West Fraser Timber Co. and Canfor Corp., Canada’s largest lumber producers, are suffering from tepid demand in the U.S. where the recovery in the housing market is stuttering.
U.S. housing starts fell a more-than-expected 8.8 percent last month, the Commerce Department said April 19. Housing demand isn’t strong enough to support lumber prices at current levels, according to Stephen Atkinson, an analyst at Dundee Capital Markets.
“This is a pretty slow recovery we’re seeing,” Joshua Zaret, a Bloomberg Intelligence analyst in New York, said in a telephone interview. “Lumber buyers have been cautious.”
The U.S. is the largest market for Vancouver-based Canfor and West Fraser, which manage timberlands in British Columbia that supply softwood such as Spruce-Pine-Fir, a widely used material used to construct house walls and roofs. The dim outlook for demand south of the border is the latest blow for Canadian producers, who are already facing a slowdown in Chinese demand and the long-term impact of the mountain pine beetle on British Columbia forests.
West Fraser, the largest North American lumber producer, has fallen 19 percent this year in Toronto. Canfor has slumped 26 percent, the sixth-worst performance on the 235-member S&P/Toronto Stock Exchange Composite Index.