry has been significant. Higher wood costs have led to an increase in the selling prices of new homes, as reported by the National Association of Home Builders. This, in turn, has affected affordability for homebuyers. However, lumber sellers are optimistic about the long-term growth prospects for wood-chip panels, indicating a positive outlook for the industry.
To further illustrate the remarkable profits in the lumber industry, the table below highlights the third-quarter revenue of two Canadian lumber companies:
| Company | Third-Quarter Revenue |
|---|---|
| Norbord Inc. | Record high |
| Resolute Forest Products Inc. | Strong increase |
The unprecedented profits for lumber sellers reflect the current boom in home renovations and the impact it has had on the construction industry. As the demand for lumber continues to rise, lumber sellers are poised to benefit from this lucrative market trend.
High Demand Fuels Record Revenue for Lumber Industry
Increased demand from the home renovation binge has resulted in record revenue for the lumber industry. The surge in demand for lumber products has led to significant growth in the industry, as more homeowners engage in home improvement projects during the pandemic.
The high demand for lumber has also had a significant impact on the housing market, with increased prices for new homes due to higher wood costs. Lumber sellers are experiencing unprecedented profits as they capitalize on the strong demand and soaring lumber prices.
This surge in revenue has allowed lumber companies to invest in expanding their production capacity and meet the growing demand. The lumber industry is poised for continued growth, driven by the ongoing demand for housing and renovation projects.