Guest Writer
Interest rates and fires are on everyone’s minds in the past few weeks. The Quebec government reported at one point over 160 forest fires burning in the province and some 115 of them were out of control. They might have to choose between which fires get fought, just due to the resources required. There was at least some helpful rain which reduced the number of fires and crews from other provinces and countries have come to help with the volume of blazes.
A Quebec lumber producer reported that “for the Ontario and Quebec mills right now, there is better demand on 2x4s’, although, I would say 2x4s’ right now for us is undervalued. When I compare the value of 2×4 versus 2×6, the 2×4 is worth a lot less than the 2×6. I would say overall, everything that’s dimension lumber, like 2×4 and 2×6 dimension is selling quite well. But all the wides, the 2×8 and the 2×10 for example, are a challenge. The eastern SPF 2×4 pricing has stayed fairly steady for the last month or so.”
Noted one Quebec wholesaler: “In Quebec, we’re producing a lot of 2×3 and the demand for this product is very poor. Some of the biggest customers are the companies that make RVs, all those campers and recreational vehicles.
The RV business is down by a lot. Everybody that wanted to buy either a trailer or an RV did so during Covid and now that they can travel, they’re not buying this type of vehicle. The demand for bedframes, to build box springs, is also down. It’s the same thing, during Covid, everybody bought their new mattresses, so right now there’s no demand for box springs.”
An Ontario manufacturer said, “Generally in the market right now, customers are very disciplined in their buying.
They’re not speculating. The order files at the mill level are quite thin, so it’s easy for the customer to get their wood with a short shipping time. There’s no risk of running out of wood in the marketplace right now, so the customers are patient and looking closely at what they need. They are buying only what they require and they are buying more regularly.”
A Quebec manufacturer speculated that “the fires could potentially cause real problems, but the fact that lumber has been available, customers are not buying just on the news of the fires. They’re not trying to speculate if there’ll be a problem. I heard there’s some areas, especially in Northern Quebec, where you’re not able to get your rail cars in to ship your wood, even though the mills are not shut down. The railway decided not to service certain areas. This might affect some operations but we don’t yet know if that is long term or short term. Some towns where people are getting evacuated have mills around them, so this could get ugly. There’s definitely a risk, but the fact that there’s been no difficulty to find wood in the last six months, customers are willing to take the risk of running out of products. Based on what we see in the marketplace, there’s enough wood in the pipeline currently to serve customers for the short term. The annual Quebec construction holiday is coming in early August for two weeks. This mandated break is more observed in Quebec than Ontario. I’m hearing some companies are shutting down for three weeks instead of two because of the market prices. They will extend their break. Others are going to do some rotational shut downs. Sometimes they shut down the sawmill but not the planer, if they have a lot of rough material to dress.
I’m also hearing some rumbles that some producers are not really interested to go back in the bush and start harvesting at these type of levels. I’m not sure what’s going to happen with that, but I wouldn’t be surprised if we see less in the second part of 2023 than we did in the first part.”
In the Pine business an Ontario producer said that, “This spring got off to quite a late start. Things are starting to pick up there now. I really don’t know what caused the late start, likely the retailers were just kind of holding tight for a bit to see if prices would soften. Normally, it starts to kick in pretty good in March, then go right through. I wouldn’t say it was dead, like it had stopped, but it had slowed down significantly from the winter, but things are starting to ramp up now.”
An Ontario wholesaler indicated that, “Pine prices for the most part, seem to be holding okay. The industrial grades have softened somewhat, which is understandable, as Spruce is down. The summer manufacturing is probably off a little bit too, which curbs demand to some extent. It’s a wait and see game out there. Interest rates have gone up and caused some headaches out there. I don’t see any indication that anybody is pushing a panic button. I think there’s still only so much supply, so for the time being we’re okay.”
A Quebec manufacturer reported, “The upper grades for Pine are still moving nitely a risk, but the fact that there’s been no difficulty to find wood in the last six months, customers are willing to take the risk of running out of products. Based on what we see in the marketplace, there’s enough wood in the pipeline currently to serve customers for the short term. The annual Quebec construction holiday is coming in early August for two weeks. This mandated break is more observed in Quebec than Ontario. I’m hearing some companies are shutting down for three weeks instead of two because of the market prices. They will extend their break. Others are going to do some rotational shut downs. Sometimes they shut down the sawmill but not the planer, if they have a lot of rough material to dress.
