Supply may not meet demand for B.C. lumber exports
Pine beetle-ravaged forests may have trouble supplying growth in U.S. home construction
Export Development Canada says the value of B.C.’s export trade in lumber and wood products, worth $11.6 billion in 2013, will increase 11 per cent this year and another 12 per cent next year.
British Columbia’s forest sector is going to lead growth in the province’s exports next year to feed burgeoning new-home construction in the U.S., but lumber makers will also start running up against constraints in timber supplies, according to Export Development Canada.
The value of B.C.’s export trade in lumber and wood products, worth $11.6 billion in 2013, will increase 11 per cent this year and another 12 per cent next year as American homebuilders continue increasing the number of units they build as part of the U.S. economic recovery, said Peter Hall, EDC’s chief economist.
However, Hall added, B.C. lumber producers are starting to be squeezed by declining timber supplies in the province’s mountain pine beetle-ravaged forests.
“In terms of fibre we have in (B.C.), yes, the intelligence we’re getting from B.C. companies is that this is the year it is first going to hurt,” Hall said.
He added that some mills face bigger constraints in timber supplies than others, but “across the board, in general, there will be a slight decline in what we can produce.”
The bright side for lumber producers such as Canfor Corp. and West Fraser Timber Co. Ltd. is that any declines in volume will be offset by higher prices, because Hall sees no let up in U.S. housing construction.
“The difficulties (U.S. homebuilders) are having is finding the construction workers they need, and a stream of supplies adequate for the activity that’s going on,” Hall said.
U.S. contractors are building homes at a pace to equal about one million new units in 2014, which is short of the 1.4 million per year the economy could use to house America’s growing population.
On the down side, mill-dependent communities can expect more consolidation, such as the swap of timber supplies Canfor and West Fraser executed in late 2013 that resulted in two mill closures.
“There’s not enough fibre to go around,” said Keta Kosman, analyst and publisher of the industry newsletter Madison’s Lumber Reporter. “Ten years ago that wasn’t true, but given the pine beetle, there are too many operators in the same area (in some locations).”
She added that most mills that are operating now aren’t running at full capacity. The overall industry is operating at 85 per cent.
Kosman expects more of the timber-supply constraints to emerge over the next two years.
Besides forestry, Hall’s forecast sees growth in other export sectors as well, even B.C.’s beleaguered mining industry.
Hall’s forecast is for an eight-per-cent increase in B.C. exports next year, led by forestry. However, he anticipates three per cent growth in exports of ores and metals, based on the amount of new mining activity that has come on stream in the last two years.
Coal is included in EDC’s energy forecast along with natural gas, though most of the coal that B.C. exports is used in manufacturing steel. Even there, despite coal-mine closures in the northeast, Hall’s forecast is for five per cent growth in 2015.
Agriculture is another bright spot, Hall added, driven by rising standards of living in emerging markets such as China, India and Indonesia. B.C.’s agricultural exports, at $2.9 billion in 2013, are small, but Hall expects them to increase six per cent in 2015.
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