- Canadian forest fires are taking hold just as the industry begins its annual summer holiday and the U.S. considers imposing a 24% tariff on imported lumber, Supply Management reported last week.
- As a result, prices are quickly rising and had reached $400 U.S. per thousand board feet on Wednesday, up from $369 last Friday. A further increase of 6-8% is expected over the next few weeks.
- Mills are closing and 10,000 residents of British Columbia have been evacuated. Nervous buyers may over-purchase, which could drive prices as high as 15% more than usual.
Sometimes risk comes in the form of controllable factors — such as neglecting to upgrade cybersecurity protocols — and sometimes risk comes in the form of nature, such as with forest fires, or a bad crop of a popular fruit or vegetable. In the case of Canadian lumber, it's safe to say that nature's got this one.
The same is true for the ongoing failure of the European olive crop. As trees weaken and die, the supply chain suffers from a lack of source availability, driving up prices around the world. In the case of olive oil, production dropped by 42% between 2014 to 2015, resulting in a price rise of nearly 80% during the period. The consumer paid the difference, of course.
With lumber, the situation is even more volatile. As firefighters work to control the flames and more residents flee the affected areas, those with access to the remaining supply will surely grab what they can. That this comes at a time of crisis for the industry is unlucky, but not wholly surprising, given the propensity of summer wild fires. However, imposing a potential 24% tariff on top of already inflated prices will negatively impact construction and the U.S. economy, the natural result of a compressed supply chain.