Canada’s wood products industry can look forward to a stronger year next year, according to the Conference Board of Canada.
In a report released Tuesday, the board expects overall wood products production to increase 3.7% in 2011 despite uncertainty in both the Canadian and U.S. housing markets.
“After three years of losses, a surge in prices and demand lined up favourably early this year for the industry,” said Jacqueline Palladini, an economist with the board.
“The industry’s rebound will continue in 2011, but the pace of growth will slow. The uncertain short-term outlook for the U.S. housing market remains a key concern for the Canadian industry.”
In B.C., forestry companies have increased their focus on Asian markets in recent years while the U.S. housing market continues to languish.
On Monday, Washington-based U.S. forestry giant Weyerhaeuser Co. (NYSE:WY) said it did not anticipate a significant improvement in the U.S. housing market next year.
“While there is significant near-term uncertainty, the longer-term outlook remains positive as we expect improved macroeconomic conditions and housing starts to return to trend levels,” said Dan Fulton, Weyerhaeuser’s president and CEO.
The Conference Board said further uncertainty has been added to the U.S. housing market now that the sale of existing homes is “being held back by revelations of question[able] practices for processing foreclosures.”
But Russ Taylor, president of Vancouver-based International WOOD Markets Group Inc., believes factors such as a Russian log tariff, the mountain pine beetle epidemic and reduced lumber production from Eastern Canada will create a supply driven market for B.C. producers in the coming years.
That could drive an increase in lumber prices and boost the bottom line for forestry companies as Asian demand continues and U.S. demand rebounds.
Said Taylor: “We’re still a couple years away but … I think we’ve turned a corner.”