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This week alone, cash prices for two-by-fours fell by US$210 for 1,000 board feet of Western SPF, or a 30-per-cent decline, compared with last week’s survey.

Jeff McIntosh/The Canadian Press

Lumber prices have crashed in a short time span, taking only eight weeks to tumble 70 per cent from record highs as the party ends for forestry companies.

The price sawmills charged wholesalers – known as the cash price – was US$485 for 1,000 board feet this week for two-by-fours made from Western spruce, pine and fir (SPF), compared with US$1,630 in mid-May, according to Random Lengths, an Oregon-based company that monitors wood markets.

“The deep slide from record-shattering levels extended to an eighth week, with triple-digit price drops common across all framing lumber species,” Random Lengths said in its newsletter.

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This week alone, cash prices for two-by-fours fell by US$210 for 1,000 board feet of Western SPF, or a 30-per-cent decline, compared with last week’s survey.

A disruption to timber supplies from wildfires in Canada and the United States isn’t forecast to bolster lumber pricing next week. Until investors see prices recover in lumber markets, the uncertainty is expected to put a damper on the share prices of producers, even with their healthy balance sheets.

“Despite the growing threat from wildfires in Western Canada and the Pacific Northwest, any sight of a bottom remained elusive for many producers,” Random Lengths said.

On the Chicago Mercantile Exchange, prices for lumber futures for September delivery have fallen by two-thirds since reaching a record high on May 10.

The lumber craze has quickly dissipated since mid-May. Instead of wood shortages, the scene has changed to one of ample supply amid softening demand.

“Western Canadian sawmills slashed their prices again this week as apathetic buyers continued to generate tepid demand at best,” Madison’s Lumber Reporter, a Vancouver-based industry newsletter, said in its weekly commentary.

Industry analysts say lumber cash prices have dipped to levels below the costs of production for some sawmills in British Columbia, where costs are higher than in the United States.

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CIBC World Markets Inc. analyst Hamir Patel estimates break-even levels for sawmills in the B.C. Interior are at about US$500 to US$580 for 1,000 board feet.

Despite the swift decline in prices for two-by-fours to the lowest level since November, softwood lumber markets are still stronger than in the early months of the pandemic.

Data for cash prices compiled by Madison’s show two-by-fours made from Western SPF sold for an average of US$321.60 for 1,000 board feet in April, 2020.

People stuck at home started a do-it-yourself bonanza in the summer of 2020, snapping up construction materials for decks and renovations. Housing starts, especially in the United States, began surging too. With demand far exceeding supply, lumber markets went on a choppy rally for 13 months, before the downward trend in pricing began eight weeks ago.

The sharp reversal in economic conditions in the forestry industry in recent weeks is reflected in the sagging share prices of lumber producers.

West Fraser Timber Co. Ltd. , Canada’s largest lumber producer, has seen its stock price fall 23 per cent since reaching a record high of $110.81 on May 10. Last week, flush with cash from the lumber rally, Vancouver-based West Fraser announced a share buyback program worth up to $1-billion.

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Canfor Corp. , the country’s second-largest lumber producer, has watched its stock price decrease 32 per cent since it hit a record high of $35.53 in May. Smaller producers such as Interfor Corp. are also caught in the downdraft. The share price of Interfor, which is based in Burnaby, B.C., has declined 32 per cent since setting a record high of $38.50 in May.

“We expect wood equities to remain volatile over the near term until wood product prices start to stabilize,” Mr. Patel said in a research note.

Industry observers say it will likely take several weeks before lower lumber prices are fully reflected at the retail level, because wholesalers paid higher prices for supplies that are currently in inventory and still available for purchase at stores.

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