As we head into a new year, and reflect on the past year, there were many positives for the Hardwood industry. The strong housing sector in both Canada and the U.S. helped keep businesses going, showing its resilience in spite of COVID-19 lockdowns and all the challenges it brought, along with labor shortages and delays in shipping. Also, the very strong renovation market, which is continuing, is boosting business for those in the Hardwood industry. As the borders start reopening, it is hoped that delays in shipping will be greatly reduced as we move forward into 2022. Output has improved for most products such as furniture, cabinets, moulding and millwork, flooring and wood components, which is helping to meet the strong demand from housing and renovation sectors. Contacts noted Hard Maple availability continues to be tight, as for Soft Maple, Aspen and Ash.
As strong housing and renovations markets continue to be strong, limited Birch production with a higher demand from these sectors reduced kiln-dried inventories. Some wholesalers and secondary manufacturers noted better sales of this species due to lower costs as compared to Soft and Hard Maple. Strong demand is pushing up prices of limited supplies of Birch, noted contacts. Some noted green supplies are also rather tight at this time.
Some areas reported that the upper grades of Hard Maple are outperforming the lower grades. However, sales for most grades are good. Orders are keeping pace with production, and competition for No. 1 Common and Better is driving prices higher. Kiln-dried inventories are thin in some cases as interest remains solid.
The high price of Hard Maple is aiding sales of Soft Maple, and so production of this species is not keeping pace with market needs, and kiln-dried inventories are also low at this time.
Ash production was controlled moving into late fall and early winter. Markets are thin for kiln-dried inventories, commented contacts. Demand on the domestic front is steady, with international markets also holding up well. Imports from the U.S. were noted to have made strong gains in Canada in recent months, as well as to the UK.
Aspen sales are based on established buyer-seller relationships. However, some noted non-traditional business is opening up as end users are looking for lower cost alternatives to Maple and higher priced species. Thus, supplies are not meeting market needs.
Several manufacturers noted low Basswood production, as log decks were down for most areas contacted.
The sawmill focus was on higher valued species like Hard Maple, Ash, Walnut and Soft Maple over this species.
The shortage is felt more for the upper grades.
With inflation rising, it is felt that the odds are the Bank of Canada will raise borrowing costs early in the new year.
The Consumer Price Index (CPI) rose 4.7 percent in October 2021 (the most current data available at presstime) from a year earlier, compared with a year-over-year gain of 4.4 percent in September, reported Statistics Canada in mid-November.
Inflation is nearing its fastest pace since the Bank of Canada began using the consumer price index to set interest rates in the early 1990s, increasing the odds that the central bank will raise borrowing costs early in the new year. The main sources of upward price pressures are crude, natural gas, housing, food and some services.
Inflation remains a dilemma for the Bank of Canada despite the alarming jump in the CPI, because various labor-market indicators suggest the economy is still weak, justifying the benchmark interest rate’s current setting of 0.25 percent. The biggest surge was a 42 percent increase in gasoline prices, stoked by a mismatch of supply and demand in global energy markets. This is not in the Bank’s control.
The best cure suggested is patience for cost increases that are the result of shortages of inputs, such as oil and computer chips, which should subside as suppliers rush to fill demand.
“While our analysis continues to indicate that these pressures will ease, we have taken them into account for the dynamics of supply and demand,” Bank of Canada Governor Macklem said in an op-ed published by the Financial Times in November. “What our resolve does mean is that if we end up being wrong about the persistence of inflationary pressures and how much slack remains in the economy, we will adjust.”
All the major components of Statistics Canada’s CPI basket increased in October, led by a 10 percent jump in transportation costs, which capture energy prices. Shelter costs increased 4.8 percent and food costs rose 3.8 percent from October 2020. Both those gains were roughly the same as the previous month.
“The recovering economy and hot inflation will likely prompt the Bank of Canada to react and raise interest rates sooner rather than later,” said an economist at Toronto-Dominion Bank. “We expect the Bank of Canada to start raising its key interest rate in April of 2022, but cannot rule out the possibility the central bank will act earlier if the job market remains resilient and inflation keeps surprising to the upside.”
It is hoped that the new year will bring better economic conditions, and that the number of COVID-19 cases will continue to subside as inoculation continues around the globe.
Here’s wishing you a happy, healthy and prosperous 2022.