According to a Quebec manufacturer, “The market peaked in March and we had a ‘dead cat bounce’ in April and it has continued in a downward trend. Lumber prices were kept a bit higher from March to May because of rail car issues. We are heading into prices that should work for the industry, prices that are more in line with the prices we had before the pandemic. This new normal is higher than before, due to inflation and the fact that everything costs more now, logs, employees, transportation, etc. We are going towards a trading range where margins are going to be tested, where we will go back to single digit margins and more realistic margins for business plans. The ‘big profitability’ is behind us now. Logging is still challenging for transportation reasons. It is hard to get the wood; people can’t really increase production in most of Canada. It is hard to get more logs, due to logistics, labor, environmental pressures, etc. There will be no growth expected this year in Canadian production, but there will be no declines. It is business as usual as far as getting the logs.”
An Ontario manufacturer noted that “we have certainly seen prices come down over the last few months and we lost that last big chunk of the inflated prices. Things have come back to what will be more normal prices. We do feel a slight slowdown in demand, but only slight. Overall consumption is not off drastically, it is a single digit decrease.”
A Quebec wholesaler reported that “the yards are busy, it is just that wood that was kept at the mills has now started to ship. It is more the desire to sell it and the people being extra cautious that created this steep drop in prices. Demand seems ok.”
“Projecting into next year,” according to an Ontario wholesaler, “we do expect further slowdowns in demand, but right now there still is a consumption base – there are needs. There are too many projects started that are locked in with decent interest rates. It is the next round of projects we are wondering about, that might create a slowdown in demand and challenges for the mills.”
Noted a Quebec producer, “Right now people need the material. Yards are managing with low inventory, so overall this year most of the yards and most of the retailers will be in a better position to manage the price drop. Last year it was a nightmare for the retailers, the drop lasted longer because the retail yards were stuck with high priced wood. They had plenty of wood but they had bought heavy and then realized that the inventory was twice the price of the replacement costs, so they were stuck and had no way to manage that. This year, overall inventory is mostly committed and the replacement cost will just make it move and they will be able to average it and stay efficient. I expect some sort of price consolidation and a bounce back in the near future. We should have some sort of rally to keep us going at least through the summer.”
According to an Ontario wholesaler, “There is an overall price drop, but wood is needed and everything is selling, it is just the number that is changing. It is just a matter of allowing time for everybody to get ready to rebuy at the new support level. When you have that kind of drop, people will wait too long before placing an order.”
On the Pine side, a Quebec manufacturer suggested that “demand is still pretty good, although there has been some softening on Spruce. It has trickled off into the White Pine/Red Pine market to some degree, especially in the industrial grades. People will use White and Red Pine as an alternative when they can’t get Spruce, but now that the Spruce is more readily available, there is not as much demand for White and Red Pine and if there is, you have to sacrifice the price on it. I would say it has not gone down drastically, but there is some softening. Customers are starting to scrutinize their shipments even more carefully for quality, as things tighten. That is more for people who were maybe pushing things a bit; it is not an issue for anybody who has been shipping consistent grades.”
“As far as White Pine, prices are still quite firm and there is still relatively good demand on it,” noted one Ontario manufacturer.
He continued, “There is a big demand for pattern material. Those that are using re-matched for pattern work, it is very difficult to get the product to start with. The 6/4 is not out there, as far as the dry material. Boards are fairly constant. There is not a lot of logging that happens this time of year. People generally won’t go back in until late summer to start logging again.”
A Quebec-based wholesaler noted, “I don’t know what the rest of the summer is going to bring. The market is going into its traditional low period for a month and a half or two months and it will kick off again at Labor Day. For a while the crystal ball has been very clear, but right now it is starting to cloud up a bit. There is an unknown out there but we will see how things transpire throughout the summer.”
“Inventory in general,” reported a Quebec wholesaler, “is pretty short with everybody, which is helping to keep the prices firm. It is hard to say what is going to happen down the road with the interest rates. That will definitely impact renovation customers. Those who have money will spend it anyway, but those on a tighter budget, their mortgages are going up so they will put projects off that do not desperately need to be done, until things stabilize a bit more and that could impact a percentage of the overall picture out there.”
In the opinion of an Ontario manufacturer, “One thing causing the most grief out there for the retailer on the Pine end is the cost of delivery. With fuel prices such as they are and being so volatile and moving all the time, retailers have no idea what to expect for a price. You can negotiate a price per thousand for the product but then there is the delivery. By the time it goes from mill to wholesaler on the order desk to the retailer, a lot can happen. In some cases from start to finish there could be a lapse of time of almost two months. What do you charge for freight? Do you pull a number out of the air and hope you can cover yourself or do you try to make some kind of an arrangement with the retailer that it has to be subject to freight costs on delivery? Most people want a commitment. It is hard to put a numbers on things, people must be tearing their hair out trying to figure out what price to put on things to cover their costs.”
Noted an Ontario wholesaler, “with the rising interest rates, there is no doubt it is going to slow the economy down. For retailers today, the overhead/cashflow they carry is more costly and some of the smaller operations may be seeing their banks not extending their credit lines any more, just because the product is worth less. That has created some issues out there too. It is kind of a perfect storm out there in some respects.”
