British Columbia’s Wildfires Threaten Lumber Supplies, Force Mine Closures

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Wildfires sweeping across British Columbia, the world’s biggest exporter of softwood lumber, sent timber prices surging and forced the closure of two copper mines in the western Canadian province.

More than 375 fires have swept across the province, burning forests, displacing an estimated 37,000 people from their homes, and forcing sawmills and mines to shut down or evacuate. Lumber futures on Monday jumped by the exchange limit in Chicago to the highest in more than two months. Imperial Metals Corp. and Taseko Mines Ltd. both said Monday that they’ve idled mines in the region.

“Forests are getting burnt, so that has a supply impact,” said Paul Quinn, an analyst at RBC Capital Markets in Vancouver. While the impact on supplies is minimal so far, “the worry is they’ll continue to grow and get bigger,” amid hot, dry conditions, he said.

Lumber for September delivery rose by the $10 trading limit to close at $387.30 per 1,000 board feet on the Chicago Mercantile Exchange. That’s the highest closing price for a most-active futures contract since May 8.

Imperial Metals said Monday that it suspended operations at its open-pit Mount Polley copper and gold mine near Williams Lake after an evacuation order was issued in the region over the weekend. Its mill processes approximately 20,000 tons a day, according to its website.

Taseko Mines also said it has idled its copper-molybdenum Gibraltar mine, which has the capacity to process about 85,000 tons a day, according to its website.

At least seven lumber mills operated by West Fraser Timber Co., Norbord Inc., and Tolko Industries Ltd. have also been affected. Tolko was the latest to announce additional closures, saying in a Facebook post on Saturday that it has shut its Soda Creek and Lakeview mills, adding that “they will not be operational for the foreseeable future.”

Cash prices for some grades of lumber rose 7 percent last week, Quinn of RBC said.

“We’re at the seasonal peak in construction activity, so anything that reduces supply will create some pricing tension,” Mark Wilde, an analyst at BMO Capital Markets in New York, said in an email.

Shares of lumber producers have also climbed in Canada trading. West Fraser Timber rose 6.3 percent last week and reached the highest since July 2015 on Monday. Canfor Corp. was little changed after increasing 7.4 percent last week.

More fire impact:

Last week, West Fraser suspended operations at three lumber mills that represent annual production capacity of 800 million board feet of lumber and 270 million square feet of plywood.
Norbord Inc., the largest North American producer of oriented strand board used in residential construction, also suspended production at its mill in 100 Mile House in central B.C.
Tolko also shut down its Williams Lake mill.
Enbridge Inc. on July 11 said it closed a compressor station on its T-South pipeline, which carries natural gas from northern B.C. to the U.S. border. The pipeline continues to operate, according to its website.
Kinder Morgan Inc. said Sunday it continues to closely monitor the fires and is taking preventative measures particularly around its Blackpool pump station near Little Fort, B.C., including setting up a sprinkler system around the perimeter fencing and the pump building.
Teck Resources Ltd., whose Highland Valley copper mine lies in the region, said in an email Monday its operations are not affected at this time.