“It’s been an incredible period of volatility and uncertainty in our world and markets,”
That’s from Susan Yurkovich, the President and CEO of the Council of Forest Industries as lumber prices drop and housing markets in Canada and the United States begin to soften due to rising interest rates from the Bank of Canada.
Last week (June 1st), the Bank of Canada raised interest rates by 50 basis points for a second straight time, bringing its overnight rate to 1.5%.
Yurkovich noted over the past 24 months, lumber prices have been as low as $385 and as high as $1600 per thousand board feet.
In addition, she noted the rising inflation and interest rates are also causing affordability issues for first-time home buyers, south of the border.
“We have that demographic between 25 and 34 that is very large in the US and that is when they tend to form households or buy their first home. But, also, they are the very same customers who are very sensitive to inflation and interest rate hikes.”
“When we look at the housing starts, they still look reasonable. But, if you are in a rising interest rate environment and people are starting to be concerned whether they will be paying their mortgage, you are seeing a drop-off in demand for sure.”
Yurkovich also noted the industry’s supply chains have still not recovered from the pandemic.
Flooding and wildfire events dating back to last year are still causing some logistical challenges in getting wood products to market.
“Particularly for the forest products sector, rail shipments, and the ability to have cars to ship our products, you can’t just switch to trucking because there are not enough truckers to pick up that extra demand.”
In May, Canfor extended its reduced operating schedules at all of its sawmills across Western Canada due to the global supply chain crisis.
This includes all locations in Prince George, Vanderhoof, and Houston.
In addition, Canfor will also be implementing two weeks of rotating downtime across its primary sawmills in July and August to help align production capacity with the sustainable timber supply and transportation availability.