Canada and the U.S. softwood lumber industry demonstrated good growth in 2015 buoyed by continued recovery in the U.S. housing market, and residential repair and remodeling, according to the Wood Markets Monthly International Report. The domestic market helped mitigate the slowdown in exports from North America to China. Total Canadian softwood lumber shipments grew by 9.2% to 26.5 billion board feet while U.S. production saw smaller gains (+1.9% to 32.0 billion bf).
According to the Report’s annual survey of Top 20 Canadian and U.S. softwood lumber producers, the top 20 Canadian companies increased production in 2015 (+3.6%). But this was insufficient to keep pace with the rest of the industry. As a result market share of total Canadian lumber shipments slipped to 74% in 2015 from 80% in 2014.
Peter Butzelaar, vice president of WOOD MARKETS, said the decline in market share points to large Canadian companies consolidating production and retooling mills in anticipation of changes in the log profile and projected tightening or outright reductions in the overall timber supply.
“However, the U.S. South is proving to be a strategic pivot option for Canadian producers looking to raise their production and diversify their market and product mix.”
The key attraction to investing in the U.S. South is the region’s close market proximity and timber supply, which is more readily available and affordable. The most active “acquiring” Canadian companies in 2015 were Interfor and Canfor. Interfor increased its U.S. South mill count from three to nine mills; Canfor added six mills, bringing its total count in the South to 10. West Fraser added no new mills in 2015, but did reap benefits from the completion of several capital upgrades in 2014.
Top Canadian softwood lumber producers
The top five Canadian producers were Canfor (+2.5% to 3.83 billion bf); West Fraser (+3.5% to 3.60 billion bf); Tolko (+3.9%, despite halving production at its Quesnel, B.C. mill in late 2015); Resolute (+5.9% to 1.68 billion bf); Western Forest Products (-1.9% to 891 million bf).
The only change in the order from 2014 was Western moving ahead of Interfor. Interfor’s drop in 2015 production (-16.9% to 784 million bf) is attributed to a combination of market-related downtime taken by its various Canadian mills as well and the curtailment of the Castlegar mill while it completed a major mill upgrade.
Top U.S. softwood lumber producers
Total lumber shipments of the top 20 U.S. firms rose by 8.0% to 19.7 billion bf in 2015. Together the top 20 U.S. firms produced 61.5% of all American softwood lumber shipments in 2015, versus 58.0% in 2014. This growth indicates that the largest U.S. producers (including Canadian firms) are continuing with their investment strategies aimed at meeting the anticipated rising demand of the U.S. housing market.
The top five U.S. firms produced 36.0% (11.5 billion bf) of all U.S. lumber shipments — up from 33.7% in 2014 — while their Canadian counterparts produced 47.8% (11.6 billion bf, down from 45.2% in 2014).
The top four companies in the U.S. in 2015 are: Weyerhaeuser (+3.1% to 3.41 billion bf); Georgia-Pacific (+3.5%); Sierra Pacific (+4.1%); West Fraser (+10.5% to 2 billion bf); Interfor (+38.4% to 1.7 billion bf). Canfor is in 7th place (behind Hampton), with production doubling from 2014 to 1.2 billion bf in 2015 via a series of acquisitions that raised the mill’s total from nine to 13 in the U.S. South.
For 2016 the greatest wildcard will be the outcome of ongoing negotiations for the next Softwood Lumber Agreement (SLA).