Alberta Forest Products Association members rank 2007 as one of the worst years on record. Further, they do not foresee much brightness in 2008, as many forces conspire to keep the market prices for pulp and paper products down from levels seen in 2007 and dimensional lumber and oriented strand board prices far below historic normals.
Alberta’s forest product industry shipped $2.7487 billion worth of lumber, panelboard, pulp and paper in 2007, a decline in value of $446.51 million from 2006’s $3.1952 billion. The value of Alberta forest products has fallen 36.2 per cent from the most recent high-water year of 2004, where total value was $4.3098 billion. In the last two years, the value of forest products from Alberta has fallen by more than $1 billion.
“Alberta’s forest industry is in crisis,” said Brady Whittaker, AFPA executive director. “The situation is critical, not just for the economics of the forest products industry – or the 3000 people that have lost their jobs in the past year – but also for the long-term sustainability and health of our province’s forests. During the recent campaign, the Premier pledged to help the forest industry. We trust the Government will fulfill this election promise soon.”
Lumber production in 2007 was 3.218 billion board feet - almost the same as 2006. AFPA panelboard production was 2.3768 billion square feet, down 441.9 million square feet year over year – a result of OSB mill curtailments, closures, and the decision by Tolko Industries to leave the association at the end of September 2007. Pulp and paper production in 2007 was down 97,100 air dried metric tones (ADMT) to 1.8729 million ADMT.
Lumber – During the fourth quarter 2007, AFPA-member lumber companies shipped 722.8 million board feet* (mmfbm) at a value of $C158.8 million. This compares to 777.8 mmfbm in Q4-2006 with a value of $C209.9 million. Full year 2007 lumber value was $C853.1 million, down $203.9 million from 2006. Part of this production came from the secondary manufacturing sector. (*A board foot (fbm) is the standard measure for lumber and is of 1”x 12”x 12” dimension or 144 cubic inches. A finished eight foot 2x4 that a consumer would purchase in a building supply store is equivalent to 3.5 board feet.)
The Random Lengths average monthly prices for Western Spruce-Pine-Fir (SPF) 2x4 Standard or Better, per thousand board feet were: $C215.81 in October 2007 ; $C222.94 in November 2007; and $C224.97 in December 2007. This compares to 2006 average monthly prices of $C264.07 in October 2006; $C269.49 in November 2006; and $279.07 in December 2006.
At the current low prices, all Alberta softwood lumber exported to the United States carries a 15 per cent export tax added to each shipment at the border. This export tax, payable to the Government of Canada as part of the Softwood Lumber Agreement – which in turn flows to the Alberta government, cost Alberta lumber producers $50 million in 2007.
Panelboard – AFPA-member panelboard operations produced 486.2 million square feet of 3/8th inch equivalent product in Q4-2007 at a value of $C91.7 million. The average monthly prices for oriented strand board (per thousand square feet) were $C157.04 in October 2007; $C172.40 in November 2007; and $C153.57 in December 2007. Comparatively, the 2006 values for the same period were $C190.72; $C194.81; and $C183.36. The average monthly plywood prices (per thousand square feet) were $C379.50 in October; $C345.25 in November; and $C338.00 in December. For medium-density fibreboard, the fourth quarter price was $C490.00.
Pulp & Paper – The AFPA’s pulp and paper sector Q4-2007 production was almost equal to that of 2006 at 375,100 air-dried metric tonnes (ADMT), but the market value was down 7.6 per cent to $C375.1 million. For the full year, pulp and paper production in Alberta was 1.8729 million ADMT with a value of $C1.4485 billion. That compares to 2006 production of 1.97 million ADMT worth $C1.4774 billion.
Industry Outlook
The slowdown in the forest sector through 2007 resulted in numerous mills taking production downtime, some mills closing indefinitely, and 3000 Albertans losing their jobs.
The forecast into 2009 is for a continuation of low market prices for dimensional lumber and panelboard products, due to low housing starts in the United States and other market factors. Alberta producers are also being hurt by inflating energy, labour and transportation costs, increased municipal taxation on mills, a strong Canadian dollar, and – for softwood lumber producers – the continuance of a 15 per cent export tax on lumber exports to the United States.
On the pulp and paper side of Alberta’s forestry business, prices may move slightly higher over the course of 2008 if international price increases come into effect and hold with customers. There have been significant supply reductions in the North American pulp and paper business over the past two years due to mill closures.
US housing starts in 2007 fell by 444,800 units from the year previous, a significant reason for the ongoing low prices for wood construction products. The United States’ National Association of Home Builders announced in March 2008 that housing starts continued to post declines with a projected seasonally adjusted annual rate of single-family housing starts to be about 707,000 units in 2008 – a 32 percent decline from 2007 starts. US sales of new houses are at a 13-year low.
Closer to home, 2008 looks to be another year of challenges and opportunities. The depressed market prices for wood construction materials coupled with high costs for energy, utilities, fuel, labour and taxes are negatively affecting most mills in the province. The continuation of these pressures may well lead to increased downtime and curtailments or outright closures and layoffs in the forest industry.
The Alberta government’s proposed Land Use Framework could have significant implications for the forest sector. However, the government’s commitment to greening growth provides some opportunities for the forest industry to be a constructive partner in the development of green energy, reduced waste and the continued enhancement of the forest environment. The AFPA will work with the Government of Alberta to provide input on all policy positions that influence the forest industry with an eye to balancing environmental and economic needs.
Production figures and values – 2006 and 2007
Lumber
2006
2007
Year/Quarter
Production (mmfbm)
$C Value (000,000s)
Production (mmfbm)
$C Value (000,000s)
1st Quarter
768.6
298.7
775.7
225.8
2nd Quarter
885.8
311.9
953.3
261.4
3rd Quarter
773.4
236.5
766.5
207.1
4th Quarter
777.8
209.9
722.8
158.8
Yearly Totals
3205.6
1057
3218.3
853.1
Source: Random Lengths (S-P-F, Western, Kiln Dried 2x4, std&btr, Random, Prices Net FOB Mill)
Panelboard
2006
2007
Year/Quarter
Production (mm sq ft)
$C Value (000,000s)
Production (mm sq ft)
$C Value (000,000s)
1st Quarter
725.9
209.2
720.3
126.5
2nd Quarter
641.5
168.5
607.3
116.8
3rd Quarter
690
142.2
563
112.1
4th Quarter
760.4
140.9
486.2
91.7
Yearly Totals
2818.7
660.8
2376.8
447.1
Source: Random Lengths - Madison’s Canadian Lumber Reporter
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