British Columbia is sharply increasing the cost of trees for lumber producers just as wood products prices slump and Canadian sawmills expand in the U.S.<\/p>\n\n\n\n
Lumber producers will pay $76.22 per cubic meter of coniferous saw log from the province\u2019s interior in the third quarter. That is a 74 percent jump from this quarter and more than triple what they paid a year ago.<\/p>\n\n\n\n
Higher tree prices reduce the ability of lumber producers to compete against sawmills in the U.S. Producers could be further encouraged to shift operations south of the border.
Canada is a top exporter of softwood lumber, with British Columbia leading shipments to the U.S.<\/p>\n\n\n\n
The province\u2019s rates were designed to provide stability against a volatile market, at a lag of two to three months.<\/p>\n\n\n\n
The price increase follows a yearlong rally that vaulted U.S. lumber futures to a record high in May \u2013 more than quadrupling in 12 months \u2013 on a home building and renovations boom that gave producers record quarterly revenues.<\/p>\n\n\n\n
\u201cNorth American production growth is constrained by log availability in multiple regions, particularly British Columbia,\u201d West Fraser Timber Co. said in a statement.<\/p>\n\n\n\n
The Vancouver-based company is the world\u2019s biggest lumber producer and has already shifted 48 percent of its North American capacity to the U.S. South.<\/p>\n\n\n\n
British Columbia-based Interfor Corp. recently said it will buy four U.S. sawmill operations from Georgia-Pacific as part of its U.S.-focused growth plan.<\/p>\n\n\n\n
\u201cRight now, log prices in B.C. are about triple what they are in the U.S. South; it\u2019s literally like they\u2019re operating in two industries,\u201d said Matt Fine, portfolio manager for Third Avenue Management in New York.<\/p>\n\n\n\n
\u201cIt\u2019s really tough in B.C. on a relative basis, which is why you\u2019re seeing virtually no investment in B.C.\u201d<\/p>\n\n\n\n
While much of Canada\u2019s harvestable timberlands are government-owned, southern yellow pine plantations in the U.S. are largely private.<\/p>\n\n\n\n