HomeBuisnessQuebec sawmills are losing money as demand for lumber declines PiPa News
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Quebec sawmills are losing money as demand for lumber declines PiPa News

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Quebec sawmills are losing money as demand for lumber declines

Quebec sawmills haven’t been profitable for more than a year because of declining demand for lumber, according to industry experts.

After hitting record pieces during the pandemic of $1,500 US per thousand board feet in 2021, the price of lumber has dropped in 2022 and is currently hovering around $575 for the same amount.

The situation has pushed some sawmills in the province to temporarily slow down production in 2023 to limit deficits.

A sawmill in the Quebec region of Lanaudière, Scierie Saint-Michel, has returned to operating at full capacity – but at a loss, said CEO Jean-François Champoux.

“The entire forest industry is operating at a loss since the beginning of 2023,” said Champoux.

Sawmills’ profits are tied to housing starts, which are themselves influenced by interest rates.

Those rates have tripled in the past two years, according to Francis Cortellino, economist at the Canada Mortgage and Housing Corporation.

Housing starts in Quebec will drop by 32 percent by 2023, he added.

Jean-François Champoux, CEO of a sawmill in the Lanaudière region of Quebec, says his sawmill is losing money despite operating at full capacity. (Radio-Canada)

“When interest rates are high, financial conditions are difficult and projects that used to be profitable are no longer profitable,” said Cortellino.

“That’s why projects are delayed. Projects are canceled.”

Champoux agreed.

“During the pandemic, we had a lot of purchases and renovations [but now] we have a tighter market, because interest rates have completely canceled out the construction market,” he said.

However, there is also optimism for 2024.

Jean-François Samray, the director of the Quebec Forest Industry Council, said he expects interest rates to drop, which means more houses will start on the horizon.

“[It] looks to be a good year in terms of market recovery. The American Federal Reserve has already indicated that March will be the month when the rate cut will happen,” said Samray.

On Wednesday, the Bank of Canada announced that it kept the key overnight interest rate at five percent.

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