BLOOMBERG— Strong homebuilding activity in North America will mean tight wood supply and demand for several more years, according to the top executive of the world’s largest lumber producer.
“In the next five years, we see housing starts continuing to be strong and an industry that will be working hard to keep up with demand,” West Fraser Timber Co. Ltd. Chief Executive Officer Ray Ferris said Wednesday in a phone interview.
West Fraser sells about 30% to 40% of its products into the housing industry, according to Ferris, which means his outlook bodes well for the Vancouver-based firm. Demand and prices for lumber and other wood materials soared during the pandemic on a surge in renovations and home construction, benefiting producers. West Fraser deepened its commitment to the industry last week with a $4-billion ($3.1 billion) offer to acquire Norbord Inc., the world’s largest producer of a plywood stand-in known as oriented strand board.
West Fraser has expanded through acquisitions during the past 65 years and Ferris said the Norbord deal will further diversify the company, providing more of a hedge on trade, currency, product line, and geography. Norbord has 17 operations in the U.S., Europe and Canada, according to its website. West Fraser has 45 facilities in the western Canadian provinces of British Columbia, Alberta, and the southern U.S., its website said.
West Fraser manufactured 5.9 billion board feet of lumber in U.S. and Canadian mills last year, according to the company. Roughly 60% of its lumber sales are in the U.S., with 20% in Canada, 16% in China, and the rest in Japan and other markets.
“We believe we’re going to be able to build at a higher level and build a capacity to take on future growth,” Ferris said, adding that though no other takeovers are looming “every day we’re looking for things that make the company stronger and better.”
One adjustment already has been to shift production to Alberta and the U.S. after mountain pine beetle infestations damaged forests in West Fraser’s home province. About three-quarters of the company’s production now takes place in Alberta and the U.S. South, according to Ferris.
“Our focus has shifted heavily to the U.S. South,” Ferris said. “We see continued ability to modernize and grow for several years to come.”