October is upon us and the fall season is in full swing for those in the hardwood industry. Planning and stocking up on supplies to see businesses through the fall and early winter are under way. Some are finding it challenging to get the lumber they need as competition is rather stiff at this time, and as sawmills try to build-up their production schedules and ensure a good mix of species according to demand.
In the U.S. border states, Ash demand is low due to the Emerald Ash Borer decimating these trees, and also most of the Ash produced is being exported overseas. Demand for this species, along with overall sawmill production, noted contacts, has been down this past year.
Demand for the regionally important Hard Maple is also down at this time, although the gap between supply and demand has been lessening and is at a more level pace. Green and kiln dried supplies are noted as readily available for most areas contacted. As for Soft Maple, demand is weak, commented contacts, and supplies are high while prices are dropping slightly. It was noted that upper grades were more popular than the No. 1 Common and No. 2A grades.
Exporters of Cherry to China were happy to report that demand had improved from that market, with a noted increase in prices for specific items. Kiln drying operations were also reported as increasing purchases of Cherry to serve their overseas customers. Prices were still experiencing a downward slide for green lumber.
Hickory production was one species that saw continuous output over the summer due to demand and to avoid staining. Although demand for this species has slowed compared to earlier this year. Contacts stated that sales are based on established long-standing relationships. Kiln-dried Hickory sales are also slower than earlier this year, and mostly for the common grades.
Oak flooring producers are ramping up supplies in preparation for the fall and winter season of White and Red Oak. Some exporters noted that sales of Red Oak had improved over late summer to China, with prices being steady.
Green Red Oak was moving better for No. 1 Common and Better grades, and No. 2A and 3A were reported as being in solid demand, while prices remained the same. White Oak demand has improved a great deal, with sawmills ramping up production to meet demand. Some supplies are reported to be tight at the moment, with prices being higher for some green listings.
Mouldings and millwork manufacturers are demanding more Poplar. Demand is reported as slow from furniture manufacturers and pallet producers. Exports are also said to be weak, even though shipments to China have increased recently. Supply is said to be keeping up with demand.
Walnut has been in demand by wholesalers as sales on domestic markets for this species have been good, as are to Chinese markets since the end of the summer.
According to Statistics Canada (StatCan), the annual rate of inflation rose to 3.3 percent in July (the most recent data available at presstime). This was up from the June rate of 2.8 percent. Economists had widely expected an increase, though the report outpaced the consensus’ estimates of 3.0 percent. Part of the reason inflation increased was because energy prices saw a smaller annual decline in July than in June, said StatCan. A monthly drop in gasoline prices between July and June last year was no longer affecting the agency’s inflation calculations due to the “base-year effect”. (Base-year effect refers to the impact that price movements from 12 months earlier have on the current month’s headline consumer inflation.)
On a monthly basis, Statistics Canada said gas prices in July were up slightly (0.9 percent) from June.
Mortgage costs once again grew at a record rate thanks to the rapid rise in interest rates, StatCan said. The Bank of Canada is hoping restrictive interest rates will tamp inflation back down to its two percent target. July’s increase moved the annual inflation rate out of the central bank’s one-to-three percent target range.
According to some economists, recent upswings in the unemployment rate and signs of cooler spending by consumers will offset the impact of the higher July inflation reading and allow the Bank of Canada to remain on the sidelines in September with regards to the rate. They feel that recent signs of softening in the Canadian economy should be enough for the central bank to forego another rate hike in September (as of time of writing).
However, not all economists agreed a pause was likely. Stating that the persistence in core inflation will put the Bank of Canada in line for a 25-basis-point rate hike in September as of time of writing. Some expect inflation will therefore drop to the two percent target as early as the second half of 2024, roughly a year ahead of the central bank’s own forecasts.
Those in the hardwood industry are waiting to see what the rate will be and how it will impact their businesses, and how much consumers will reign in spending from here to the end of the year.
