Canadian lumber output was down more than 20 per cent for the better part of 2023, compared to 2022, and even lower in B.C. -- a reflection of higher interest rates and muted global economic growth, according to a Global Consulting Alliance forest sector outlook.
And the first half of 2024 may not be much better for the forest sector.
Forest sector analyst Russ Taylor, whose consulting firm is part of the Global Consulting Alliance, noted that lumber prices have recently fallen below US$400 per thousand board feet -- the break-even point for many producers in B.C., as well as the U.S.
“We’re sort of treading water,” Taylor said.
“The U.S. south is losing money,” he added. “They’re below break-even. They’re in worse shape right now than B.C. mills are.”
Lumber demand has not come back yet in 2024 the way he expected, Taylor said. High interest rates have a lot to do with the muted demand for lumber, since high interest rates suppress new housing construction.
“Housing starts, I think, are going to be lower this year than last year,” Taylor said. “It’s not what I would have thought a few months ago.”
The outlook notes that Canadian lumber output was 21.2 per cent lower in the first nine months of 2023 than the same period of 2022.
“B.C. production was down by a whopping 26.5 per cent,” the report observes.
“Canadian softwood lumber exports through November were 12.35 billion (board feet), down 7.7 per cent compared to last year, with most of the reduction attributed to declining output in B.C.”
The report notes that B.C.’s Crown timber harvest has “plunged” from 65 million cubic metres in mid-2016 to just 32.5 million cubic metres at the end of 2023.
“The outlook for the Crown timber harvest in 2024 is for a level below 30 million (cubic metres).”
The report acknowledges the role forest fires and beetle infestations have played in reducing B.C.’s fibre basket, but also blames government policies like old growth logging moratoria, landscape planning, “and other initiatives that play to the government’s base of urban voters.”
“Forest stewardship and incentives for the industry are sadly lacking,” the report says.
The biggest market for B.C. lumber is the U.S, followed by Japan and China.
Total U.S. housing starts in 2023 were 1.414 million units – nine per cent lower than in 2022.
The lower demand for lumber in the U.S. drove North American lumber prices down – low enough to cause some higher cost mills to take curtailments, including in the U.S.
The average price for Western SPF (spruce-pine-fir) was around US$400 per thousand board feet.
Canadian lumber exports to the U.S. through November were 7.9 per cent lower than the same 11-month period of 2022. Canadian exports to Japan were also down 21 per cent, and 12.6 per cent higher in China.
B.C. lumber exports for the first 11 months of 2023 were 16 per cent lower than the same period of 2022.
B.C. pulp exports were also 11 per cent lower in the first 11 months of 2023 compared to the same period of 2022.
“B.C. lumber exports to the U.S.A. were 19 per cent lower than a year earlier, partly due to weak prices that were below break-even levels for much of the year," the Global Consulting Alliance report observes.
Going forward, economic growth is expected to be somewhat muted this year and next, compared to previous periods.
The outlook cites the World Bank, which forecasts global economic growth to be 2.4 per cent in 2024 and 2.5 per cent in 2025.
It forecasts U.S. real GDP growth be 1.6 per cent in 2024 an 1.7 per cent in 2025. China’s growth is expected to slide from 5.3 per cent in 2023 to 4.5 per cent in 2025.
“I think it’s going to be a tough first half of the year,” Taylor predicted.
He expects more North American sawmill curtailments this year.
“That will put supply and demand back into balance,” he said. “I think the second half of the year should be better.”
