The big ones are getting bigger
The Canadian timber industry is currently undergoing profound changes. Sales volumes have decreased by 28% over the past five years, from 42.9 million m³ to 31.1 million m³. In comparison, the Top 10 sawmill groups only recorded a 19% decrease. “As a result, those companies now have a market share of 68%,” Provost explained. He also predicts a further decline in Canadian sawmill production. In 2023, as many as eleven sawmills were closed, and at least six more mills will likely face the same fate in 2024.
At the same time, new sawmill capacities are being created – in the US South, though. 2.5 billion Bft (around 5.9 million m³) in capacities have already been put into operation or will be added in 2024. “Those are Southern Yellow Pine (SYP) mills. So, will SYP increasingly replace SPF lumber in the future?” Provost asked.
SYP production keeps increasing
Marc Brinkmeyer added: “Over the past ten years, the share of SYP in total US production has gone up from 29% to 39%.” Plantation wood ensures low production costs, and SYP products already account for 85% of impregnated US wood. For the period from 2024 to 2026, Brinkmeyer expects an additional capacity of 3.6 billion Bft (8.5 million m³).
Provost believes that US demand for SPF lumber will continue to rise – for several reasons:
- SYP cannot replace SPF everywhere.
- The US population is growing by 2 million people each year. 40 to 50% of this increase is due to immigration.
- A significant wealth transfer (the “Great Wealth Transfer”) enables a new generation to build in a more ecological and energy-efficient way.
“At the moment, though, fewer and fewer people can afford to buy their own home,” Brinkmeyer noted. “For many, renting is the better option.” Accordingly, the number housing starts for owner-occupied homes fell by 8% in 2023 and by 3% this year.
Construction demand to drive the upswing
Nevertheless, Brinkmeyer also believes that demographic developments will lead to a strong upswing in construction, which will start this year and is not expected to subside before 2035 for demographic reasons. New public construction (hospitals, schools) has already grown by 30% – a significant change.
Boscus, which trades 2.3 million m³ a year, sees itself as the biggest importer of European wood products. However, Provost criticized the fact that not all European market players understand the peculiarities of the US market. “Many are willing to work with questionable partners, which significantly disrupts pricing,” he complained. According to Brinkmeyer, imports are decreasing due to the price situation.
Imbalance: prices too low, high costs
Brinkmeyer also mentioned the mismatch between the current supply and demand (“oversupplied market”). Softwood lumber prices are below pre-Covid levels “while costs are much higher,” he said. He expects further curtailments of production on the part of major producers, as well as lower interest rates.
2025 not much better yet
Although Brinkmeyer believes that the current economic cycle will soon end, he does not believe in strong growth in 2025.
