Canadian wood-products industry profits will more than double this year to Can$808 million as the surging sector cashes in on a US housing market recovery and strong demand from China, according to the Conference Board of Canada. Source: The Vancouver Sun
A board report noted US housing starts recently passed the one-million mark — on a seasonally adjusted annual basis — for the first time in five years.
Canadian exports to China increased by more than 1400% between 2003 and 2012, and Canada now accounts for 31% of total Chinese lumber imports, representing more than six million cubic metres of lumber last year.
“The strength of the US and Chinese housing markets will more than offset the slackening demand at home,” the report said, noting Canadian housing starts are expected to fall to 191,000 this year, from 215,000 in 2012.
Canadian wood-products firms posted total pre-tax profits of Can$342 million last year and profits are expected to rise steadily over the next several years, reaching $1.2 billion in 2017.
But the report warned the future supply of Canadian timber would be constrained by the mountain pine beetle infestation in British Columbia (BC).
The industry also faces a shortage of Canadian rail cars devoted to shipping wood products to the US market, a situation that has forced some companies to turn to trucks — which are also in short supply.
The report predicts 6000 new workers will be needed in the wood-products sector this year but a lack of skilled workers has forced some BC mills to bring in workers from other parts of Canada.
The report said industry costs would rise by 18% this year, largely due to extra staffing requirements.
Many skilled workers left the industry years ago to work in other sectors and enrolment in forestry-related education programs is declining.
MaryAnne Arcand, executive director of the Central Interior Logging Association, was encouraged by the Conference Board forecast but noted lumber prices — which hovered near eight-year highs of US$400 per 1000 board feet early this year — have since fallen to about US$330.
She also said the industry faces severe labour challenges, particularly in the trucking sector.
“We need something like 35,000 new truck drivers in BC over the next seven years and our guys here are already bringing in truck drivers from back east and overseas,” she said.
“But growth always brings challenges and I’m sure we’ll see some innovative new practices coming from our sector over the next five years.”
The Conference Board wasn’t as bullish on Canada’s paper products industry, forecasting a pre-tax loss of Can$213 million this year compared with a Can$682-million loss in 2012.
The board cited the European debt crisis, the slow pace of the US economic recovery and a sluggish domestic economy for the “tepid” demand for paper products.
Paper products manufacturers are expected to keep cutting costs wherever possible before the industry returns to profitability in 2014, with pre-tax profits forecast to reach US$330 million that year.
