Ontario Business Trends

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The winter weather was milder with less snowfall in certain areas, thus affecting logging activity levels. Markets have contracted, causing limited timber sales and putting a strain on logging operations to operate efficiently and make a profit. Finding adequate logs to process was another factor.

With the low sawmill production and steady demand we see prices rising for Red and White Oak, Ash, Hard and Soft Maple. This is also affecting prices for Aspen and Basswood in certain areas on both sides of the border.

Wholesalers and secondary manufacturer contacts say they are not rushing to purchase Ash, even though they would like to increase their green Ash lumber receipts. Demand at this time is not exceeding supply. Prices are steady to firm, they commented, as is for kiln-dried stocks. At this time of year inventories are low, but the shortage is not seen as severe.

Some sawmills have been avoiding Aspen production as they noted there are enough supplies available to meet demand. It is challenging to move most grades of this species at this time. Kiln-dried Aspen demand is weak, and inventory is available, and competition for orders intense.

Basswood demand is slow noted contacts, as it has been for several months, due to its loss of market share to other materials.

Birch is not selling well, said contacts, and is hard to move. However, since sawmills have reduced producing this species, price pressures have eased. Inventories are high. Pricing is steady for sap Birch.

Hard Maple sales have improved somewhat, with price gains being supply driven. Production of green lumber is the lowest it has ever been, and poor logging conditions are further constraining mill output. Many buyers increased their purchases, thus pushing prices up. Kiln-dried Hard Maple sales are positive, with inventories thin as a result.

Contacts described Soft Maple sales as decent, with inventories contracted for certain grades, thicknesses and color.

Sales of Red Oak to domestic and international markets are based on color premiums which is prompting demand for this species. As supplies are higher and demand is now higher, prices are in a firm upward trend. Output of green Red Oak is sufficient to meet demand.

White Oak sales are strong, while kiln-dried inventories are thin for most grades and thicknesses. Poor logging conditions and competition for better quality logs has been keeping supplies short, with prices lifting.

The Bank of Canada Governor said the Prime Minister of Canada should avoid major spending increases in his next federal budget so they don’t hinder the central bank’s efforts to bring down inflation.

Governor Macklem said in a testimony to the House of Commons finance committee in February, if there are large spending increases, it could get in the way of getting inflation back down to target on the timeline they’ve laid out.

Macklem was responding to a question about the federal government’s upcoming budget that was due to be released in March or April.

Overall government spending at federal, provincial and municipal levels is now increasing about 2.25 percent annually, which is not helping bring down inflation, the governor said. But if spending in the federal budget stimulates demand, it would be “particularly problematic,” he said.

The Bank of Canada has held its key overnight rate at a 22-year high of 5 percent in an effort to tame inflation, even as GDP growth has been lackluster and inflation has remained well above its 2 percent target. Inflation was 3.4 percent in December.

The governor said unexpected developments, such as a sudden supply chain blockage, could still force the central bank to raise interest rates again even though now it is more focused on when it should start to lower them.

The central bank wants to see price pressures easing and clear downward momentum in underlying inflation before it considers lowering interest rates, Macklem said.

The February numbers on Canada’s job market moved the needle on when some economists think the Bank of Canada will make its first interest rate cut. Labor numbers released by Statistics Canada were unexpectedly strong, with a gain of 37,000 jobs that more than doubled forecasts.

That prompted some economists who predicted the first Bank of Canada cut in April to push back their forecasts until June.

Economists felt that although the sharp rise in employment in January painted a healthier picture of the labor market than what is under the surface, the Bank of Canada will still be concerned about the renewed decline in the unemployment rate and the strength of wage growth. The employment data suggests that June is more likely for the first rate cut.

Several reasons why the data might concern central bankers: the unemployment rate isn’t rising as quickly as expected; it fell back to 5.7 percent in January, the first drop in more than a year. For now, the labor market remains fairly tight. The unemployment rate edged down, and remains low on a historic basis, and average hourly wage growth of 5.3 percent year-on-year is still too discomforting for the Bank of Canada.

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By Miller Wood Trade Publications

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

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By Miller Wood Trade Publications

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

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