Contacts commented sawmill production was up in late winter, which were noted by wholesalers and secondary manufacturing facilities. However, supplies are still a bit shy of meeting demand for some species, grades and thicknesses, while for other supplies are even with demand. With oil demand being down, board road items are also seeing a downturn in production. With the Russia-Ukraine war, contacts expect disruptions to export markets in the foreseeable future.
Ash demand continues to be strong on international and domestic markets. Supplies are hard to come by due to low inventories, and to the Emerald Ash Borer that decimated many tree stands of this species. Prices responded by rising slightly.
Basswood production has remained rather low over the winter as the focus was on higher valued species, such as the regionally important Hard and Soft Maple. The Basswood supply is not where it should be as a result for most grades and thicknesses, commented contacts.
Cherry markets are reported to be doing better than at the beginning of the year, due to improved Chinese markets. Some orders are taking up all of the on-hand supplies available for certain businesses. The cabinet, flooring and components manufacturers are also seeking more Cherry as their respective sectors are performing well.
Hickory sales are also on the rise to a variety of markets. The U.S. residential flooring sector is seeking more of this species, as are cabinet and moulding and millwork operations. This has resulted in prices being firm for most grades and thicknesses of this species.
Business for the regionally important Hard Maple is noted as brisk. Demand for Hard Maple continues to lead as the top selling species. Even though lower cost substitutes were used instead of Hard Maple earlier in the year, businesses reverted back to Hard Maple as other species weren’t sufficient to meet market demand. Prices are firm as a result.
Soft Maple is also seeing strong activity and suppliers are struggling to keep up. Sawmills, kiln drying operations and wholesalers can’t get enough supplies to meet demand. The cabinet sector is the largest buyer for this species. Prices are responding in an upward trend.
With strong housing markets on both sides of the border, some home projects have stalled due to the shortages of labor and building materials. Delays in supply chains are being felt in the building sector with finish dates being pushed back due to these delays.
Oak purchases appear to have levelled off, especially to the flooring manufacturers. Truck trailer flooring companies appear to be quite busy and buying No. 2A and 3A Oak, while others are reining in their purchases of this species. Sawmills are not having any difficulty finding outlets for their developing production. The Chinese market for Red Oak is gaining momentum, especially for No. 1 Common and Better grade. Business is reported as good for this species.
White Oak sales on exports markets are seeing competition from European Oak. Some contacts say competition should ease since the Ukraine is a major source of European Oak, but there is no evidence of this happening at the time of this writing. Demand for kiln-dried White Oak is steady on domestic markets and improving in the Far East, noted contacts.
Poplar sales have declined since last year, and many scaled back purchases even though demand for this species and for finished goods is still strong. Prices for this species are coming down. Kiln-dried prices are coming down, but are still high from a historic perspective.
The Bank of Canada (BoC) raised its key lending rate on March 2nd to 0.50 percent, the first rate hike since 2018. This rate affects rates Canadian consumers get on a mortgage, lines of credit and savings accounts at their own banks.
The increase is the first of a series of anticipated hikes that some analysts believe could see the overnight rate rise by 175 basis points by the end of 2022 as the BoC attempts to control a rise in inflation, which increased to 5.1 percent in January 2022.
The Bank cautioned that “inflation is now expected to be higher in the near term than projected in January. The Bank will use its monetary policy tools to return inflation to the 2 percent target.
“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7 percent. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed,” according to the statement.
Mortgage lenders note that lending rates remain near history lows and the most BoC increase may not have much effect on buyer demand. Many variable-rate mortages, which are affected by overnight rate increases, have an interest rate of below 2 percent. Even a rise of 175 basis points over the course of the next eight months, a variable-rate mortage of 2 percent would only rise to 3.75 percent, well below the rate that consumers qualified at. Despite the rate hike, this can be seen as positive for those in the Hardwood industry as consumers are still planning on home-buying, and purchasing Hardwood finished goods or tackling renovation projects once they move into their new homes.