Interfor Corporation's average lumber selling price rose to $739 per mfbm in the second quarter, up $73 per mfbm, or 11%, from the first quarter, as lumber prices strengthened across all operating regions. Adjusted EBITDA increased to $92 million from $31 million, while the company recorded net earnings of $1 million compared with a $63 million net loss in the preceding quarter.

Industry-wide production curtailments over the past several years and seasonal demand accounted for much of the lumber price increase. The gains continued into July. Compared with second-quarter averages, July lumber prices increased 4% for the Southern Yellow Pine Composite, 12% for KD H-F Stud 2x4 9', 9% for the Western SPF Composite and 10% for the Eastern SPF Composite.

Lumber production increased by 71 million board feet from the first quarter to 927 million board feet. The increase primarily reflected the ramp-up of the rebuilt Thomaston, Georgia, sawmill and higher operating rates in the U.S. Northwest and British Columbia after temporary production curtailments at the start of the first quarter. Shipments totaled 941 million board feet and exceeded production, reducing lumber inventory by 14 million board feet.

Production costs declined for a third consecutive quarter despite fuel and other cost inflation. Second-quarter production costs were $41 per mfbm, or 6%, lower than full-year 2025 levels. The reductions reflected productivity and portfolio optimization initiatives rather than the increase in operating rates.

Logistics constraints improved modestly from the first quarter, but problems continued across the broader supply chain, particularly in the U.S. South. Oil price fluctuations are expected to affect end-use demand, logistics costs and raw-material purchases and could restrict offshore lumber imports from Europe.

North American lumber markets are expected to remain volatile in the near term as the economy adjusts to changing monetary policies, tariffs, oil prices and geopolitical uncertainty. Industry production is also expected to continue adjusting to demand. Production curtailments, seasonal demand and logistics constraints, particularly in the U.S., are expected to drive additional lumber price fluctuations during 2026.

Canadian lumber duties remain a financial risk. A preliminary combined anti-dumping and countervailing duty rate of 25% for the seventh administrative review is expected to result in a non-cash incremental expense, including interest, of about $76 million in the second half of 2026 if the preliminary rate is maintained. The final rates are expected in the second half of the year.

Separate Section 338 and Section 301 tariffs announced by the U.S. in July do not apply to Interfor's products exported to the U.S. About 65% of the company's lumber is produced and sold within the U.S., while about 20% of total production is exported from Canada to the U.S. and is exposed to duties, tariffs or other potential trade measures.

Over the mid-term, Canadian lumber is expected to remain an important source of supply for the U.S. market. Growth in U.S. lumber manufacturing capacity is expected to remain constrained by labour availability, equipment lead times, residual offtake constraints and lengthy project ramp-up periods. North American demand is expected to benefit from the age of the U.S. housing stock, a shortage of available housing and demographic factors.

The Thomaston sawmill is ramping up toward pro forma annual production capacity of 240 million board feet after the rebuild was substantially completed in the first quarter. The mill generated positive Adjusted EBITDA in the second quarter after making a negative contribution during the final construction phase.