Ontario/Quebec Business Trends

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Ontario/Quebec Business Trends 1
By Richard Lipman
Guest Writer

According to an Ontario-based manufacturer “Prices continue to rise in all species after last week’s curtail announcements from Canfor. The U.S. is the primary driver, as mills reported strong sales south of the border.” A Quebec producer told us the U.S. is “desperately searching for studs, which has allowed mills to build solid order files. Stud grade 2×4/8 and 2×4/9 increased noticeably early in the week. In the East, 2×4 No. 2 and Better random widths went up and 2×6 random widths rose as well. However, we’re still in the grips of winter and recent ice and frigid weather from Texas to the Midwest and Northeast disrupted trucking, which slowed consumption.”

Noted an Ontario wholesaler, “the order files are at the three, six or sooner, depending on the item. Some stuff is out to near to the end of February or the middle of February, just depending on the product. The shutdowns definitely have had an impact, I mean we’re a business that’s dependent on supply and demand and, if there is a certain amount of demand and then the supply all of a sudden starts to shrink, then the prices have nowhere to go but up. The mills have probably pushed the prices as high as they’re going to get for now, because, late this week, business started to tail off, like yesterday it was quiet and today it’s definitely quiet. However, the mills have got order files and if in two weeks there’s still no more business and the market looks like it’s getting lost again, I think what will happen is that there’ll just be more announcements from the mills that they’re going be curtailing production.”

Reported a Quebec manufacturer, “I think this week it was 2×4 8 foot studs that led the way. That was the big mover. So that’s encouraging in the sense that, if you’re building homes, you need studs. And so, if there’s a demand for studs, it means that there’s a demand for the construction of those homes.” An Ontario wholesaler told us, “I think anybody who needs to buy a home in Canada is probably going to wait it out a little bit, just to see that inflation numbers and the interest rates start to stabilize. We’ve heard that builders in the U.S. are starting to adjust the size of the houses. They’re now building smaller homes because they’ve got to cutback on the size of the homes so people can afford them. If the builders can make these adjustments and find the right spot in the market for the demand, 2024 should be a decent year. We should see some recovery.”

“My feeling is that 2023 is going to be bumpy,” according to a Quebec wholesaler. “We could have a lot of stops and starts to this market, as supply and demand try to find a balance. But there is underlying demand in the marketplace, so I think people are looking positively at 2024 and thinking we just have to get through this year and then next year will be a lot better. I think people understand that, based on the demand now, there has to be a curtailment of production. There’s no other way around it. There have been some quiet cutbacks in the east as well as the major announcements in the west.” Echoed an Ontario producer, “It might not be publicized in the same manner as out West, but I know that mills are curtailing production. They’re trying to ease some of the pain everywhere. You know, you’re coming into the busiest time of year for your product and then there is an oversupply out there. So, if they’re prudent they would try to scale back a little bit, just kind of protect their markets. Their product goes to the states, just like the Western mills”.

According to a Quebec producer, “Nobody wants to buy as the market’s falling and people still had a lot of inventory. They’re just hanging on and they want to average their prices down, so they want to make sure they’re buying at the bottom. What I see out for three months, six months is we will go sideways to perhaps upwards. I think we’ve seen the bottom for the time being. A lot is going to depend on what happens with the demand, with the talk of possible recession that is kind of on the horizon. So sure, if we don’t get a recession, I think we’re going to kind of cruise through this in a moderate way. If not, I think we could see some more downward pressure again.”

Noted an Ontario wholesaler, “Things seem to be firming up a little bit. I know Cedar is starting to pick up and I see that all the high grade and the merch logs are holding their own. They haven’t come down in price, which is good. So that means 4×4, 6×6, 2×8, 2×10 – all the bigger stuff is holding its own and we’re buying in. I see some of the smaller logs, the gang and chip and saw, they’ve come down. There used to be a little bit more, but there’s not a lot of it out there. I think we found the floor and the magic number and with all the mill closures going on, I think we’re going to see some firming in the market in the next little while.”
On the Pine side, an Ontario manufacturer reported that, “Prices are still fairly firm. I would say if anything has loosened up a little bit, it might be on the industrial grades. The production is pretty much unchanged from what we can see in our region. Everybody seems to be pretty much producing about the same, so we don’t anticipate there will be an oversupply.”

A Quebec wholesaler noted that “some, but not all the industrial, like the wider widths are ok. It’s just some of the narrower widths that are starting to soften up a little bit. I mean you’re talking about the pallet guys. Spruce plays a big part of that too, if there’s a bit of economy Spruce out there, people will grab that before they use White Pine.” An Ontario wholesaler indicated that “for the most part, everything is kind of holding its own. We haven’t already gone into the full swing yet of the market starting up again for spring. We usually expect to see that about the middle of February or so, but we expect things will be rolling along, there is some optimism. Our seasonal trends are November, December and January where it’s the cheapest time to buy. Then come February, March and April it picks up, for the exception of a few years in the many years I’ve been doing this.”

Said a Quebec producer, “I don’t know whether the market will be as good, there might not be quite as much demand as there was last year. I don’t think it’s going be a bad year. I think, there’s no doubt that some things will soften up a bit, mostly in industrial grades. As far as the upper grades, for good quality materials, the price is not likely to fluctuate at all, from what I can see. And hopefully it doesn’t because the mills really need that level. There’s still good demand on the selects and the upper grades. Generally something like that might fall off in the winter months cause there’s not quite so much demand overall, but I think it just goes to the point that there’s not a lot of product out there, so that’s kind of holding price in place.”

“With a bit of the slowdown that is happening in other sectors,” noted an Ontario producer, “you might see trucking slowly fall into place, to something a little bit more manageable. It certainly would help because transportation has been costly. They might be a little bit hungrier for work, as other operations are scaling back a little bit. As well, we’ve had a very good winter. It’s been exceptionally mild. We just got over that one wicked spell, but it’s quickly warming up again. I would think the Northeast states have had a tough time because it’s been too mild. They just never got any frost in the ground to be able to log. This might be good in a sense because there was some production off the market and having a little extra wood off the market to try to stabilize things a bit might be helpful for everybody.”

By Richard Lipman

Richard Lipman Guest Writer Miller Wood Trade Publications

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