North American mills are sawing lumber at the fastest pace in six years after a recovering U.S. housing market, a beetle infestation in Canada and increasing Chinese demand drove the biggest price surge in two decades.

About 55.5 billion of the industry’s standard board feet will be made this year, 6.7 percent more than in 2012, CIBC World Markets estimates. Futures will average $371 per 1,000 board feet on the Chicago Mercantile Exchange in the fourth quarter, according to the mean of nine analyst estimates compiled by Bloomberg. The forecast is 9.8 percent above the November contract and the highest for the period since 1996.

Builders started work on the most new U.S. houses in almost five years last month and China (CNGDPYOY)’s economy is expanding at the quickest rate in more than a year. Supply is being constrained by the worst pine-beetle infestation on record in Canada, the biggest exporter. More than half the commercial pine in British Columbia, the largest timber-producing province, has been lost to the outbreak, government data show.

“For the first time ever, we have a recovery in North American housing alongside a very robust China market, and Canada cannot go back to peak production any time soon,” said Gerry Van Leeuwen, a vice president at consultant International Wood Markets Group in Vancouver who has worked in forestry for four decades. “The combination is raising prices worldwide.”

From Bloomberg: http://www.bloomberg.com/news/2013-04-29/lumber-mills-expand-as-prices-rise-most-since-1993-commodities.html?utm_source=buffer