Forest industry anticipating a gradual recovery in 2011

Posted by Rumin Mann
February 10th, 2011

‘Everybody is poised and waiting. The mood is bullish but nobody wants to say it’

The worst of the recession is over for the forest products industry, but even though companies are reporting strong results for 2010, plenty of obstacles loom in 2011 that are keeping a lid on optimism.

Prices for lumber are above what they have been for four years and a tight log supply practically guarantees they will remain relatively high. New markets in Asia are expected to keep growing, but optimism is muted by several other factors: a strong Canadian dollar, a new court challenge from the United States on the softwood lumber file and a logging sector that’s still too crippled by the recession to fully recover this year.

“Everybody is poised and waiting. The mood is bullish but nobody wants to say it,” said Keta Kosman, publisher of Madison’s Lumber Reporter.

Companies are expecting 2011 to be similar to 2010, a year of recovery, said John Allan, president of the B.C. Council of Forest Industries. He foresees lumber shortages that will drive prices higher, but not until 2013-15.

Allan said companies will continue investing in modernizing existing equipment and, as confidence returns, begin adding shifts at existing mills. But there will likely be no new mills built, he said.

To further underscore the sentiment that this is not going to be the breakout year for the lumber industry, the U.S. foreclosure authority RealtyTrac released a report earlier this month forecasting a record 1.2 million American home foreclosures in 2011. With that much uncertainty in the housing sector, demand for new construction -and lumber -is expected to remain constrained.

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