British Columbia Sawmill Curtailment & Timber Supply Update: June 2019

British Columbia Sawmill Curtailment & Timber Supply Update: June 2019

As the home building and construction season for 2019 marches on, seasoned players in the production, sale, and purchase of North American softwood dimension lumber products are surprised at the very low demand for solid wood commodities. Relentlessly dropping lumber prices — admittedly from soaring highs one year ago — since the end of 2018 are doing nothing to restore fragile confidence.
In response to the slack demand and other poor market condition, several of the largest sawmill operators in British Columbia curtailed production significantly during April and in May and announced some permanent closures as well. The most-often cited reasons for curtailing and closing production facilities were:

  • “uneconomic” log costs in BC;
  • low lumber prices across North America;
  • and, reduced timber supply overall due to the Mountain Pine Beetle infestation and the most recent wildfires.

In total the sawmill curtailments and closures to date this year in British Columbia will take almost 400 million board feet of annual production offline for 2019. This, it is important to remember, during a time when Canadian and US sawmills are usually running at the highest capacity rates for the year.

SOURCE: BC Ministry of Forests

In that regard, the Canadian and Pacific Northwest lumber producers in May 2019 have their yards absolutely jammed with logs waiting to be processed over what is usually the busiest season. Most made that investment at the start of this year in expectation of a bustling US home building and thus lumber buying season again this year. With demand so low right now, these sawmills could have concern that these ample log supplies might not be consumed before US home building slows down into October.
To put things in perspective, North America sawmill capacity utilization rates, as reported by the Western Wood Products Association, have not been encouraging so far this year. The latest issue of WWPA’s Lumber Track, for February 2019, has US sawmill capacity utilization rates almost flat compared to one year ago, at 86%. However that for Canada is down by a large ratio, from 87% this time last year to only 78% for February 2019.

Madison's Historical Softwood Dimension Lumber Price Comparison Table MAY 2019
SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

Regarding the mid-term timber supply in British Columbia, this is a topic of great discussion in many quarters. Until relatively recently, BC was forecast to have a stable mid and long-term timber supply of about 70 million cubic metres per year. The actual harvest from public lands has been closer to 64 million cubic metres. Recent analysis projects decreases in timber supply to about 58 million cubic metres per year by 2025—due to mortality caused by the mountain pine beetle epidemic. The forecasted timber supply returns to approximately 65–70 million cubic metres per year by 2075.

SOURCE: BC Ministry of Forests

Sawmill operators across the province are surely thankful that there is new, additional, timber supply available from First Nations land, as well as mechanisms to access fibre through local Woodlots and Community Forests.
This week Madison’s inquired of the BC Ministry of Forests, Lands and Natural Resource Operations the latest data update for the near- and mid-term timber supply to feed the provinces sawmills:

“After the 2017 and 2018 fires we re-analyzed the Timber Supply Areas (TSAs) most affected and concluded that the current Annual Allowable Cut (AAC) for these TSAs did not need to change. We have just started new timber supply reviews for the Quesnel and 100 Mile House TSAs, so the new AAC will reflect the impact of those fires. The new AAC for the Lakes TSA, expected this Autumn, will also include the effects of recent fires.
We have not adjusted the AAC for any TSA to account for spruce beetle. We were aware of the extent of the spruce beetle during the Timber Supply Review for the Prince George TSA and we concluded that the spruce beetle could be managed within the AAC set for that TSA, there is no uplift needed. We recently adjusted the partition for the Mackenzie TSA to account for the spruce beetle. That AAC did not change; just the partition.” — BC Ministry of Forests, Lands and Natural Resource Operations

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