Canadian Producers Brace for Impact While Ending 2024 with Lean Inventories
THUNDER BAY – Business – Canada’s lumber industry is bracing for significant challenges as U.S. President-Elect’s threats of new tariffs on imported lumber loom. This potential policy shift has pushed Canadian producers to adopt a strategy of selling off remaining inventory before year-end, leaving lumber yards empty as they navigate volatile market conditions.
Since 1952, Madison’s Lumber Reporter has been a trusted source for tracking lumber prices and trends across North America. The latest data paints a complex picture, with declining prices, softened demand, and shifting production strategies marking the close of 2024.
Housing Market Woes in the U.S. Impact Lumber Demand
The U.S. housing market, a critical driver of lumber consumption, saw mixed performance in November. Single-family housing starts rose to a seasonally adjusted annual rate of 1.01 million units, up 6% from October. However, this represents a 10% drop from the previous year, indicating ongoing uncertainties in the sector.
This decline in U.S. construction activity directly affects Canadian lumber exports. Lumber manufacturers are contending with lower prices and reduced orders, a scenario further complicated by the threatened tariffs, which could increase costs for Canadian producers and potentially dampen demand further.
Softwood Lumber Prices: A Year-End Snapshot
Madison’s Lumber Prices Index reported a drop to US$470 per thousand board feet (mfbm) for the week ending December 20, 2024, down 5% from the previous week and 7% month-over-month. Key benchmark prices include:
- Western Spruce-Pine-Fir (WSPF) 2×4 #2&Btr KD (RL):
$435 mfbm, down 6% from the prior week. However, compared to last year, prices are up 5%. - Southern Yellow Pine (SYP) East Side KD #2&Btr:
$365 mfbm, marking a 73% drop from its 2021 high but a 17% increase from 2015 lows.
These trends underscore how market volatility has subsided since the extreme price swings of 2020-2021. Yet, with new tariffs potentially on the horizon, further disruptions could arise.
Canadian Producers Navigate Production Declines and Regional Shifts
Production in Canada remains nearly flat for 2024, with 15,490 MMfbm produced from January to September, slightly up from 15,257 MMfbm in 2023. However, British Columbia saw a 4% decline in output, offset by increases in Alberta and Quebec, which rose 4.5%.
Producers are also responding to softer demand by trimming production schedules and prioritizing inventory clearance. With sawmills nearing holiday shutdowns, the focus remains on selling off stock rather than overproducing in uncertain conditions.
The Local Impact: Thunder Bay’s Role in the Lumber Market
For Northwestern Ontario and regions like Thunder Bay, the lumber sector’s challenges carry direct implications. As a key hub for Canadian forestry products, regional producers may face higher costs and tighter margins if tariffs take effect. These pressures could influence local employment and the broader economy, especially in communities reliant on forestry jobs.
Looking Ahead: Stability or Turmoil?
As interest rates begin to decline and consumer confidence in the U.S. housing market grows, Canadian producers may find new opportunities in 2025. However, the looming threat of U.S. tariffs creates uncertainty, pushing stakeholders to adopt cautious strategies.
For Thunder Bay and Canada’s forestry sector at large, adaptability and collaboration will be critical in navigating these turbulent times.
