VANCOUVER, British Columbia (Reuters) - Investors in Canada's forestry sector should pay attention to the speed skating competition at next year's Winter Olympics in Vancouver because it could help them with an insect problem.

Western Canada's mountain pine beetle infestation has left forestry firms with both the short-term problem of how to make money in a tough market from beetle-killed trees, and the long-term risk of a fiber shortage.

If the industry is lucky, the spectators at the 2010 Games will take their eyes off the athletes speeding around the skating oval and spend a few moments looking at the newly built facility's "wood wave" ceiling.

It's made from trees killed by the beetles that spread through British Columbia's Interior region over the past decade - and have now jumped over the Rocky Mountains into Alberta.

The forest industry says "beetle wood" is as strong as normal lumber, but a blue stain caused by the insects make it harder to sell to some consumers worried about quality.

"People always ask: Do you use it? Now we can point at the (skating) oval...and say, yes we do," said Doug Routledge of the British Columbia-based Council of Forest Industries.

The facility will also allow the industry to show that wood can be used for larger commercial structures where architects might have favored concrete or steel.

"It's a chance to get away from some of the dependency on residential construction," said Kevin Mason of Equity Research Associates.

British Columbia produces about half of Canada's softwood lumber exports, and the beetle infestation has hung like a sword of Damocles over producers such as West Fraser Timber Co. and Canfor Corp. since the late 1990s.

The tiny bugs, Dendroctonus ponderosae, are estimated to have killed up to 623 million cubic metres (22 billion cubic feet) of wood, or about 46 percent of British Columbia's marketable pine, according to the province.

The infestation is beginning to wane, but only because the supply of mature pine trees the beetles favour is dwindling.

Industry officials and analysts stress that the beetle's immediate impact on company balance sheets pales in comparison with the collapse of the US housing market, which pushed Chicago Mercantile Exchange lumber futures this year to their lowest level in more than two decades.

But even as demand eventually begins to improve, analysts say the infestation could reshape the Canadian forestry sector, creating investment opportunities in some areas while damaging others. A key factor is the impact on timber supply.

The pine beetle could help boost lumber prices in the long term by limiting Canada's production capacity, Toronto-Dominion Bank economist Dina Cover said in a recent report.

Recent studies found that affected trees have a "shelf life" of eight to 12 years when they can economically be turned into lumber - four years longer than initially expected.

That means there should be plenty of timber available when demand starts to improve, as many expect, in the next year or two, said Paul Quinn, an analyst at RBC Capital Markets.

"We're talking five, seven 10 years out," Mr. Quinn said.

Potential long-term winners from tighter supplies include investors in timberland outside the infestation areas, Mr. Mason said. Canadian firms active in timberland investment include Brookfield Asset Management.

Possible long-term losers include mills. Tight supplies could eventually force the closure of eight to 12 sawmills, British Columbia's forest minister warned last month.

Ratings agency Standard & Poor's predicted in a recent credit report on West Fraser that the beetles will eventually shrink British Columbia's lumber industry by weeding out higher cost mills.