The fall and early winter is seeing lackluster demand for lumber and finished hardwood products. Secondary manufacturers such as residential flooring, cabinets, wood components, some millwork and moulding manufacturers noted they were keeping busy, compared to other markets. Several sawmills have reduced their production as lack of available logs is making it challenging for them at this time. Several contacts noted that inventories are low. With the Christmas Holiday coming up, they don’t foresee any improvements over the near future.
Contacts noted green Ash is moving well for most grades and thicknesses, with prices being firm. Exports at this time are steady with China being the main buyer. On the domestic side, shipments are steady, although at low levels.
The wood components manufacturers, cabinets, and other finished goods are more assertive with their purchases of the regionally important Hard Maple, as are many wholesalers. End users have not increased their purchasing. Trends are driven by tighter supplies. Some have expressed concerns there will be tighter supplies in the coming months as prices continue to climb for this species.
Wholesalers, end users and distributors of Soft Maple are looking to fill inventories, which have been depleted due to limited purchases in the past few months. Developing supplies of green lumber are not that readily available, stated contacts. As kiln-dryers did not process that much Soft Maple over the summer months because of lower interest for this species it has resulted in weaker prices. Many contacts noted they are low on specific grades and thicknesses of this species.
Millwork and moulding manufacturers reduced their purchases of Basswood as did the shutter and window blinds manufacturers. Wholesalers are also limiting their purchases. Sawmill output has been low, and supply and demand has narrowed.
Green lumber supplies of Cherry have contracted said contacts. Kiln-drying operations are looking for more Cherry to supply demand from China, which is pressuring green lumber prices.
Flooring plants are holding back buying Hickory, and some wholesalers are also reducing orders of this species. Kiln-dried business is flat mostly everywhere at present for Hickory.
Certain residential wood flooring manufacturers are more cautious in purchasing Red Oak and are lowering prices accordingly. Business is reported as not being strong for Red Oak; supplies are thin due to its low production this year. Kiln-dried prices gained traction over the past few months with figures being raised accordingly. Drying operations were purchasing No. 1 Common and Better Red Oak, as they do not have much in drying yards or kilns.
Certain residential wood flooring manufacturers said they were taking a cautious approach to Red Oak buying and lowering their prices.
Contacts noted strong demand for White Oak for green No. 1 Common and Better, due to low production. Prices are rising for certain grades and thicknesses, and demand on domestic markets are quite good, while exports are fair for certain businesses.
Demand for Poplar is reportedly decent while prices for Common grades have tightened in certain areas.
Markets for Walnut are not that strong, except for the U.S. and to China; production has been low for the past several months.
Furniture producers are experiencing slow business while supplies are ample for raw materials and framestock. Wood pallet markets are also slow while others note steady sales.
According to Canada Mortgage and Housing Corporation (CMHC) housing supply across Canada’s largest cities saw just a 1 percent growth in the first six months of 2023, compared to the first half of 2022. CMHC’s latest Housing Supply Report examines new housing construction trends in Canada’s six largest Census Metropolitan Areas (CMAs). These are Calgary, Vancouver, Edmonton, Toronto, Ottawa and Montreal. Tighter borrowing conditions, elevated construction and labor costs, and high interest rates created challenging conditions for homebuilders across all six major markets. Additionally, construction timelines saw a slight increase from the first half of 2022, up 0.9 months.
Toronto and Vancouver accounted for nearly two-thirds of the housing starts across the six markets, with apartment starts making up nearly three-quarters of all housing construction. The strong apartment growth observed in Toronto and Vancouver was offset by declines in Canada’s other largest centers.
Montreal tends to build more small and low-rise apartment structures than Toronto and Vancouver. Because of their smaller size, these structures take less time to plan and build. The decline in housing starts in Montreal was, therefore, more reflective of the recent deterioration in financial conditions.
Elevated rates of apartment construction, highlights the report, are not likely to be sustainable due to various challenges facing developers. These challenges include higher construction costs and higher interest rates.
This cutback takes place at a time when more sellers are coming to market. New listings have increased in each of the last six months, and in September surpassed their pre-pandemic level by 10 percent (this data is the most current data available at press time).
The Royal Bank of Canada’s Monthly Housing Market Update notes that early evidence in September confirmed that higher interest rates continue to restrain real estate activity across most of the country – with Alberta once again bucking the trend with its sustained vigour. Home resales fell 1.9 percent month-over- month (m/m) nationwide, marking the third consecutive monthly decline.
A sharp easing of supply-demand conditions since summer has brought most markets into better balance while tipping Ontario into a buyer’s market. This has relieved the upward pricing pressure that built in the spring. Canada’s aggregate MLS Home Price Index fell slightly month-over-month in September (-0.3 percent) for the first time since March. Prices are expected to soften further through the remainder of this year and possibly into early next as market conditions continue to tilt in favor of buyers.
Sales declines were widespread in September with few markets reporting advances. Among Canada’s larger markets, the pullback was sharpest in Vancouver (-5.6 percent m/m). Though the latest backstep in Toronto looked comparatively modest at -1.8 percent, the fall since this spring’s peak is substantially more pronounced -22.4 percent than in Vancouver (-13.7 percent).
Higher interest rates, affordability challenges and economic uncertainty are likely to keep homebuyer demand muted in the near term. At the same time, higher interest costs may also exert increasing pressure on existing homeowners to sell, keeping the flow of new listings going. Together these trends would hand buyers more pricing power in the months ahead, driving prices further down in Ontario while restraining gains elsewhere in the country.
With housing markets down, it will mean less consumer spending on many hardwood finished goods as consumers reign in their spending as interest rates are higher and with the economic uncertainty.
We extend the hardwood industry sincerest best wishes for a happy, healthy and prosperous Holiday Season.
