Oct. 25 (Bloomberg) -- Lumber futures jumped to a six-month high as two producers plan to close mills in British Columbia, fueling supply concerns as a beetle infestation decimates forests in the region.
West Fraser Timber Co. said yesterday it plans to shut its mill in Houston, British Columbia, and Canfor Corp. will close its Quesnel site in the province. The Vancouver-based companies cited a timber shortage after forests were ravaged by the mountain pine beetle. Lumber futures have surged 22 percent since the end of May.
The shutdowns will aggravate supply concerns already heightened by low inventories, said Paul Jannke, an analyst at Forest Economic Advisors LLC, an industry consultant in Westford, Massachusetts. The announcements marked the first major closures linked to the beetle scourge, which has destroyed an estimated 710 million cubic meters of timber, he said.
“This is definitely going to bolster prices going into next year,” Jannke said in a telephone interview. “It’s also coming at a time when you typically start to see mills going down for maintenance.”
On the Chicago Mercantile Exchange, lumber futures for January delivery surged by the limit of $10 to settle at $373.80 per 1,000 board feet at 2:14 p.m., the highest for a most-active contract since April 12. The 2.7 percent gain was the biggest since Sept. 13. Prices are 18 percent higher than they were a year ago.
The mills that are closing account for more than half a million board feet of lumber, Jannke said.
The beetle “infestation has killed vast portions of the interior pine forest, resulting in a continuing deterioration and loss of merchantable timber available to wood-products producers in the interior” of British Columbia, West Fraser said yesterday in a statement.
--Editors: Patrick McKiernan, Millie Munshi