The Forest Economic Advisors LLC, (FEA) annual survey of the “Top 10” Canadian lumber producers reflects the unprecedented year that the industry has seen as a result of the COVID-19 pandemic.

The Canadian lumber market had been tough in 2019 with a number of mill curtailments and closures, but there were signs of a recovery late in the year and into the first months of 2020. However, at the onset of the COVID pandemic lumber producers feared the worst. But history tells us that this was not to be the case, as lumber demand across North America increased due to a mix of (1) government incentives to stimulate the economy and (2) people confined to their homes. This led to homeowners carrying out those long-deferred renovations that they had never gotten around to starting. The subsequent demand growth led to prices rising rapidly, especially in the U.S., with benchmark structural lumber grades breaking through previous historical record high prices to create new ceiling prices that have left many stunned in disbelief.

Total 2020 North American lumber shipments: up by 0.5 billion board feet

In 2019, total North American shipments were down for the first time in a decade, declining by over 2.6 billion board feet from 2018. This trend has been reversed for 2020 over 2019, with North American shipments increasing by just under 0.5 billion board feet (to 59.61 billion board feet from 59.12 billion board feet). Growth was particularly strong in 2020H2 in both U.S. housing and residential repair/remodeling, with inventories almost non-existent and prices skyrocketing as mentioned above. This resulted in a significant decrease in U.S. lumber exports of almost 26 per cent (down from 8.546 million m3 net in 2019 to 6.350 million m3 net in 2020), and growth in non-Canadian imports by almost 30 per cent (up from 2.789 million m3 net in 2019 to 3.623 million m3 net in 2020) as offshore suppliers looked to cash-in on the price boom.

Canadian Top 10: shipments unchanged from 2019 to 2020

The Canadian Top 10 lumber producers saw shipments remain static in 2020 at 13.866 billion board feet compared to the almost identical 13.862 billion board feet in 2019. However, the Top 10’s share of total Canadian shipments increased to 61.0 per cent in 2020 versus 57.9 per cent in 2019 as total Canadian shipments dropped by 5.2 per cent (from 23.956 billion board feet in 2019 to 22.717 billion board feet in 2020).

This drop in total Canadian shipments resulted from a combination of Canadian sawmills taking more extensive downtime in Q12020 and weaker domestic consumption.

The top 10 Canadian firms changed slightly from 2019, with RYAM Lumber (Rayonier) coming in at #10 (#11 in 2019) at the expense of Arbec (now at #11). The top seven Canadian producers in 2019—West Fraser, Canfor, Resolute, Tolko, J.D. Irving, EACOM and Weyerhaeuser—kept the same rankings as in 2019. These producers collectively accounted for 11.8 billion board feet (54 per cent of total Canadian lumber output), versus a similar output volume in 2019, but at a lower 49 per cent of total Canadian lumber output.

West Fraser retained top spot, with its Canadian output slightly lower by 50 million board feet (-1.7 per cent) across its 12 mills. Canfor remained second with 2.49 billion board feet, recording a decline in output of almost 270 million board feet (-9.7 per cent) at its 12 western Canadian mills. Resolute stayed at #3 with output at its fourteen mills increasing by 312 million board feet (+18.0 per cent). Tolko, at #4, also saw its output increase by 50 million board feet (+4.1 per cent). Finally, at #5, J.D. Irving reported 1.05 billion board feet of output at its seven mills, an increase of 100 million board feet (+10.2 per cent). Three of the top five firms recorded output growth and the three largest declines occurred at Interfor (-11.7 per cent), Canfor (-9.7 per cent) and Weyerhaeuser (-9.7 per cent).

The four largest North American softwood lumber producers (West Fraser, Canfor, Weyerhaeuser and Interfor) have operations in both the U.S. and Canada. Collectively, they produced 16.94 billion board feet (28.4 per cent of total North American lumber output) at 93 sawmills in 2020. These publicly traded companies were positioned in the top nine in Canada.

Supply and demand drivers in 2021, as well as how long these current record prices might continue, were examined at length recently during FEA’s eleventh annual Global Softwood Log and Lumber Conference which was held online with pre-recorded presentations and live Q&A sessions. Further information on obtaining these presentations, post the conference, is available at FEA’s website (www.getfea.com).

By Mark Smith, Partner, FEA; Research by Chari Gimenez, FEA Canada.