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Production increases of Canada’s top lumber producers tied to hot China market
West Fraser and Canfor retain their top one and two positions in a ranking of the Top Lumber Producers in Canada.
By Gerry Van Leeuwen
The WOOD MARKETS’ 2010 annual survey of the top Canadian lumber producers confirms that 2009 marked the low point for North American softwood lumber production in the current economic/U.S. housing starts cycle—and that 2010 was likely the turnaround year for Canadian lumber output.
After four years of declining lumber production in Canada, higher lumber prices and improved demand in 2010 encouraged sawmill owners to add shifts and in some cases re-open sawmills that had been closed indefinitely over the last three years.
Canadian softwood lumber production rose from 19.42 billion board feet in 2009 to 21.95 billion board feet in 2010 (+13 per cent). Although U.S. housing starts rose slightly from 2009’s low of 554,000 starts to a lackluster 587,000 starts in 2010 (+5.5 per cent), the sudden jump in North American lumber demand and higher lumber prices were certainly not due to the meek improvements seen in U.S. market. Instead, it was Asian demand (mainly from China) that was the biggest factor driving increases in Canadian softwood lumber output.
China’s rising softwood lumber demand created the momentum required to significantly increase Canadian (mainly B.C.) lumber output and create the turnaround so desperately needed by the North American industry following the 25-year price lows hit in 2009.
The average annual FOB mill price for W-SPF 2x4 KD #2&Btr R/L lumber was only U.S.$181/thousand board feet in 2009. In 2010, the average W-SPF 2x4 price jumped to U.S.$255/thousand board feet, for an incredible and unexpected year-over-year gain of 41 per cent. In the first two months of 2011, the average W-SPF 2x4 price has jumped another U.S.$44/thousand board feet to U.S.$298/thousand board feet.
B.C. lumber producers have been the main beneficiaries of rapidly growing Chinese demand for North American softwood lumber. Canada (B.C.) softwood lumber shipments to reached China 4.6 million cubic metres (or 1.96 billion board feet, net, to as much as 2.95 billion board feet, nominal), a massive increase of 2.1 million cubic metres (890 million board feet, net, to as much as 1.4 billion board feet, nominal) in 2010 (+82.5 per cent).
In 2010, softwood lumber production by the top 10 Canadian lumber producers increased faster than production for all Canadian mills (+17.8 per cent compared to +13 per cent), or from 11.59 billion board feet in 2009 to 13.64 billion board feet in 2010. The six western Canadian companies in the top 10 increased their production by an average of 30 per cent in 2010 compared to the four eastern Canadian companies that expanded their production by an average of 20 per cent. The growing acceptance of SPF dimension lumber in China has enabled the B.C. Interior to establish a dominant lead over other North American regions in terms of China’s softwood lumber imports.
The top 10 Canadian companies produced 62.2 per cent of Canadian softwood lumber in 2010 versus 59.7 per cent in 2009. This indicates that the largest lumber producers in Canada have been able to capitalize on growing export demand more than average Canadian sawmills.
In 2010, the same companies made the top 10 list as in 2009, although the order has changed slightly for three companies. West Fraser, Canfor, Tolko, Abitibi and Tembec were again the top five lumber producers in Canada. These five companies produced a total of 10.3 billion board feet (47 per cent of Canadian softwood lumber output) versus 9.1 billion board feet (46.5 per cent) in 2009. West Fraser retained its top position with output of 3.32 billion board feet, 15.1 per cent of total Canadian softwood lumber production.
West Fraser had the largest lumber volume increase in 2010 (increasing by 435 million board feet), while International Forest Products (Interfor) had the largest percentage volume increase for the year (up 107 per cent over 2009).
In terms of total North American softwood lumber production, West Fraser easily retained their position as the largest producer of softwood lumber at 4.68 billion board feet (10 per cent of North American output), while Weyerhaeuser again slightly exceeded the lumber output of Canfor (3.3 billion board feet compared to 3.24 billion board feet).
China’s demand for softwood lumber (and logs) is expected to continue to grow and is forecast to have a very positive impact on North American lumber supply and prices in 2011. It is expected that Chinese imports of softwood lumber from Canada could jump from 2.95 billion board feet nominal (4.6 million cubic metres) in 2010 to over 4.4 billion board feet, nominal (about 7 million cubic metres) in 2011 (+50 per cent), provided transportation and logistical support can sustain this increasing volume.
The Chinese reach for North American softwood lumber started in B.C. but has now moved to include Alberta, the U.S. Pacific coast region and even the U.S. South. It is being felt across North America as growing volumes of lumber purchased for offshore exports tighten supplies available for the domestic market.
U.S. housing starts are forecast to improve by another five to 10 per cent from the anemic levels of 2010. Combined with increasing Asian softwood lumber demand, production output in Canada is expected to continue to grow in 2011 as increasing demand and higher prices support added production volumes.
Most importantly, the industry has gone through the worst of the current economic recession and brighter times are now clearly on the horizon. As western North American lumber producers look towards Asia, there is a much needed sense of optimism that hasn’t been seen by anyone in the industry for at least four or five years. How the recent earthquake and tsunami impacts Japanese demand in the short term is an example of yet another wild card in the lumber business.
This article is summarized from WOOD Markets Monthly International Report (March 2011 issue) by Gerry Van Leeuwen, Vice President, WOOD MARKETS Group.
International WOOD MARKETS Group Inc. is Canada’s largest wood products consulting firm. Its consulting team has provided industry and market expertise in the solid wood products field to its industry clients since 1993. The company provides market research, new business development and business plan/strategy as well as other consultative services to wood product companies in North America and around the world. The firm also publishes a number of strategic industry multi-client reports including its landmark WOOD Markets Monthly International Report (since 1996). Further information is
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