Quebec/Ontario Business Trends – September/October 2022

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In SPF, a Quebec producer noted, “We were off for a few weeks and we just came back, to adverse market conditions. It is a bit easier for smaller mills to navigate. We sold everything before the shutdown. Like other mills, we built an order file and now we are facing prices that are $100 less than before the shutdown. Our market’s lower prices were driven by the West Coast. The east was in better shape before the Quebec holiday; there was some optimism left in eastern Canada at the end of July.”

Noted an Ontario wholesaler, “Western Canada chased the market down. Futures reacted accordingly by being as much as $100 lower. The September contract was suggesting a $100 drop in addition to the $100 drop we experienced. But, lumber futures are volatile so the $100 became $60 in one day. There was a swing of $40 in one day, which is not that unusual.”

“Some very noticeable market fluctuations are becoming regular business now,” in the opinion of a Quebec manufacturer. “Back in the day, a swing of $30 in one week was dramatic and that is no longer the case. The crazy conditions of the last two years were like a roller coaster ride. The ‘new normal’, if I can say that, will still be highly volatile compared to what we experienced in the past, where minimum volatility was about $130-140, and highly volatile years were $200. Now, in my opinion, we are likely looking at $500 between the highs and the lows in a given year. Still, that is well below the $1,500, which we were just living in for the last two years. My expectation for the next year and a half is $500 spread between the highs and the lows.”

Noted a Quebec wholesaler, “I don’t see us going down more than $150 from where we are now, which will be the low point in this current period. I see the potential for things to go up from there by $200 to $300 in my estimation. This should allow for more reasonable profits for companies. For the months ahead, we will be at the lower end of the pricing, as the housing market needs to adapt and adjust to the new financing situation. I predict we are going to have a decent August and then we are going to prepare for a difficult six months.”

“The commodities currently are selling better right now,” according to an Ontario producer. “The industrial product is already harder to sell, the No. 3 and No. 4, especially on the whites. The U.S. duty is kind of an all or nothing situation. In some market conditions you cannot pass any of it to anyone, you can’t dictate anything at all. When the market was strong you could show what the U.S. was paying, and encourage your Canadian customers to pay more. The duty gives us access to the U.S. market, but you can’t say we are able to bump up the Canadian prices because of it.”

On the Pine side, an Ontario producer commented, “The summer is slowly coming to an end and it will be gone before we know it. Being that we are in the summer doldrums right now, things have quieted down a little bit over the past month or so. I think it is still going to look ok for the fall, prices are still fairly firm, so there are no real issues there.”

Particularly in the last couple weeks, according to an Ontario wholesaler, “The market has slowed down noticeably, but it generally does this time of year. There is still no significant amount of product out there and inventories are very low.”

An Ontario producer commented, “There is a shortage in the pattern work, siding and panelling, as it is in high demand. It is the thicker product and it takes a long time to dry. When you get in to the 6/4 and 8/4 material, some mills don’t want to kiln-dry it because of the time it takes and there are sometimes wet pocket issues to contend with. It is far better as an air-dried product. With this selling well, those inventories have gone down at the mills, and will need to be replenished now. I don’t see there being any excess of product out there any time soon on the White Pine.”

A Quebec producer noted, “At this point, I would say that things look good for the fall. There seems to be some demand there. There is no doubt that the interest rate increases will likely curtail some of the business. Those on a tighter budget may well think about holding off on some of their projects for another year until things settle down, but people with money will still spend, so there will be activity. I would say everybody is trying to put one foot in front of the other and hope that things hang on for a while yet.”

An Ontario-based wholesaler commented that trucking is always an issue and it really has been for the last couple of years. Even though rates have come off a little bit, with fuel prices being what they are, the transporters are charging for it.

Reported a Quebec producer, “The high costs all roll down to the consumer, who have to first pay the prices of the wood itself. With the cost of the resource going up so much, the mills are trying to pass the costs on, but then you have the freight people charging high as well. The mills sometime feel like we get credit for all the increase in prices.”

A Quebec wholesaler indicated, “The logging has not started up again and that it usually is late August or early September before they go back in the woods. There is always a little bit of work that gets done during the summer months, but if there is any hint of drought, they don’t do any logging at all; they shut it down. The fire season has been relatively quiet so far. It has not been one of the bad years so far, even though it has been quite dry in the last month or so. The recent rain will really help.”

By Richard Lipman

Richard Lipman Guest Writer Miller Wood Trade Publications

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