Lumber futures rally as 'unprecedented' challenges prompt production cuts

Forklift loading truck

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Lumber futures rose to their highest in a month as two top Canadian producers curtailed output and transportation snags disrupt shipments to customers, Bloomberg reports.

March lumber futures (LB1:COM) rose by the exchange limit of US$45 on Wednesday to $1,336 per $1,000 board ft. in Chicago before trimming gains; futures already have jumped 34% this month due to tighter supplies ahead of peak building season.

ETFs: WOOD, CUT, NAIL

Canfor (OTCPK:CFPZF) said it plans to cut 150M board ft. of production in British Columbia, citing impacts of the mountain pine beetle infestation and other constraints on available timber.

West Fraser Timber (NYSE:WFG) said its ability to ship products in a timely manner "remains challenged" after floods late last year washed away rail tracks and shut highways in B.C., forcing it to take "unscheduled downtime" due to the transportation constraints.

"In Western Canada these transportation challenges are really unprecedented in both scale and duration," West Fraser CEO Ray Ferris said on the company's earnings conference call, adding that lumber and plywood shipments tumbled 20% Y/Y and pulp shipments fell 30% in January.

Other potentially relevant tickers include WY, LPX, PCH, RFP, OTCPK:IFSPF, OTCPK:WFSTF

Just three weeks ago, lumber prices were suffering their worst downturn since July.

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