By Russ Taylor

FEA-Canada’s annual survey results of the “Top 10” Canadian lumber producers featured a tough lumber market that saw far more mill curtailments and closures than acquisitions in 2019.

North American lumber prices were stubbornly low, a function of soft U.S. demand that caused higher-cost regions (especially the B.C. Interior) to curtail and close mills. There was only one smaller acquisition by North American companies during the year: Dunkley Lumber purchased two sawmills from C&C Resources.

Of the Top 10, six Canadian producers recorded declines in output, a somewhat similar trend to 2018. The total mill count of Canada’s Top 10 dropped by three mills versus the previous year.

North American shipments: down 4.2 percent

Total North American softwood lumber shipments were down in 2019 for the first time in a decade, declining by over 2.6 billion board feet (-4.2 percent) from 2018 (to 59.49 billion board feet from 62.12 billion board feet). However, lumber consumption growth finally occurred in the second half of 2019 from stronger activity in both U.S. housing and residential repair/remodelling, allowing for price increases as the year ended. Export markets were unsettled, with U.S. exports down 21 percent (partly as a result of the U.S.–China tariff war). Canadian exports to the U.S. dropped by 7 percent (a substantial 1.3 billion board feet), leading total Canadian shipments to see a whopping 11.7 percent decline (-3.2 billion board feet) to 24.15 billion board feet.

Canada’s Top 10 lumber producers: down 10.6 percent

Canada’s Top 10 lumber producers witnessed a further decline in 2019 production to 13.9 billion board feet—a massive drop of over 1.5 billion board feet—as compared to production of 15.4 billion board feet in 2018. However, the Top 10’s share of national output rose slightly, moving from 56.2 percent in 2018 to 57.4 percent in 2019.

The drop in Canadian shipments is a function of supply, cost and market factors. The implementation of import duties to the U.S. took a hard bite out of Canadian mills’ margins, particularly in the B.C. Interior (with its escalating log prices and continued tightening of overall SPF timber supply). As a result of the duties and weaker sawmilling economics, Canadian lumber production plunged, with at least seven sawmills closing last year and dozens of others curtailing output.

The top six Canadian producers in 2019—West Fraser, Canfor, Resolute, Tolko, J.D. Irving and EACOM—kept the same rankings as in 2018. These producers collectively accounted for 10.9 billion board feet (45 percent of total Canadian lumber output), versus 12.5 billion board feet in 2018. West Fraser retained top spot, but its Canadian output moved substantially lower to 3.21 billion board feet (-15.3 per cent) at 12 mills (its Chasm, B.C. mill was closed). Canfor remained second with 2.76 billion board feet, recording a large output decline of almost 800 million board feet (-22.3 per cent) at its 12 western Canadian mills (the largest volume decline of the Top 10 Canadian (and U.S.) mills); the company closed its mill in Clearwater, B.C.

Resolute stayed at #3 but output at its eight mills dropped by 115 million board feet (-6.2 per cent to 1.73 billion board feet). Tolko, at #4, saw its output fall by 151 million board feet to 1.30 billion board feet (-10.4 per cent). Finally, at #5, J.D. Irving reported 953 million board feet of output (+0.3 per cent) at its seven mills (it was the only company in the Top 5 to record an increase, replicated from 2018).

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 17.42 billion board feet (29.2 per cent of total North American lumber output) at 93 sawmills in 2019.

The wild card for 2020 is the global impact of the COVID-19 virus, and a recovery is going to take time. The potential ramp-up in offshore lumber exports (especially from Germany and Sweden) is another question mark, as are further lumber production increases from new mills in the U.S. South. These topics will be examined at length at our tenth annual Global Softwood Log and Lumber Conference in Vancouver, currently scheduled for June 17–18, 2020.

Russ Taylor is Managing Director for FEA Canada (WOOD MARKETS) based in Vancouver. International WOOD MARKETS Group was purchased by Forest Economic Advisors LLC (www.getfea.com) in August 2017 and now operates as FEA Canada.

The company survey for the Top Lumber Producers was done by Chari Gimenez.