With the Quebec construction break taking place the last two weeks of July, there was the usual slowdown for hardwood business at this time. Contacts stated that some businesses were struggling to stay afloat, and some even thinking of closing up shop. The industry is struggling due to lack of pulpwood markets, shortage of finding qualified labor and its higher costs, machinery, insurance and other issues are all factors sited.
Ash exports to China were noted as steady by some manufacturers, which has cut into logs being received at some sawmills thus reducing the volume of available Ash supplies. Other export markets were also noted as lackluster. Kiln-dried sales to domestic end users and distribution yards were also slow.
Basswood sales are hard to come by note contacts. Certain sawmills are struggling to get orders for green Basswood production. Kiln-dried Basswood sales are similar note mills, wholesalers and lumber distributors. Some companies are avoiding Basswood log purchases and stocks of this species.
Exports to China of Cherry are also reported as declining, and business on both sides of the border is reported as slow. Kiln-dried inventories are now growing for this specie.
The regionally important Hard Maple is maintaining its traction with continued strong demand for upper grades, followed by No. 1 Common, and then No. 2A and No. 3A grades. Contacts note availability has also improved. Soft Maple conditions are similar with upper grades being the best sellers. Soft Maple No. 1 Common is not selling as well as Hard Maple.
Demand is not great for Poplar on the domestic front, but it is sufficiently moving to keep inventories manageable. Demand from domestic and overseas markets for kiln-dried No. 1 Common and No. 2A Poplar improved during the summer. Green Poplar is satisfying demand.
Red Oak exports to China are more challenging. High prices for many White Oak items and comparatively high prices for European Oak were driving a bit more interest for Red Oak in certain European markets commented contacts. Demand for kiln-dried No. 1 Common and Better is steady on domestic and international markets as supplies improved in late spring.
Sawmills would have liked more White Oak logs over the summer, but competition was strong during this time to obtain them.
Walnut supplies are exceeding demand – green lumber supplies are high compared to buyers’ needs resulting in prices going down. Exports to China have also reportedly waned for this specie.
According to Canada Mortgage and Housing Corporation (CMHC), the total monthly seasonally adjusted annual rate (SAAR) of housing starts for all areas in Canada increased 10 percent in May (264,506 units) compared to April (241,111 units).
“The focus for home builders remains on multi-unit construction in Canada’s major centers as both the SAAR and trend of housing starts increased in May, following two consecutive months of decline. This was due to growth in actual year-over-year starts, driven by significantly higher multi-unit starts, particularly in Montréal and Québec. While this is good news for housing supply, we do expect downward pressure on starts through the rest of 2024,” said Bob Dugan, CMHC’s Chief Economist.
The six-month trend in housing starts increased 3.8 percent from 238,859 units in April to 247,830 units in May. The trend measure is a six-month moving average of the SAAR of total housing starts for all areas in Canada.
The actual number of housing starts across Canada in urban centers with a population of 10,000 and over was up 39 percent to 21,652 units in May compared to 15,606 units in May 2023. The year-over-year increase was driven by higher multi-unit starts, up 49 percent and higher single-detached starts, up 6 percent.
May’s total actual housing starts were higher in two of Canada’s three major cities, with Toronto up 26 percent and Montréal up 200 percent compared to May a year ago. Vancouver declined 13 percent. Montreal’s total starts result was driven by a 59 percent increase in single-detached starts and a 218 percent increase in multi-unit starts versus May 2023.
In early June the Bank of Canada announced its first interest rate cut, by a quarter of a percentage point to 4.75 percent, in more than four years following a hiking cycle aimed at tamping down inflation. Governor Tiff Macklem said the central bank has more confidence that inflation is heading toward its two percent target. He acknowledged there are limits to how far the Bank of Canada can diverge from the U.S. in terms of rate policy, but he said, “We’re not close to those limits.”
Canada has five-year mortgage terms, meaning more Canadian homeowners have had to review their mortgages during this period of higher rates, which has led consumers to rein in their spending.
Macklem said that the Bank of Canada is taking its interest rate decisions “one meeting at a time.”
“If inflation continues to ease, and our confidence that inflation is headed sustainably to the two percent target continues to increase, it is reasonable to expect further cuts to our policy interest rate,” he said.
