This year’s fire season came early with uncontrolled fires in every province across the country caused by unseasonably warm temperatures and little rain, making it difficult to battle wildfires.
Environment Canada issued alerts of high air pollution in many areas downwind from the flames throughout the country. This fire season has already broken records for the number of hectares burned, approximately 200,000 hectares burned, with 211 fires reported as of June 5 by the Ontario and Quebec governments; 145 of them are considered to be out of control with certain jurisdictions being on alert for evacuation while others have already been evacuated. It was also reported that logging activities were suspended in some areas, along with fire bans issued in all provinces. One fire in Northern Ontario in mid-June was estimated to have burned 300 hectares while temperatures remained at 30 C, creating ideal conditions for fires to flare up.
There is concern about these ongoing fires for timber supplies. There has not been too much impact at the time of writing for actual sawmills, however, there were railway and highway closures in affected areas. The question is how these fires will affect supply chains, even though during the summer there are regular road closures and fire bans during the summer months. We will have to wait and see the impact it will have on sales and prices for the rest of the summer and into early fall.
With markets continuing to see low demand for hardwoods, businesses were finding it harder to increase their sales and improve profit margins. Some commented market conditions had been poor for Whitewoods heading into early summer. Supplies are reported to be exceeding demand for green Hard Maple, Basswood, Soft Maple, Birch and Aspen from end users. Kiln dried inventories for these species are also ample to meet demand. Prices are responding to these changes.
Some contacts noted that Ash demand to export markets are doing well, and domestic sales are decent. The better sellers are the No. 1 Common and Better grade, with prices moving upward slightly for this grade. Wholesalers commented they are shipping green production.
Developing green stocks of Aspen are selling noted sawmillers. Markets, however, for kiln-dried Aspen are reported as slow, with inventories creeping up, and prices are going down.
Basswood sales are declining note contacts, and so they have ample raw materials for short term needs. End users of this species state they have ample stocks of most grades and thicknesses for this species.
Birch was managed by loggers and sawmills in May and June to ensure coordination of log receipts and production schedules to produce this species in a timely manner. It was reported that competition for Birch was high. Kiln-dried
Birch demand was also reported as decent.
Obtaining Hard Maple logs and processing them over the summer was a critical time to do so. However, most buyers advised they had ample Hard Maple inventories and so were limiting purchases to just maintain their desired inventories. Selling green lumber is more challenging rather than the sales prices, even though prices are still going down. Markets of kiln-dried Hard Maple are also slow, with inventories rising.
Soft Maple prices were also in a downward trend, although it was reported as not dropping as much as in late May and early June.
Red Oak production, on the other hand, is reported to be meeting buyers’ needs for most grades and thicknesses.
Domestic sales are doing well whereas international customers are controlling their purchases. Inventories are building for certain items, which is producing price pressures.
Business for the upper grades of White Oak is reported as good, and international FAS orders are also holding up.
Inventories are thin, noted some contacts, which is resulting in firm pricing. The upper grades are selling better than the No. 1 Common and No. 2A kiln-dried White Oak. Some say their inventories are edging up, but it is being managed.
According to The Conference Board of Canada’s 2023 report “Hitting the Pause Button: Provincial Three-Year Outlook”, real GDP growth in Ontario will be significantly slower this year than in the two previous years. They forecast output will increase by 0.9 percent in 2023, on par with the national average. Next year, real output growth will accelerate to only 1.4 percent as the economic slowdown across the country continues to be felt in 2024. By 2025, a strong rebound is expected, with output rising by 2.7 percent, states the report.
After increasing by 6.2 percent last year, real household spending will ease to 1.0 percent growth this year, buoyed by spending on services. The significant savings accumulated during the pandemic will help many households during this period of slow growth and high prices.
Large increases in the population are also giving a boost to the economy in Ontario, lifting housing starts and providing the labor force with much-needed workers. The report forecast is for the population to rise by 2.9 percent this year, the largest increase in decades, led almost entirely by international migration. Last year, nearly half a million net international migrants came to the province, and this year, another 313,000 is expected.
Non-residential investment will post healthy growth rates in Ontario, continued the report. Battery plant production, in particular, has been a significant boon for the province. With substantial government involvement, Ontario has been able to secure major auto company investment in the southwestern region, the latest being Volkswagen, which is investing $7 billion to build its first battery plant in North America. The manufacturing and construction industries will get a boost from these investments, but there will likely be spillover effects to other industries.
On the Quebec side, states the report, as the full weight of higher interest rates filters through the economy, Quebec’s real GDP growth is forecast to weaken further in 2023. Higher borrowing costs and softening homebuyer demand are weighing heavily on residential investment and housing starts. But household consumption has thus far remained resilient, aided by elevated savings. Nevertheless, tighter credit conditions and increased incentives to save will cause consumer spending to soften, helping to bring inflation back to target. In 2023, Quebec’s economy is forecast to post real GDP growth of just 0.6 percent. It is expected to improve, with economic growth rising to 1.1 percent in 2024 and 2.2 percent in 2025.
Recent job growth has pushed up Quebec’s employment rate and combined with strong wage growth is supporting household incomes, stated the report. Conditions in Quebec’s labor market are some of the tightest in the country, due to its aging population and lower immigration relative to other provinces. Having opted not to raise immigration targets in line with the federal government, Quebec is now relying more on non-permanent residents—a group that includes temporary foreign workers and international students—to fill job vacancies. Over the coming quarters, labor demand is expected to cool as firms react to a slowing economy. This will create some upward pressure on the unemployment rate. However, over the medium term, tight labor supply will keep the jobless rate low.
The report continues, the energy and natural resource sectors are on a firm footing, with efforts to export hydroelectricity to the U.S. progressing and several new mining projects on the horizon.
The recently tabled 2023–24 budget delivered a win-win promise of tax cuts and higher spending. With inflation having eroded household purchasing power, reducing the tax burden in one of Canada’s highest tax jurisdictions will help household coffers. Funding the announced measures will require reduced contributions to the province’s Generations Fund— set up to help pay off Quebec’s debt—and slower debt reduction.
