Business continues to improve for some in the Hardwood sector as we move through a third wave of COVID-19. Vaccination efforts ramped up across the country, with some positive results being seen in lower new case numbers, with easing of restriction plans rollout to what is hoped will be a return to normal for people and the economy. Log supplies have increased for sawmills. There is a labor shortage that is holding back logging productivity and log supplies. Contacts note that domestic and export markets are doing well, however. Demand is strong for Red and White Oak and Walnut. Contacts note that supplies for a vast majority of species, grades and thicknesses of green and kiln-dried lumber supplies are limited with strong to growing demand. Sales of pallet material, rail ties and timbers are reported as good. Low sawmill production and strong demand for pallet lumber and cants from the wooden pallet and container industry is driving prices higher. Markets are improving for board road supplies in areas contacted.
Improvements to the supply of the regionally important Hard Maple production has helped, but not enough to fill inventory decks for all sectors. Sawmills are looking to get more quantities of Hard Maple logs. Buyers are also seeking additional stock but with mixed results. Prices are firm to higher, they noted. There is also a shortage of kiln-dried lumber, and with new home construction and renovation markets booming in Canada and the U.S., Hard Maple is in short supply. While the cabinet and wood component industries make up a large part of the market for Hard Maple, this species is also gaining ranks from the flooring sector.
Demand for Soft Maple, according to areas contacted, is good, but varies according to grade and thickness. Upper grades are consistent for both green and kiln-dried markets.
Ash is in demand to the Chinese market and appears to have lost some of its momentum in mid-May. Contacts reported no difficulty getting orders to China and elsewhere. There has been an increase in demand from the U.S. RV industry for this species, and demand in that country has been strong due to new home building and renovation markets. Kiln-dried business is fuelling green lumber price increases, noted contacts.
Secondary manufacturers and wholesalers are keeping Basswood demand up, along with exports to the Far East. With warmer weather upon us, less Basswood is being cut; supplies are not quite meeting demand, and prices are edging up.
Cherry demand has been very strong in the past several months, with sawmills moving production at steady to higher prices here and in the Appalachian Region. Exports to China continue to be strong but are showing a slight slowdown.
Flooring manufacturers are seeking more Hickory for both domestic and export markets. Prices are rising for this species, and sawmills are struggling to produce sufficient supply.
Exports of Red Oak to China continue to be strong, yet have started to slow down, reported contacts. Demand on domestic markets is good as well, with firm pricing for many grades and thicknesses of kiln-dried Red Oak.
Business is strong for White Oak according to sawmills and drying operations. Flooring manufacturers are the main requester at this time. Demand is also coming from other end users in Canada and the U.S., Asia and Europe keeping demand high and in short supply. Prices are moving upwards as a result, even at record levels.
Market demand is also very strong for Poplar to millwork, furniture and moulding companies. Contacts noted that exports are limited by supply rather than by demand. Sawmills have increased production of this species, and markets are readily absorbing it. Prices are on the rise for this species as well.
There are brisk sales of pallet stock with low to marginally adequate pallet cant and lumber supplies. Rail shipments are trending up. The need for track maintenance is increasing, including black tie installation.
The Canadian Real Estate Association (CREA) forecast big 2021 home sales, but the second half will be slower than the first. CREA sees a less exciting, but more typical year for sales next year. Using their estimates of spin-off economic activity from each home resale, this year’s economy will get a boost. For next year, they see the spin-off will be a drag on economic growth.
Spin-off economic activity is secondary spending that occurs during a home buy, beyond a house and land. Paint, furniture, moving fees, legal fees, and other things are spin-off activity. On the positive side, this activity is a significant part of the total economy. CREA estimates the average home resale generated $55,122 in spin-off economic activity. This gives a big boost to the economy when home sales rise. If home sales fall, it withdraws some of that activity as well, leading to excess capacity. This year is seeing a huge benefit from higher home sales. However, next year’s falling forecast shows it may be a drag on the economy.
The dollar value of spin-off economic activity reached a new record high last year. The estimate comes in at $36.27 billion for 2020, up 13.33 percent from the year before. That’s on top of the 6.06 percent increase 2019 made on 2018’s activity.
Using the CREA home sale forecast, numbers should be higher, even as sales slow. The estimate works out to $46.42 billion in 2021, up 27.99 percent higher than a year before. If the year hits projected economic growth, just the spin-off economic activity would be 1.91 percent of GDP. There’s a large dependence on real estate, when the spin-off of higher home sales, prints 0.4 more GDP points.
The CREA forecast for next year shows things will calm down a little, cooling spin-off. The estimate is $40.57 billion in 2022, down 12.60 percent from the 2020 estimate. This is all good news for the Hardwood industry as consumers will continue their strong demand for Hardwood products.