West Fraser Timber Co. and Western Forest Products Inc. are leading Canadian lumber producers to the biggest combined profit since 2006 as mills run at five-year highs to feed a U.S. housing rebound and near-record Chinese demand.
Lumber mills in B.C., Canada’s leading forestry region, ran at 86% of production capacity in the five months through May, compared with 82% for all of 2011, says the Western Wood Products Association. Lumber futures rose to a 15-month high on Aug. 15 on the Chicago Mercantile Exchange.
The industry is recovering from losses and mill closures during the four-year U.S. housing bust amid resurgent new-home sales and building activity south of the border. Some producers are also capitalizing on orders from China for imported Canadian lumber even as China’s economy slows.
“We’re extremely early on in the lumber cycle and it has the potential to be a four-year run,” said Paul Jannke, a lumber-market analyst at Westford, Massachusetts-based Forest Economic Advisors LLC. He estimates the industry in Western Canada in 2012 will probably earn the most since before the housing decline and that next year is looking even better.