Wood Business

Industry News Markets
Looking ahead

Feb. 13, 2014 - There’s something about a new year that tends to make people feel optimistic. Last year at this time, I was at a conference of economists who felt confident that 2013 would be the year the U.S. would see unemployment fall back around six per cent and their economy would bounce back with ours in tow. But the year defied previous trends as consumer confidence remained low and unemployment stayed around seven per cent.

It isn’t just about getting the unemployment rate back down to prerecession levels under six per cent – job quality is important and the jobs that are being created are temporary in nature and come without benefits. It isn’t easy to build back a strong economy when workers don’t have job stability or benefits.

Will 2014 be any different? At Canadian Forest Industries, we’re hopeful that this will be a good year for the industry. Cautious optimism is the sentiment expressed by analysts and industry experts we spoke with across the county.

The Canadian dollar has been in a downward trend and lumber prices have been steadily rising. These are both good signs for the industry as the weak dollar makes our wood products more competitive in export markets.

The federal government has boosted its investment in expanding the export of wood products to India. The Chinese government recently predicted it would build 6 million units of government-subsidized affordable housing and complete the 4.8 million units that were started last year. According to a Wood Markets special report on the Chinese housing market, demand remains stable to strong as imports of wood products continue to increase in almost all product categories. Canadian exports to China were up 27 per cent in 2013 over the previous year.

That growing market strength is reflected in industry confidence. We visited Resolute Forest Products in Northwestern Ontario; it has weathered the storm and is ready to expand. Nearby, the sawmill in White River has changed ownership and is running better than anticipated. We visited OSB Athabaska in Slave Lake, Alta.; it has reinvested and diversified its range of products. Business is booming in parts of Interior B.C. that haven’t been impacted by the mountain pine beetle outbreak. Canfor has set out to make its sawmills more competitive – investing in the sawmills in Elko and Radium, B.C., and more recently in a sawmill in Grande Prairie, Alta. Canfor recently announced a further investment of $10 million at the Elko sawmill where they will install a wood biomass-fired energy system to improve energy efficiency. 

One challenge over the longer term is a lack of funding for new technologies that can give Canadian wood products a competitive advantage. The Forest Products Association of Canada has been working with the government to get the scientific community and investor community interested in new uses for wood fibre. When I spoke with David Lindsay, president of FPAC, he was excited about sustainable rayon or even windshield wiper fluid made from a byproduct from a sawmill in Northern Alberta. As the industry recovers and cash flow improves, these are the kinds of investments that will help steel us against the next housing downturn.  

Thankfully that may be some time in coming if the American National Association of Home Builders is correct in its forecast that single-family housing starts will pick up by 32 per cent this year. The U.S. is our biggest customer and its climb out of this recession has been long and slow. A dearth of well-paying jobs south of the border has been one drag on the housing recovery, especially in the key single-family category. It will take more confidence among American consumers to turn 2014 from a solid year to a boom year, so we’ll join you in watching that indicator closely.

At CFI, we also like to ring in the new year with some excitement. That’s why we’ve unveiled a completely new magazine design in print. We hope you enjoy it, and we welcome your feedback.