Plans by West Fraser Timber Co. Ltd. and Canfor Corp. to close sawmills in the interior have raised concerns that B.C. lumber output in the region will lag demand driven by a rebound in the U.S. housing market.

B.C. interior sawmills operated by firms such as West Fraser and Canfor have been largely relying on timber left over from years ago, when mountain pine beetles decimated forests in the region. The infestation of pine beetles began in the late 1990s and peaked in 2005.

The upcoming mill closings and the prospect of further declines in timber supplies from the B.C. interior helped boost lumber prices Friday. But longer-term lumber exports will be crimped just as demand for forest products increases from the U.S. housing industry, adding to strong buying from China. With large swaths of beetle-infected trees harvested over the years, the supply of damaged timber is declining and there are also annual limits on allowable cuts for the remaining healthy trees in the B.C. interior.

“Once the U.S. gets back to its normal housing activity, the B.C. interior will be producing 5 billion board feet less a year than it produced in 2005,” CIBC World Markets Inc. analyst Mark Kennedy said in an interview.

Lumber output from the B.C. interior is forecast to be less than 12 billion board feet this year, down from peak production of more than 15 billion board feet in 2005. At the end of this decade, mills in the region will likely produce less than 10 billion board feet a year of lumber, as the focus shifts back to primarily sourcing new log supplies, undamaged by beetles.

From The Globe and Mail: