Canada's wood products industry is benefiting from the ongoing recovery in the U.S. housing and a weaker Canadian dollar, according to The Conference Board of Canada's latest outlook for Canada's wood products industry.
"The continued recovery in the U.S. housing market is supporting increased demand for Canadian wood products, leading to a 8.7 per cent increase in export volumes this year," said Michael Burt, Director, Industrial Economic Trends, The Conference Board of Canada. "However, while production should remain strong over the next five years, growth is set to eventually slow due to timber shortages in B.C. and softer growth in demand from China."
- Rising production and higher prices mean industry revenues are set to reach nearly $29 billion by 2016.
- Pushed higher by increases in production and rising material costs, industry costs are expected to rise by 8.7 per cent in 2015.
- The spread of the mountain pine beetle continues to pose a risk for Canada's lumber supply.
Industry production is expected to grow by 6 per cent in 2015. This, combined with higher prices will support industry revenues, which are set to reach just under $29 billion by 2016. However, rising production and material costs are expected to drive strong cost growth in the industry. Overall, industry costs are set to rise by 8.7 per cent in 2015. The industry will need to find cost-cutting initiatives to help support its bottom line.
With cost increases forecast to exceed revenue growth, pre-tax profits in the wood manufacturing industry are expected to fall 0.2 per cent to $1.4 billion in 2015.
Various risks cloud the outlook over the medium term. While production will continue to increase, timber supply constraints (a result of the mountain pine beetle infestation) will continue to limit domestic production. These supply problem will plague lumber companies operating in British Columbia's interior and could lead to plant closures.
In addition, the current Canada-U.S. Softwood Lumber agreement is set to expire this October, which will likely affect Canadian softwood lumber producers' access to the U.S. market.