Quebec/Ontario Business Trends – May/June 2022

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In the SPF business, “Customers want to wait as long as possible before placing orders,” reported a Quebec wholesaler. “They want to postpone buying as much as they can. They feel there is a correction going on. Like always, they want to start buying on the bounce-back, that is what they want to do. They want to know what is the support level and then start buying. They don’t mind paying $50 above the support level, but what they don’t want to do is pay $100 more than where the market is heading. There is a little bit of uncertainty and prices are soft.”

“Overall, inventory is under control on our side,” noted a Quebec producer. “From what I hear, inventory might be on the high side for some of the major mills that rely on rail for their delivery. They could not get enough rail cars in the last two months, but it is getting better. So they are in a catch up mode. The inventory right now is on the mill side and retail distribution is super lean. The reason there is no panic is that there is an overall sense of a slowdown on the retail side. That could change, but that is the overall feeling that we are in right now.”

Noted a Quebec manufacturer, “Grades are selling pretty consistently across the board at the present time. The 9-foot studs are the hardest ones to sell right now. The industrial grades are ok, the No. 3 and No. 4 are still pretty good. The tide is going up or down, but right now when the tide goes down, everything goes down. For the next six months or so, I would say the highs are likely behind us and we are going to enter in to some kind of new normal, but at a decent price, historically.”

An Ontario wholesaler commented, “We are going to be above average for the next six months that is for sure, certainly above the average that has been experienced traditionally in our business. So, it is still going to be good prices but somewhere between the lows and the highs of last year.”

Regarding the Softwood duty, an Ontario manufacturer said, “It is computed in the prices, it is business as usual and we have figured out what is the acceptable discount, Canadian versus paying the U.S. tax. It seems to be very stable at this point. I haven’t heard of any new talks, but there are still hopes in the industry that the negotiations will start again and we can put this dispute behind us. I would doubt we will see anything for the next six months, but this dispute has gone on for way too many years. Another challenge is that labor keeps coming up in almost every conversation I have and this will be a persistent problem for the lumber industry. Getting any people is quite tough, and you just can’t find any decent workers. The results on the hiring we have done lately have been disappointing.”

On the Pine side, the situation is positive for the manufacturers. An Ontario-based manufacturer indicated “to sum things up, things are pretty much unchanged over the last couple months. Lumber is still in short supply, and prices are firm. Diversification is good, the products are good and logs are in good shape.”

However, noted an Ontario wholesaler, “Trucking is still an issue. Freight, with this fuel surcharge, is quite tough. It is hard to get the trucks in the first place but they just put the screws to you. I have heard some describe it, lets just say, quite negatively.”

Said an Ontario manufacturer, “It is difficult for producers to pass fuel surcharges along. We are doing it for now but I am sure it is going to come to a head. In some industries I am sure it is an open check book, but in the lumber business, it is a little bit more difficult to pass things along. The margins of profit aren’t near as much for us as in some other industries.”

A wholesaler from Quebec reported that “in terms of grades, it is pretty good all the way through, even in the industrial grades. Regarding Spruce and Red Pine on industrial products, they had a bit of a rise going through the winter months. It has done what it will always do and has trailed off a little bit. A lot of these guys are still sitting on high inventories from last year that they were not able to move because they got caught with inventory when the price fell so abruptly. They are using this year to sell that off and are a little more cautious when they are buying. Right now they will not pay any price, they are holding back a little bit.”

Noted an Ontario wholesaler, “The market appears to be doing quite well. Demand seems to be there, at least for now. Unless something happens south of the border where U.S. demand slows, it would roll back and affect us to some degree.”

According to a Quebec producer, “We are going to be ok for the remainder of the year. I don’t have any idea what 2023 has in store for us. Many think there will be some kind of correction. However, it is really encouraging to see that all the grades seem to be moving well. There is a good range of products moving and there are no loss leaders that are being left behind. This is a welcome and rare situation, and there are no U.S. duty issues for us.”

“It has been a good little stretch for manufacturers,” said one Ontario mill, and it would be nice if this could continue for at least five years. We could catch up for the last many years when we ‘lost’, but we will certainly take it. It is just unfortunate that sometimes the perception at the retail end of the business that the mills are unduly tough on them and that is not the case. Ultimately the consumer pays the price, but they are still buying. I am not sure where all the money is coming from and they could have decided to move some of their projects to next year, but that doesn’t seem to be that case and I have to wonder. The houses are still going up and they are finding a way to do it. It is also good to see the hardwoods done quite well in the last couple of years. They finally got their pricing up to where it should be. If they can hold that, it would be good.”

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