B.C.’s economy is on the rebound, and a gradual turnaround in the province’s depressed forestry sector is helping, according to an RBC Economics report released this morning.
The report projects the economy will grow 3.5% this year, which is the strongest growth rate since 2006.
“The global economic recovery and improving U.S. housing sector are expected to go a long way in helping repair B.C.'s export performance,” said Craig Wright, RBC’s chief economist.
Strengthened prices in B.C.’s forest, pulp and paper sector are going to help the economy continue to grow into 2011, the report said, and gains in the mining and energy sectors should boost the provincial coffers as well.
According to Natural Resources Canada, North American softwood lumber prices hit $320 per thousand board feet the week of June 4, which compares with approximately $250 at the same time last year.
Meanwhile, U.S. pulp prices rose to $1,009 per tonne this week compared with slightly above $600 a year ago.
Yet many analysts argue the recent vigour in the forestry sector is the result of supply gaps after a number of mills were curtailed or shuttered during the economic downturn.
Michael Armstrong, director of PricewaterhouseCooper’s (PwC) global forest and paper practice, believes the demand hasn’t returned for a full ramp up in production.
“There’s no duty on exports right now, and prices are high and people will put their mills back online, which will make the situation worse,” Armstrong told BIV.
His advice is for companies to maintain their discipline and not get too excited about the “good times” again.
While many B.C. forestry companies attempt to tap Asian markets, Armstrong believes the U.S. housing market will continue to be the bellwether for resurgence in the sector.
“China is helping the lumber industry, but it’s not offsetting it enough yet to make a huge impact, so we still have to wait for the U.S. housing market.”