Recently, the North American lumber giant CANFOR announced its third-quarter results. The company's consolidated operating loss of $65 million, but continued strong results for companies in the southern U.S., and solid results for European companies despite seasonal shutdowns, was a challenging quarter for Western Canada.
For most of the third quarter, global lumber market demand and pricing continued to be under pressure, with shipments falling due to market-driven production cuts in Western Canada and seasonal shutdowns in Europe. But Canfor said it has confirmed a future investment of $200 million to build a new state-of-the-art paper mill in Houston, British Columbia.
Canfor said it was confident in the southern U.S. market due to increased production and shipments due to a 5% price increase for Southern Ponderosa Pine (SYP) 2x6#2, although offset by a 7% drop in the price of the 2x4#2 specification.
On the market front, FOB timber prices in Asia remained relatively stable in the third quarter of this year, amid improved demand in China and Japan. Inventory levels in China and Japan have risen.
In Europe, timber demand and prices improved slightly quarter-on-quarter, particularly in the UK, where demand for lumber in the repair and rebuild sector continued to be strong.
Looking ahead, Canfor said that while the long-term fundamentals of the timber market remain positive, it expects consumer affordability constraints to continue to weigh on demand in the near to medium term. And high mortgage rates, persistent inflation and geopolitical tensions are expected to weigh on new home construction activity through the end of this year and into 2024.
Timber demand in Japan is expected to remain somewhat weak for the remainder of the year, and the same trend is expected in China. However, pricing for China is expected to improve slightly in the coming months (higher export prices to China) due to lower imports from Europe and continued inventory reductions in the region. And European lumber prices are expected to face downward pressure through the fourth quarter of 2023 due to low levels of residential construction activity.