Ontario Business Trends

Sept Issue

Share this...

As COVID-19 restrictions ease across the province, the forestry sector is optimistic business will improve through the fall. The continued vaccination efforts, the reduction of reported cases, and the recent Canada border reopening announcement are all positive factors. Sawmills report decent volumes of logs over the summer. For some, however, green lumber production had not increased significantly due to the shortage of labor. Demand for Hardwood products continues to be strong, and so there was a push to build up inventories heading into early fall. Demand is consuming production of developing grades as well as for that of industrial products. Domestic and international markets are performing well, and keeping kiln-dried inventories thin.

With forest fires at a high, additional restrictions were imposed on July 21st and are under the authority of an emergency order in place for Northwestern Ontario. The announcement added activities in the mining, rail, construction and transportation industries that have the potential to cause sparks and ignite fires. Forest industry bans include blasting related to road work, the use of mechanized power equipment and power saws for harvesting or processing wood, and all hot work such as welding, torching and grinding. These restrictions will remain in place until further notice.

According to statistics, U.S. Ash exports to China fell 24 percent in the first five months of 2021 compared to the same period in 2020. Contacts commented that they have not improved. Domestic markets are performing well and supplies are low. Prices for certain grades had risen slightly, and wholesalers and secondary manufacturers were looking to boost green lumber inventories. 

Basswood supplies are low relative to demand, commented contacts. However, in the Appalachian region production has picked up and thus more available to wholesalers. As such, prices have risen slightly for 4/4 through 8/4 FAS and Select, while price gains are broader for kiln-dried Basswood.

With the housing markets strong in the U.S. and Canada, Birch which is very reliant on this sector, is pushing secondary manufacturers and wholesalers to buy more supplies of this species. Prices remain stable, with all grades of kiln-dried Birch performing well. Contacts reported there is a stronger demand for premium color stocks.

Hard Maple sales continue to be strong for kiln-dried No. 1 Common and Better grades. Contacts noted that No. 2A supplies are building sufficiently to meet demand. Premium color Hard Maple is performing better than Unselected or other colored material. Sales are strong on both sides of the border for this species due to the housing market, thus causing price rises. Supplies of developing green stock are meeting markets’ needs. The same is reported for Soft Maple. Demand from consumers for Hardwood finished goods is also a big driver for this species. Again, the market is demanding premium color kiln-dried Soft Maple rather than Unselected or other color material. 

The National Bank of Canada’s (NBC) most recent 2021 Monthly Economic Monitor, stated that following substantial progress in the struggle against COVID-19, the world faces a new enemy in the Delta variant. This threat has led many investors to question the extent of a strong recovery of the global economy and to go back to safe-haven vehicles such as USD-denominated bonds. NBC’s reply in response to the question of the market being justified in its fears for world output, their answer varies according to the degree of immunity attained in each region. In developed economies, where vaccination rollouts are moving along, the Delta variant could bring a rise in new cases without overwhelming health-care systems, since the main aim has always been to avoid hospitalizations and fatalities rather than to prevent spread, and current conditions are still consistent with a gradual reopening. 

The outlook for emerging countries is not so upbeat as their lag in vaccinations increases the risk that one or more of them could cause a situation like in India. Though far-reaching restrictions are fairly rare in the emerging economies, the virus could force more localized restrictions. Despite a rise in uncertainty, NBC leaves their global growth forecast unchanged for both 2021 (6.0 percent) and 2022 (4.5 percent).

NBC says the U.S. is recovering fast. After an expansion of 6.4 percent annualized in the first quarter of 2021, they expect Q2 to show an acceleration to about 10 percent, with household spending likely to be the main driver, and business investment also contributing to growth. Residential investment could be set for a pause after several months of frenetic activity. Although they think the labor market is in better shape than some of the data would suggest, it will take more time for the upside effects of reopening to be fully reflected in the numbers. This will allow the Fed to keep its monetary policy accommodative in the coming months. The median forecast of the Federal Open Market Committee participants suggests that short-term interest rates will remain abnormally low relative to the output gap through to the end of 2023. Under these conditions, the U.S. economy is likely to continue outperforming over the longer term. NBC sees real GDP growth of 6.9 percent this year and 4.3 percent next year. 

In Canada, recent data are highly encouraging, although many are apprehensive of a fourth wave of COVID-19. Canadians responded positively to vaccine rollout. Hospitalizations fell sharply in recent weeks (as of time of writing) which allowed an easing of public-health restrictions. After a moderation of expansion in Q2 due to public-health measures and to production issues in automaking by reason of the chip shortage, impressive growth continues to be expected with the coming reopening of services entailing close physical proximity. Forest-product prices have subsided considerably but soaring natural gas prices drove the Bank of Canada commodity price index to a 13-year high in July. In this context, the labor market is expected to recover rapidly in the coming months as hiring intentions and labor shortages suggest strong employer demand. 

A recent population survey sees a gain of 231,000 jobs that erases at one stroke almost all the losses of the third wave of the pandemic. Most summer gains were in accommodation/food services and retailing. The wave of hiring will continue: the Bank of Canada’s Business Outlook Survey reports record hiring intentions. 

The report is the same for small and medium businesses, which in the summer reported labor scarcities as acute as before the pandemic – 41 percent worried about a lack of skilled labor and 27 percent about lack of unskilled labor. This situation is explained: in June about 800,000 workers were still drawing on the income support program. This support is slated to diminish considerably in August, from $500 a week to $300, which could encourage workers to go back to work and reduce labor-market tensions. 

Additionally, Finance Minister Freeland said economists are forecasting a strong economic recovery, but Ottawa is retaining the power to extend support measures until the end of November if needed. 

By Miller Wood Trade Publications

The premier online information source for the forest products industry since 1927.

Share This
Related Articles
National Hardwood Magazine
Miller Wood Trade Publications and Chris Fehr

Penn-Sylvan Welcomes Guests To Penn-York Event

The Penn-York Lumbermen’s Club recently held a meeting featuring golf and dinner with Penn-Sylvan International Inc., located in Spartansburg, PA, serving as the host. Golf

Read More »