Canada’s Wood Product Manufacturing Industry: Industrial Outlook Spring 2006

Declining residential construction, the ongoing softwood lumber dispute and the strong Canadian dollar will all contribute to lower profits for wood producers this year.

Wood sector profits are expected to drop by 27 per cent in 2006 and 16 per cent in 2007, to reach $1.9 billion. Although output prices are expected to improve somewhat as the loonie weakens slightly, lower production will lead to falling revenues.

Profits are forecast to remain little changed between 2008 and 2010 because of flat prices and limited production gains. Even though U.S. duties on softwood lumber were reduced to 10.8 per cent last December, the Conference Board estimates that for every 1 per cent of the duty that remains in place, profits will be about $30 million lower per year. Consolidation is expected to provide a small boost to profits by improving productivity through the elimination of the least efficient mills.