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Expect Continued Strains on Lumber Supplies, Interfor’s Chief Warns

Interfor slide on starts vs lumber
Chart shown by Interfor's CEO during a presentation March 11, 2024

North America’s lumber-producing capacity will be constrained for years to come, as steady growth in the Southern U.S. will be too little to overcome steep declines in Canada's British Columbia and unchanged output levels elsewhere, the President and CEO of Interfor says.

Ian Fillinger’s presentation March 11 to the North American Wholesale Lumber Association (NAWLA) carried two unspoken implications for dealers. First, they shouldn’t expect lumber prices to drop significantly because of overproduction in North America. Second—and while Fillinger might not want it—dealers may turn to buying more lumber from Europe and South America to meet customer demand.

Interfor is the No. 3 lumber producer in North America, with 28 sawmills and 5 billion board feet of production capacity. It operates in all four major lumber-producing regions of North America: British Columbia (BC), eastern Canada, the U.S. Pacific Northwest, and the U.S. South. 

Since 2005, BC’s production has dropped 61%, Fillinger said. This is in part because there has been a 23% drop in allowable annual cut for BC’s interior between 2010 and 2023, and forecasts call for a further 18% reduction. The mountain pine beetle also devastated BC's interior forests.

“Clearly, BC is in trouble,” he told attendees at NAWLA’s Leadership Summit, held in a resort near Tucson, AZ. “We’re going to see more production coming out.”

Ian Fillinger

Meanwhile, earlier production declines in eastern Canada and the U.S. Northwest have pretty much worked their way through the system, Fillinger continued, so their output should remain at current levels. That leaves the Southeast U.S., where lots of investment has taken place.

But the growth experienced in the South is occurring at a measured pace, with production capacity rising 3%-4% per year, Fillinger said. The South also has constraints finding workers and equipment, as well as locating sources (like pulp mills) to buy its byproducts. A new mill takes three to four years to generate good returns, a dry kiln up to two years, he said.

“As much as we see the South growing, it’s not growing at a rate to overcome the declines elsewhere,” Fillinger concluded.

It’s an antitrust violation to discuss prices at events like NAWLA's, and Fillinger abided by the rules.  But it’s reasonable for dealers to conclude that if demand stays steady or grows and North American lumber capacity isn’t keeping up, either prices for fiber will rise or more imports will have to come in to keep shortages from elevating prices again.

European wood is making steady inroads in the U.S., especially with dealers located near ports. Fillinger said he “obviously” would like to see European imports drop to below COVID-era levels, perhaps back down to 3% or 4% of total lumber consumption. 

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