The North America softwood lumber market ended October 2018 in a complete reversal to the rest of the year, and indeed most of 2017.
Inventories were plump, customers were silent, producers were just starting to announce seasonal downtime, and secondary suppliers had an abundance of wood on hand. At sawmills, log supply was ample. Sales phones rang infrequently, and orders were mostly for small volumes of fill-in lumber for immediate needs only.
The below table is a comparison of June 2018 and November 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05:
An unexpected pickle manifested itself in the form of labour action for British Columbia producers; the United Steelworkers Union, representing sawmill workers across Canada, is in negotiation with two BC employer groups. In the north interior, is CONIFER and in the south interior is the IFLRA. CONIFER has been hit by rotating strikes at select operations. In response, several individual operators have announced seasonal curtailments and downtime.
This sudden uncertainty is hitting at a time when lumber demand is soft and prices lower than earlier in the year, so the impact of little bits of reduced production have not yet really been felt in the marketplace.
First, in the north, the United Steelworkers local 1-2017 confirmed October 25 that 40 employees between two Canfor sites were on picket lines. Close to 200 union members were involved in the job action. It’s the first strike at the sawmill since 1986.
The strike has been prompted by a lack of progress at the bargaining table. Workers have been without a contract since June.
The union, representing about 1,600 workers at 13 northern BC sawmills – including Canfor’s Prince George Sawmill and Isle Pierre sawmills – continued a campaign of rotating strikes in a bid to win a new contract. Members of United Steelworkers Local 1-2017 had been picketing Tolko’s Soda Creek operation in Williams Lake October 18.
Employees represented by USW 1-2017 joined those negotiating in the north by walking off the job in the morning of November 2 in Williams Lake, BC, at Tolko’s Soda Creek Division and West Fraser’s Planer. The union represents 13 sawmills in northern BC including Tolko in Quesnel and Williams Lake, the West Fraser planer mill in the Lake City and Dunkley Lumber.
It also includes operations in Prince George, Houston, Burns Lake, Fort St. James, Fort St. John, and Mackenzie, BC, which account for over 1,500 forestry workers.
As well, members of three USW locals representing about 3,500 sawmill workers in the southern Interior have voted in favour of giving their bargaining committee a strike mandate.
For it’s part, Canfor announced October 26 it would temporarily cut back due to log supply constraints, log costs, and current market conditions. The curtailment is expected to reduce Canfor’s British Columbia production output by about 10 per cent throughout 4Q 2018. This will be achieved through immediate short-term curtailments at some facilities, along with extended downtime at Christmas. Canfor has 13 sawmills in Canada, with total annual capacity of approximately 3.8 billion board feet.
*** CORRECTION AND UPDATE ***
NOV 8, 2018 — CONIFER companies have had very limited rotating strikes (which has now ceased) and IFLRA member companies have not experienced any strike action to date. Further, all curtailments from companies are unrelated to the USW strike mandate, and purely driven by market conditions and log costs.