Canadian Lumber Production Falls by 3.3B Board Feet in 2 Years

In 2022, Canadian softwood lumber shipments experienced a significant decline, dropping by nearly 2.2 billion board feet—a 9.4% decrease compared to 2021. This downward trend has persisted into 2023, with total shipments falling from 20.9 billion board feet in 2022 to 19.8 billion board feet in 2023, marking a further loss of 1.1 billion board feet. Over the two years of 2022 and 2023, this results in a combined reduction of 3.3 billion board feet in lumber supply.

In this blog, we will explore the factors contributing to this decline, its impact on the industry, and the potential future outlook for Canadian lumber production.

Market Forecast and Future Outlook

In March 2023, it was noted that softwood lumber usage was expected to decline further throughout the year. Residential construction, residential improvement, and industrial use all faced setbacks as the economy slowed. However, the fundamentals underlying softwood lumber’s primary end-use markets remained strong, with an expected recovery in 2024.

This prediction has proven accurate. North American softwood lumber demand, largely driven by U.S. consumption, has remained sluggish. Rising home prices and interest rates have created enough uncertainty to restrain demand. Nonetheless, the U.S. housing sector is anticipated to recover to some extent in 2024 due to favourable demographics, particularly the age-class distribution, and the accumulation of underbuilding. As a result, the American and Canadian wood markets are forecasted to grow by 2% and 5%, respectively, due to this housing demand.

Regional Shipment Trends and Their Implications

In 2023, total North American softwood lumber shipments decreased by 1.4 billion board feet, falling to 57.2 billion board feet from 58.6 billion board feet in 2022. This decline reflects the ongoing weak demand mentioned earlier. A similar trend was observed from 2022 to 2021, with shipment volumes dropping by 1.8 billion board feet. Over the past two years, this results in a combined reduction of 3.2 billion board feet in shipments from North American mills compared to 2021 levels.

When examining the total Canadian shipments, which decreased by 3.3 billion board feet through 2022 and 2023, it is evident that the entire decline in North American shipments can be attributed to Canadian mills. In contrast, U.S. mills have shown a slight increase of approximately 0.1 billion board feet during the same period.

Performance of Top Canadian Lumber Producers

Overall Growth in Shipments:

• The top 10 Canadian lumber producers experienced a 0.2% increase in shipments despite a 5.3% decline in total Canadian shipments.
• Top 10 producers' shipments rose by 31 million board feet, while total Canadian shipments dropped by 1,110 million board feet.
  
  

Market Share:

• The market share of the top 10 producers increased from 64.2% in 2022 to 68.2% in 2023, showing their resilience.
  
  

Shipment Volumes:

• Top 10 producers shipped 13.482 billion board feet in 2023, up from 13.451 billion board feet in 2022.
• Total Canadian shipments decreased from 20.937 billion board feet in 2022 to 19.827 billion board feet in 2023.
  
  

Top 10 Companies:

The list of top 10 Canadian lumber companies remained unchanged from 2022.

• Rankings shifts:
• J.D. Irving and Tolko swapped positions at #5 and #6.
• Weyerhaeuser and Dunkley Lumber exchanged places at #7 and #8.
  
  

Rankings and Output

Top Three Canadian Lumber Producers:

• West Fraser, Canfor, and Resolute FP retained their positions from 2022.

Together, they produced 6.8 billion board feet, accounting for 34% of Canadian shipments—a consistent share since 2021 despite higher total shipment volumes in prior years.

West Fraser:

• Ranked first, with a 2% increase in output, adding 52 million board feet to reach nearly 2.7 billion board feet from 13 mills.
  
  

Canfor:

• Ranked second, with a 5.4% decrease in output, producing just under 2.2 billion board feet from 13 mills (a drop of 126 million board feet).
  
  

Resolute FP:

• Maintained third place, with a 5.4% decrease, reducing output by 109 million board feet to produce from 14 mills.
  
  

Interfor:

• Climbed to fourth place with a 19.1% production increase, reaching 1.6 billion board feet, compared to just under 1.4 billion board feet in 2022.
  
  

J.D. Irving:

• Ranked fifth, with a 6% increase in production, adding 62 million board feet to total just under 1.1 billion board feet.
  
  

Tolko:

• Ranked sixth, with a 12.3% decrease, producing just over 1.0 billion board feet in 2023.
  
  

North American Producers:

The top four—West Fraser, Weyerhaeuser, Canfor, and Interfor—operate in both Canada and the U.S.

Together, they produced 18.3 billion board feet, accounting for 32% of total North American lumber output in 2023 across 108 sawmills.

Is 2024 a Hopeful Year for Canadian Softwood Lumber Production?

Why Should the Industry Be Hopeful?

1. Strong Spring Surge:

• The production of softwood peaked in April at 4.49 billion cubic meters, showcasing the industry's capacity to meet seasonal demand. This surge signals robust operational efficiency and market demand in the early months.
  
  

2. Steady Growth in Non-SPF Species:

• Douglas Fir and Western Larch production steadily increased, with an impressive 85% rise from January to June. This growth demonstrates diversification efforts, reducing over-reliance on Spruce, Pine, and Fir (SPF).
  
  

3. Western Red Cedar’s Stability:

• Production of Western Red Cedar remained resilient, with a peak in May (104.5 million cubic meters) and consistent output even during traditionally slower months. This signals a strong demand for premium-grade timber.
  
  

4. Softwood Excluding SPF Shows Promise:

• Softwoods outside the SPF category recorded consistent growth, peaking at 482.4 million cubic meters in June. This diversification positions the industry to cater to a broader market base.
  
  

Concerns and Anticipations

1. Summer Slump:

• The seasonal decline in production during July (3.63 billion cubic meters) and August (3.70 billion cubic meters) raises questions about whether this is a typical seasonal dip or reflective of deeper challenges, such as labour shortages or economic slowdowns.
  
  

2. Fluctuations in SPF Production:

• SPF, which dominates softwood production, saw a steep decline of 22% between April and July. This dip could indicate vulnerability in the industry's core segment, potentially linked to shifting market dynamics or supply chain issues.
  
  

3. Inconsistent Output in Niche Categories:

• Some categories, like Hemlock Fir and "Other Softwoods," showed erratic production trends, with missing or fluctuating data. This inconsistency may hint at operational bottlenecks or niche market volatility.
  
  

What Can We Expect Moving Forward?

1. Seasonal Recovery:

• Historically, softwood production tends to rebound in the fall and early winter months. With the year's peak in spring already outpacing 2023 figures, there’s hope for a strong finish if demand aligns.
  
  

2. Market Diversification:

• The increasing reliance on non-SPF softwoods like Douglas Fir, Western Larch, and Western Red Cedar positions the industry to cater to evolving market demands for diverse timber applications.
  
  

3. Cautious Optimism:

• While production trends are promising overall, the summer decline highlights the need for agility in addressing potential disruptions in supply chains or labour markets.
  
  

Outlook: Hopeful but Watchful

The Canadian softwood lumber industry has shown resilience and adaptability in 2024, driven by a strong spring performance and efforts to diversify its product offerings. However, challenges such as SPF fluctuations and seasonal dips warrant careful monitoring. As the year progresses, industry stakeholders should remain hopeful yet proactive, capitalising on emerging opportunities while addressing vulnerabilities to ensure a strong year-end finish.

Conclusion

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