I’m also hearing some rumbles that some producers are not really interested to go back in the bush and start harvesting at these type of levels. I’m not sure what’s going to happen with that, but I wouldn’t be surprised if we see less in the second part of 2023 than we did in the first part.”
In the Pine business an Ontario producer said that, “This spring got off to quite a late start. Things are starting to pick up there now. I really don’t know what caused the late start, likely the retailers were just kind of holding tight for a bit to see if prices would soften. Normally, it starts to kick in pretty good in March, then go right through. I wouldn’t say it was dead, like it had stopped, but it had slowed down significantly from the winter, but things are starting to ramp up now.”
An Ontario wholesaler indicated that, “Pine prices for the most part, seem to be holding okay. The industrial grades have softened somewhat, which is understandable, as Spruce is down. The summer manufacturing is probably off a little bit too, which curbs demand to some extent. It’s a wait and see game out there. Interest rates have gone up and caused some headaches out there. I don’t see any indication that anybody is pushing a panic button. I think there’s still only so much supply, so for the time being we’re okay.”
A Quebec manufacturer reported, “The upper grades for Pine are still moving pretty well. The industrial grades are slower. As an example, companies building sheds take some wider material, one by eight and one by ten, one by twelve. Their demand has slowed up quite a bit as nobody’s taken a big position out there to buy much of that material, because the consumer is not stepping forward. It’s not to say that there won’t be any activity. A lot of the one by ten goes into making bee boxes. There is little to no demand for this either.”
“Fires have not caused a lot of problems in the Ontario area yet,” according to an Ontario manufacturer. They have mostly been out east and west and of course in Quebec. There are some in Ontario but it is not too crazy like in some of the other provinces. And it’s in the news, some of the big Canadian cities are seeing a lot of smoke. It has blown south and caused lots of air quality issues in the US too. Some areas got some relief, but it is awfully dry and we could use some rain. I think a lot of what is going to happen in the next few months will be interest rate dependent. If they start showing some relief out there, you’ll probably see more activity. It’s hard to put a finger on it right now as things are just really beginning to get started here. All the logging is all over until the next season.
Echoed an Ontario wholesaler, ”There’s still limited production with White Pine, at least in certain areas, so I don’t think anybody’s pushing the panic button at this point to reduce prices to try to move material. I think it’s just consumer confidence has dipped a little bit, only because they are watching their pennies closer.”
“Things seemed to have started to pick up again in all species,” according to an Ontario wholesaler. “Distribution is quite busy. The Canadian economy has not hit a recession, so it’s generally positive. Granted, things are not as strong as we’d like them to be, but it will improve with time. We’re just waiting to see what’s going to happen with the announcement from the Bank of Canada this week with regards to interest rates. If they put it up, it could slow down the economy a little bit more, but this could help our dollar get a little stronger. One kind of offsets the other, so we’ll see what happens.”
“From my past experience, the spring market picked up a little quicker than I thought it would. But it is in fits and starts. We’re busy for two or three days, and then we’re quieter for a week or so, then we’re busy for two or three days. We don’t see anybody’s filling up their yards, everybody is just going hand to mouth. I do know log costs have firmed up for the last two months and that’s a good thing coming into the summer. Log prices should start to firm up in the Fir, the Cedar and the Hemlock. Things seem to be selling pretty consistent across the board, with the Cedar and the Fir being the busiest.”
According to a Quebec producer, “When it comes to the forest fires, everybody’s waiting to see if that’s going to get worse. It’s a negative thing. It could tighten up the market more if we get in to what the Canadian government is suggesting could be the worst fire season on record and we don’t get the supply we need. But if the demand’s not there, it just might not go anywhere. Some have suggested if anything right now, curtailment would help hold prices up.”
A Quebec wholesaler remarked that “looking out three to six months, it really depends on what the Bank of Canada does with interest rates. If they put them up, it’ll slow the economy down more. If they hold them, or if they start to drop them, you could see the economy begin picking up again and that of course would be good for business. That’s really one of the major factors we are watching. We notice the states has slowed down a lot. Canada seems to be just doing okay. We’re not running off our feet, but our yard is busy every day. Trucks are leaving and orders are coming in and there’s business going on.”
Noted one Ontario wholesaler, “The cost of transportation has already come down. It’s been down now for a few months, since the beginning of the summer. Transportation has loosened up. We’re getting more truckers phoning us looking for business.”
