Canada’s Wood Product Manufacturing Industry: Industrial Outlook Autumn 2005

Profits in the wood products sector are poised to drop by a third this year over 2004, as prices and production fall from last year’s highs. Home building, a key demand driver for wood products, has been resilient in both Canada and the United States, but it will weaken as mortgage rates rise over the coming year.

As a result, wood product profits will drop to $2.9 billion this year, and decline further to $2 billion in 2006. The deterioration will be even more pronounced if an expected reduction in duty rates on softwood lumber does not materialize in January 2006.

In the medium term, profits are forecast to stabilize as production begins to rise again. However, the softwood lumber dispute and the strong Canadian dollar are expected prevent any major improvement in profitability.