Guest Writer
One Quebec SPF producer reported that “with all that is happening, there has not been a big effect on the market yet. Without sounding like the bullish mill guy, I think in the first quarter of next year, with all the curtailments coming, you will see something. On prices, 2×6’s had a very big run, relative to 2×4’s. 2×6’s have been a standout.
Studs are a bit lackluster, and overall it is kind of a muted market right now. Prices are holding steady, but they are not at the level we want them to be at. We want prices to go higher. Frankly, 2×6’s are in a good place and 2×4’s need to get there.”
Noted an Ontario wholesaler, “I wouldn’t say that the customer has a lot of inventory and I wouldn’t say that the mills have a lot of inventory. The customers are buying what they need and that is it. They are reducing risk by minimizing any carry costs that way.”
“The duties are having an impact,” according to an Ontario manufacturer, “going from 8 percent to 14 percent and they are slated to double from there potentially by next summer. I can’t speak for all mills, but we are doing our best to keep production in Canada if we can.”
Noted a Quebec wholesaler, “Where six months ago a lot of people would have said things had settled in and the duty was not a significant factor in the market, now it is on people’s minds. If you don’t think that both government and softwood industry management in Quebec are really concerned, with the prospect of getting to an even higher duty rate at some point, and if you combine that with a slow economy in general and housing starts that are low, that could make for a tough situation indeed. I know that this lumber dispute has been going on seemingly forever, but I know this decision, that they say is protecting jobs in the states, will also have a negative impact there as well as here. Seems to me that being able to afford a home is as big an issue in the U.S. as it is in Canada and the duties will drive housing prices up. Both the homebuilder and the consumers are going to be impacted. If the sawmills slow down, that will also impact the pulp mills and again hurt the customers. Canada is going to challenge the duty decision, but this dispute just keeps on going.”
From the Pine perspective, an Ontario manufacturer remarked. “It’s starting to get ugly, not so much in the upper grades but in the low end industrial, it’s a tough go out there. Demand is way down and we are competing with Spruce, which is cheaper, and it is driving prices down quite a bit.”
Noted a Quebec producer, “I think that for manufacturing in general, production levels have fallen off. If they hadn’t, the demand would be there. They don’t need our product for pallets or crating.”
An Ontario wholesaler reported that “our low end is hard to sell. A lot of the product was going into items for the residential housing market, to subdivisions, and there is not a lot of that going on right now. There are also finished low grade items coming in at a low cost from South America, so it is not worth manufacturing them here right now.
That detracts from our customer base.
“We do hear that the cost of shipping containers has gone up, which may help the competitive situation. The high end, the 6/4 and 8/4, have been good products for us. They had been selling right away, but now we are seeing a bit of inventory build-up.”
“Some producers have been hanging on to inventories hoping that the price would stabilize a little bit,” said a Quebec wholesaler, “in part because these firms are now pushing the panic button and are trying to move this material, that is helping to send the prices down. Between that and competing with the Spruce, the D grade is moving okay. The problem is the No. 3 and 4 Common, that material is hard to move and those are not profitable items for us. It will probably be a year to a year and a half before that comes back, once housing rebounds.”
According to an Ontario producer, “The upper Pine grades seem to be holding alright at the present time. I don’t believe we are going to see a real significant change, as some mills have curtailed production and that is going to take some availability off the market. When the U.S. market isn’t strong, some mills tend to move their products toward the Toronto area, but there is still a lot of wood in the market right now. I see there are some producers that haven’t slowed down and are still producing at a significant pace, which seems odd. Why do they keep producing so much when things are not that steady? Lots of the upper end is going into big box stores and other DC’s and services the retail stores, many of which have slowed up quite a bit. They haven’t completely stopped, but there is not the turnover of product that there was – we are just in the slow part of the cycle right now. Once interest rates start to drop further, perhaps that will entice people to spend some money on renovation. It is going to take a while for the initial interest rate reductions to have an impact. We won’t see the repercussions from that for several months down the road. But at least this is a positive and it is going in the right direction. Maybe they should have started cutting rates sooner, but that was not the decision. We really need more new home construction to get buyers motivated. The new home numbers are not very good right now. There is an awful shortage of homes out there and you need to have the infrastructure to support new people coming into the country, as Canada does. This deficit in housing drives up the cost of homes and it’s another inflation factor.”
An Ontario producer said, “To see Pine prices go down in the same neighborhood as the Spruce is a tough pill to swallow. You are trying to recoup your log costs. I think lots of people in the Pine are losing money at the moment. It’s supply and demand, it’s a cycle, we have been through it all before. It is going to be a rough patch; I think it will be nine months to a year before it stabilizes. There is a lot of low end to get off the market and once that starts to level out, I think we will see things firm up a bit. The logging season generally starts around the beginning of September. If those firms are not cutting, they are building roads, but most everyone has started to cut by now. Everything is late this year. The weather has been mild and while we are in October, a lot of the trees don’t have color yet. We had a lot of rain this summer, so the fire season was not at all as difficult as it had been the previous summer, especially not in Quebec.”
