Lumber makers see comeback for do-it-yourself home improvement projects

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Do-it-yourself home renovations are going to soon regain popularity, which is good news for lumber companies.

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Prices for wood have swung wildly in recent months as seemingly insatiable demand for home makeovers helped drive lumber prices to record highs — only to crash after the hikes reached consumers and sticker shock set in.

Now, people are spending money on activities like eating out and travel as economies reopen. That has hurt demand for lumber, but producers are saying it won’t last forever. When cold weather returns during the Northern Hemisphere’s autumn, stores will need to replenish stocks and consumers are expected to return to their home improvement projects with lower prices reflected on the shelf.

“There will be more work from home. I don’t think it’s the end of the repair and remodel section,” Remi Lalonde, chief executive officer of Montreal-based Resolute Forest Products Inc. said in a phone interview Thursday. Consumers are just “taking the summer off” after being cooped up during the pandemic.

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There will be more work from home. I don’t think it’s the end of the repair and remodel section

Remi Lalonde, chief executive officer, Resolute Forest Products

Lumber makers Resolute and West Fraser Timber Co. Ltd. have posted second-quarter earnings that beat expectations this week, mostly on the back of the record prices.

Currently, the picture isn’t as rosy. While the extreme price swings have abated for now, there are still uncertainties that could inject volatility into a market that homeowners are depending on. Companies are facing disruptions due to wildfires raging across Canada, a major producer of wood for homebuilding. Resolute temporarily stopped harvesting logs in Ontario, home to a quarter of its output, because the provincial government has restricted operations that could potentially spark fires in dry conditions.

On Wednesday, West Fraser said fires in British Columbia have forced it to suspend some production, and impacts will continue in the second half of 2021.

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The disruptions are occurring as demand for lumber for building houses, as opposed to the do-it-yourself market, continues to be strong.

Meanwhile, industries that rely on another byproduct of wood — pulp — to make cardboard, are still struggling to meet demand that is soaring because of the rise in e-commerce sales.

“We saw the lowest inventory levels in our system than we’ve probably ever experienced,” Mark Sutton, chief executive officer of International Paper Co., told analysts on a call Thursday.

Supplies were also hit by the U.S. winter storm early this year, but inventories are starting to recover, he said.

International Paper’s second quarter results were in line with estimates.

Bloomberg.com