Blog – What is next for the Forestry Sector – May 2023

Summary:

With our updated forecast of 1.4MM housing starts for 2023 (900,000 singles and 500,000 multis), we now expect lumber demand from new residential construction to decline by fully 2.9Bbf y/y to ~16.0Bbf. This compares to lumber demand from residential construction of 19.2Bbf in 2021 and 16.8Bbbf in 2020. A shift of 50,000 starts from single-family to multifamily (i.e., the latest tweak to our housing forecast) results in a lumber demand decline of ~460MMbf, roughly the equivalent of two greenfield SYP sawmills. …All else being equal, a steeper decline in lumber demand from new housing will necessitate even more sawmill downtime in 2023. We suspect that most downtime will take place in BC given its position as the highest-cost producing region in North America. BC accounted for 15% of total North American lumber production in 2021 and significant, timely downtime in the region should be enough to keep North American lumber markets somewhat tensioned through 2023. As such, we still expect benchmark lumber prices to hover around BC cash-cost levels next year, and we forecast a 2023 average S-P-F 2×4 price of $510, with SYP 2x4s priced slightly lower (at $495) given accelerated lumber supply growth from the U.S. South.

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Source - https://treefrogcreative.ca/housing-slowdown-may-mean-addition-downtime-for-bc-lumber/

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Links:

Housing starts outlook - https://www.canadianmortgagetrends.com/2023/05/home-prices-wont-revert-to-pre-pandemic-levels-should-start-rising-again-in-2024-cmhc/

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Home improvements spending - https://www.globalwood.org/news/2023/news_20230502a.htm

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Lumber production - https://www.lesprom.com/en/news/Canadian_sawmills_decrease_9_8_lumber_production_in_February_107606/

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Lumber Prices - https://www.woodbusiness.ca/lumber-prices-tick-up-slightly-even-as-demand-remains-low-madisons/

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Affordability - https://www.mpamag.com/ca/mortgage-industry/industry-trends/with-home-prices-set-to-climb-again-whats-the-outlook-for-first-time-buyers/444384

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ESG and Sustainability Reporting - https://www.ey.com/en_gl/tax/how-to-navigate-global-sustainability-compliance-challenges

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Innovation - https://www.canadianbiomassmagazine.ca/eyeing-the-bioeconomy-fibre-solutions-innovation-and-support-for-first-nations-in-b-c/

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Additional - https://www.slideshare.net/paulyoungcga/what-is-next-for-the-forestry-sector-and-lumber-production-april-2023pptx