As we move further into 2023, domestic markets for grade lumber contracted in the second half of 2022 and the first half of 2023. Conditions have not changed for businesses. The residential wood flooring, moulding/millwork, and truck trailer flooring sectors are reported to be performing the best. Demand from furniture, cabinet, and wood components is slow. Commercial markets are a mixed bag.
Production of kiln-dried Ash has edged up since the past several months and exports have cooled off, whereas earlier in the year, Ash supplies were not meeting demand. Contacts say most grades and thicknesses are in good supply, with prices trending lower. Green lumber prices seemed to be under less pressure than kiln-dried.
With Hardwood lumber usage reduced by the cabinet industry in the U.S., it has impacted the regionally important Hard and Soft Maple. Contacts noted Hard Maple supplies are exceeding demand, even though sawmills are controlling production. Sales are harder to come by for Soft Maple, said contacts. Customers have the supplies they need, which include the case goods, moulding and millwork plants as well as the cabinet industry.
Cherry seems to have lost its first-place ranking in many areas of the world, including the U.S. and Canada. China is the biggest buyer of Cherry, yet, their demand of Cherry contracted quite a bit in the past few months. Cherry prices steadily retreated during that time, but currently, price pressures appear to be easing.
Hickory sales are seeing less activity, as flooring producers reduced buying, and demand from wholesalers and cabinet plants were sluggish. It was noted that interest in kiln-dried Hickory and for Common grades was also off.
Demand for Red and White Oak from residential and truck trailer flooring manufacturers is doing well. Some companies have ample inventory, while few are comfortable with on hand supplies, given the low rate of sawmill production and the potential for further mill disruptions in the months ahead.
Exporters said Chinese markets are a bit more active now than during the past two months. For many, most say depressed prices and concerns about possible shortages later in the year are driving activity rather than any increase in underlying demand. Chinese buyers were ordering large quantities of Red Oak, but pricing was intensely competitive in most cases. Domestic markets for kiln-dried Red Oak, while steady, are not absorbing enough volume to mitigate price pressures.
There is solid momentum for White Oak markets. While White Oak is attracting decent interest in North America and overseas, much of the marketplace energy stems from low supply. Stave manufacturers are buying large volumes of White Oak logs, limiting the availability of high quality logs for sawmills, making prices firm to higher as a result.
On domestic markets Poplar is a bestseller say sales contacts. The moulding/millwork sector is the strongest domestic market for Poplar. In contrast, Poplar exports are weak to Europe, Vietnam, and several other destinations. Lately, prices were under moderate pressure, and green and kiln-dried figures were lowered accordingly.
The U.S. and China are the largest consumers of Walnut in the world. Currently, companies are experiencing very different results in selling kiln-dried Walnut in the U.S. compared to China. Walnut is moving well in the U.S., especially stock graded to NHLA clear face cutting rules (Oak rules) and in premium color selections. Prices for these items are holding up better than for other items. In China, prices are heavily pressured, which is the primary market for stock graded according to NHLA’s Walnut rules.
The wildfires in Quebec are devastating, as they are across the country. Millions of hectares of land have been destroyed. Throughout July, wildfires continued to rage across Canada burning close to 9 million hectares of forestland, and forcing some forestry companies to pause operations, and municipalities being evacuated.
Derek Nighbor, president and CEO of the Forest Products Association of Canada, told The Canadian Press, “The impact is significant. It’s really varying across the country.”
One of many companies forced to suspend operations across the province is Montreal-headquartered Resolute Forest Products Inc. The company was impacted by the boreal forest devastation in Quebec, where 2023 is already shaping up to be the worst year in over three decades in terms of the extent of area affected, said spokesman Seth Kursman.
Although wildfire is natural for forest regeneration, unseasonal heat and lack of rain prompted many fires to erupt at the same time, making them very difficult to manage. Quebec has seen the biggest impact in July when it comes to forestry companies’ operations being affected by wildfires, said Nighbor. The association is also particularly concerned about the fire outside Edson, Alta., he said.
As the fires continue, lumber prices are also rising, with lumber futures recently up 6.8 percent the second week of July compared with a week earlier.
RBC Capital Markets analysts Paul Quinn and Matthew McKellar said in a note, forest fires can contribute to higher lumber prices, likely due to either constrained supply or the fear of constrained supply leading to buyers increasing inventories. The analysts noted at the time that lumber futures had ticked higher, attributing that to the current fires, and also noted that significant fires can affect longer-term timber supply.
Nighbor said that even once the fires are under control, it won’t be business as usual for companies that have paused operations, as they have to assess the impact of the fires on supply.
“The next question is, what forests have been impacted? And how bad have they been impacted?” he said. “We’ll then be able to assess the impact on timber supply, and what needs to be done to either salvage or get some of the dying or dead or decayed stuff out of the bush so it doesn’t become kindling for the next fire season.”
Resolute’s infrastructure appears to be intact so far, said Kursman, but the company expects that some of its woodlands contractor partners will have lost critical equipment. The company is in the process of planning the harvest of burned trees as soon as the province gives Resolute the green light to resume woodlands operations, said Kursman.
“This must be done as quickly as possible before insects infest and further degrade the trees,” he said.
