As we move into 2023, and remember the challenges faced and overcome of the past year, supply and demand are still off at this time. According to sources it seems there is a closer balance being experienced for certain grades and thicknesses for green lumber, but a different story for kiln-dried items. Markets are weak for both domestic and international markets causing elevated inventories for most Hardwoods, and prices are decreasing for many key species. However, some businesses report solid sales for pallet material and railroad ties.
With sawmills reducing production of Ash, supplies have edged lower for most areas. Supplies are meeting demand, with prices steady. Kiln-dried Ash inventories are high, with business being reported as highly competitive.
Aspen kiln-dried demand is steady, noted contacts, but declining prices for most species are impacting business for this species as well. Green stock demand on markets is keeping pace with production.
Depending on areas contacted, Basswood details are mixed where sawmill production is reported as up, and wholesalers are facing pressure on prices, while other sawmills and wholesalers are selling developing production and as supplies arrive. New home construction is down both in Canada and the U.S., thus negatively impacting demand for Hardwood finished goods. Kiln-dried demand of Basswood was affected, and was lower than earlier in 2022. Prices remain stable, however.
Contacts stated that traditional markets for Birch have remained steady thus keeping prices more stable than seen for Hard and Soft Maple. Birch is also used as a substitute for higher priced species, therefore demand has been good.
Secondary manufacturers and wholesalers noted having ample supplies of Hard Maple for their finished goods and inventories. Markets at this time were slow to fair. Markets during the second half of 2022 were weaker than earlier in the year, especially for kiln-dried stocks. Prices trended in the same way, thus decreasing margins. There is strong competition for kiln-dried orders which is impacting prices for many grades and thicknesses.
According to most recent new home starts, demand has fallen and so it is affecting demand for Hardwood products and finished goods. With supply chains impacted, competing imports or exports are affecting demand now. Soft Maple demand of kiln-dried stocks is down, as are prices.
With prices falling for Maple, some sawmills processed more Red Oak as stocks were available to do so. Red Oak is in demand for railroad ties. Contacts noted green lumber markets for this species are not great even though some sawmills are able to ship total output.
Demand for White Oak is slow going south of the border and to export markets. Buyers are waiting for prices to settle before purchasing the upper grades of this species. According to reports, sales are slow to Europe, the U.S. and Japan, which is limiting hours worked and lumber purchased. As a result, prices have fallen for this species.
The Forest Products Association of Canada (FPAC) released its national conservation report, Conservation Forestry – Careful Use of Canada’s Forest Resources. The report identifies the link between Sustainable Forest Management and the progress being made on biodiversity goals, Indigenous-led management and net-zero carbon targets. It also provides insights into sustainable forest management in Canada, the world-leading regulatory frameworks in place, the growing impacts of fires on forest health and the commitment of Canadian forestry workers to supporting the animals and fish that call Canada’s forests home. It also recognizes forestry as a critical tool in the global toolbox to support biodiversity and climate change.
This report follows the global report by Dalberg, issued during the COP27 climate meetings in Egypt, outlining how governments around the world are turning to benefits of climate smart forestry and forest bioeconomy to support climate action as well as sustainable and inclusive economic development. The report is available on FPAC’s website.
In December 2022, the Bank of Canada raised its key interest rate to 4.25 percent, the highest level since January 2008. The central bank signaled it may pause its aggressive rate hike cycle.
“Looking ahead, the governing council will be considering whether the policy interest rate needs to rise further to bring supply and demand into balance and return inflation to target,” the Bank of Canada said in a news release in December 2022.
The shift in tone is a marked departure from previous announcements where the bank said more rate hikes should be expected. The central bank has been raising interest rates rapidly to slow the economy and bring inflation down.
The Bank of Canada said there’s “growing evidence” that higher interest rates are restraining demand in the economy.
“Consumption moderated in the third quarter, and housing market activity continues to decline,” the central bank said.
The Bank of Canada said economic data released since its October interest rate decision supports its forecast that growth will stall through the end 2022 and into the first half of 2023.
At the same time, it said inflation is still too high and short-term inflation expectations remain elevated.
