A growing number of Canada\u2019s largest producers, including Canfor Corp. and West Fraser Timber Co. Ltd., recently announced plans to scale back production in British Columbia, citing softening demand among other factors.<\/p>\n
\u201cWe are temporarily curtailing production in British Columbia due to reduced market demand,\u201d Don Kayne, chief executive of Vancouver-based Canfor,\u00a0said in a press release\u00a0on Sept. 19.<\/p>\n
The company said it expects annual production to drop by 200 million board feet, or an estimated six per cent of its annual capacity in B.C., where Canfor\u2019s disclosures indicate it has around three billion board feet of annual capacity.<\/p>\n
Canfor\u2019s news follows\u00a0West Fraser\u2019s August announcement\u00a0that it would \u201cpermanently\u201d curtail production at several B.C. facilities by eliminating shifts at several sawmills and plywood mills throughout the first quarter. It estimated the cuts would decrease wood production by an estimated 255 million board feet.<\/p>\n
Both announcements tie into a multi-year trend in which B.C. lumber companies have been reinvesting their profits overseas, particularly in new operations in the southern United States.<\/p>\n
That\u2019s driven in part by the effects of climate change: Record wildfires in 2017 and 2018 destroyed huge swaths of forest and added to losses caused by the explosion in populations of mountain pine beetles, which also decreased the volume of available wood supply in B.C. Add in the flooding in 2021 that wiped out key transportation corridors, and production costs rose.<\/p>\n
As West Fraser said in August, \u201caccess to available timber is an increasing challenge in British Columbia and ongoing transportation constraints have impaired the company\u2019s ability to reliably access markets.\u201d<\/p>\n
Still, some analysts believe Canfor\u2019s statement about softening lumber demand may signal that rising interest rates in the U.S., Canada and elsewhere are beginning to have the desired effect of cooling demand and thus tamping back inflation.<\/p>\n
The Bank of Canada\u00a0raised its benchmark interest rate by three percentage points\u00a0between March and September, and probably isn\u2019t finished. Statistics Canada on Tuesday said the consumer price index\u00a0increased seven per cent in August\u00a0from a year earlier, cooler than recent peaks of around eight per cent, but still well outside the Bank of Canada\u2019s target of two per cent.<\/p>\n
\u201cLast week, I met with a bunch of home builders, and they\u2019re seeing their order file drop by 30 to 40 per cent year over year,\u201d said Paul Quinn, an RBC analyst who covers Canfor and other lumber producers. \u201cSo there\u2019s no question, interest rates are definitely cooling the economy.\u201d<\/p>","protected":false},"excerpt":{"rendered":"
A growing number of Canada\u2019s largest producers, including Canfor Corp. and West Fraser Timber Co. Ltd., recently announced plans to scale back production in British Columbia, citing softening demand among other factors. \u201cWe are temporarily curtailing production in British Columbia … Continue reading