As we head into the Holiday Season, there is the usual slowdown in logging activities and sawmill output. Mill output, it was reported, had increased compared to the previous year. Demand for Hardwood finished goods has shifted to a moderated level. The gains in production were evident, and demand on the domestic front softened along with international demand, which brought prices down sharply and quickly this year. The changes experienced in the Hardwood sector has been hard on businesses. Inflation has pushed the costs of all goods and services higher. Contacts commented they are optimistic inflation will go down heading into the new year.
Ash demand continued to be moderate as the Emerald Ash Borer affected supplies of timber and log availability. Some noted Ash production had risen, especially in the U.S. border states, while demand had softened. Prices had decreased over the past few months. Some said kiln-dried markets weren’t as strong now as in 2021 and earlier this year, but inventories have increased.
Basswood appears to be doing better than many other key species. Some non-traditional markets that bought Basswood as a lower priced alternative to Poplar have decreased their use of this species. However, suppliers noted they’ve been shipping regular volumes to their traditional customers. Sales orders heated up from previous oversold levels and transactions point out varied lower pricing. Prices have gone down for certain grades. Green Basswood lumber production is meeting demand for most grades and thicknesses, noted contacts.
Demand of Birch finished goods decreased but end users said they were still busy filling existing orders. Cabinet manufacturers were feeling the pinch as the slowdown of completing homes under construction was holding back demand and fulfillment of some business for them. This slowdown affected Birch, Hard and Soft Maple sales. Millwork and moulding producers were also seeing similar challenges. Secondary manufacturers and lumber wholesalers said they were being more cautious with their purchases. Kiln-dried prices softened slightly, they commented.
Sawmill production of Hard Maple continues to be steady, with availability outpacing demand, which was reported as having declined and buyers were controlling their purchases. They were buying for short term or immediate needs. Wholesalers are struggling to keep production and inventories turning over, resulting in lower prices for some kiln-dried items.
Soft Maple was not a good seller for some areas contacted recently, compared to it being the best seller item only a few months ago. Availability is better but demand is weaker from most buyers and end users. End users are reluctant to buy more lumber currently as they have ample supplies on hand, and as prices are declining, are not purchasing more than needed for the short term. Mills that process kiln-dried lumber have large inventories. Lack of storage space and cash are causing stiff competition for orders, thus impacting kiln-dried prices.
Demand from export markets has waned for Red Oak. Canadian and U.S. business is better than international markets, although end users are not buying as much either. Inventories are high compared to buyers’ needs, with prices going down. Sawmills are having difficulty moving production.
White Oak continues to see high demand, especially for high end finished goods. Demand, here too, has softened due to both weaker domestic and export market demand.
The Bank of Canada governor Tiff Macklem said in October more interest rate hikes are necessary to bring inflation down, despite some early signs of a slowing economy. Speaking to the Halifax Chamber of Commerce earlier that month, Macklem said high inflation increasingly reflects domestic pressures on prices.
The governor said while global events such as the pandemic and the Russian invasion of Ukraine have fed into higher prices, demand is outpacing supply more broadly in the Canadian economy. He said, in hindsight, the bank’s early assessment that high inflation was temporary was “overly optimistic.”
As the economy fully reopened in the spring, pent-up demand for services in travel and recreation began driving inflation even higher, he said. Canadians experienced these pressures first-hand with travel bookings or reserving at their favorite restaurant.
After inflation reached an annual rate of 8.1 percent in June, the pace of price increases in Canada has since slowed, largely due to lower gas prices. In August, the annual inflation rate was 7.0 percent. However, Macklem said the core measures of inflation “have yet to decline meaningfully” even as headline inflation has come down.
As the Bank of Canada monitors inflation and the effects of higher interest rates, the governor said it will be paying close attention to its core measures of inflation, which tend to be less volatile than the overall inflation rate.
Macklem said there are some signs that global inflationary forces are easing, and that food inflation should soon begin to come down.
Despite prices for goods and services falling and global supply chains easing, though, these developments are not enough to bring inflation down, he said.
With labor markets still tight, the economy still in “excess demand” and inflation still too high, Macklem said more interest rate hikes will be necessary.
The central bank has been monitoring inflation expectations among people and businesses over concern inflation could become “entrenched.” High inflation expectations can lead to businesses setting future prices even higher and workers demanding higher wages in future wage contracts.
Macklem said to keep inflation expectations in control, “Canadians will need to see inflation clearly coming down.” There is more to be done, he said. At the time of this writing, the bank was set to make its next interest rate announcement on October 26. Since March, the central bank has raised its key interest rate from 0.25 percent to 3.25 percent, one of the fastest rate hike cycles in its history. Macklem said high inflation hurts people and business by creating “uncertainty and unfairness” and distorting decision making and undermining confidence.
Let’s hope that more will be done and that the Hardwood sector can see some relief in the coming year. Wishing everyone the best of the Holiday Season and a Happy New Year!
