Lumber industry sways up and down: StatsCan study

OTTAWA — Canada’s lumber industry has remained profitable despite being impacted by various trade and economic pressures in recent years.

According to a new Stats Canada study, the industry has lost thousands of jobs since the turn of the millennium, but by undergoing extensive restructuring, it has still be able to achieve substantial gains in productivity.

These gains, combined with a brief but large surge in lumber prices and operating revenues in 2004, have helped the industry maintain positive profit margins comparable, on average, to those reported in the manufacturing sector from 1999 to 2005.

Among the challenges faced by the industry during this period were the Canada/United States Softwood Lumber Agreement (1996 to 2001); the American anti-dumping and countervailing duties imposed on the industry from 2002 to 2006; rising energy and raw material prices; declining lumber prices and a higher exchange rate for the Canadian dollar.

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The lumber industry survived market changes the early
millennium, but tariff issues with the U.S. caught up in 2005.

n 2006, the lumber industry contributed $7.6 billion to Canada’s GDP — representing 4.4 percent of the manufacturing sector and 0.7 percent of the overall Canadian GDP. The industry is also a key player in export markets, accounting for more than 4 percent of Canada’s total merchandise exports.

Turning Point:

With the end of the Canada-U.S agreement in 2001, the Americans began imposing anti-dumping and countervailing duties on the Canadian lumber.
While production volume kept rising more or less steadily until 2004, employment started to decline in 2001.

The study showed that labor productivity, as measured by economic output per hour worked, intensified starting in 2001. From 2001 to 2005 (the latest year for which data are available), it rose at an annual average rate of 5.8 percent — achieved partly by closing plants that were least efficient.

However, in 2006, lumber shipments amounted to $11.9 billion, down 17.5 percent from 2005. This was the lowest level in 14 years, well below the level of $17 billion registered in 2004, when the industry enjoyed a short-lived recovery. In 2005, shipments declined another 14.9 percent.

The considerable declines in the value of shipments were due to a great extent to falling prices, which plunged to their lowest levels since 1992.
The decreases in the value resulted largely from a significant decline in the value of exports to the United States in the past few years.

Shortly after the freefall, though, a new pact with the United States was reached on softwood lumber exports. It included an agreement to reimburse most of the duties collected since 2002, and it established a new base price over which Canadian exporters will not have to pay duties.

“Time will tell how the industry’s financial situation in 2006 and in subsequent years will be affected by this new agreement and the other factors influencing this industry.”