Canada is one of the largest economies in the world due to the country’s high gross domestic product (GDP). Furthermore, Canada has large amounts of imports as well as exports, which are the two main components that contributed to the economic growth and development of the country. However, in this article, we will only focus on one industry that plays a massive role in Canada’s economy, the Lumber Industry.And why is lumber so expensive in canada?
Lumber Industry in Canada.
Canada is popular for exporting softwood lumber to countries such as the United Kingdom, Japan, China, Korea, India, and United States. The softwood lumber industry in Canada drives a large portion of the forest sector and it is considered the key pillar of Canada’s forest sector.
The softwood industry provides the following:
- It employs many Indigenous and rural communities.
- This industry improves the standards of living of a majority of Canada’s population.
- Other industries benefit from the softwood industry. They benefit from the supply of the following:
- Pulp
- Paper
- Bioenergy
- Wood-based panels
- The softwood industry increase exports, which contributes to the overall growth of the economy
- The industry contributes to the nominal Gross Domestic Product.
The softwood lumber is produced using different coniferous tree species such as fir, pine, and spruce. On the other hand, the lumber industry also provides hardwood from deciduous trees such as oak trees, maple trees, and birch trees
Canadian lumber is commonly used for the following reasons:
- Remodeling and repairing
- Non-residential construction
- Furniture manufacturing
- Residential construction
Apart from the lumber industry, Canada has other wood industries that supply :
- Plywood
- Veneer
- Particleboard
- Oriented strand board
- Wood pellets
- Engineering wood
Canada’s achievements in recent years
- Canada became the second largest provider of softwood lumber worldwide.
- Canada one of the leading exporters of softwood lumber and many other lumber products
- The majority of softwood lumber is exported to China, the United States, and Japan.
- The softwood industry has opened doors to more job opportunities for Canadians.
International trade in Canada
As previously mentioned, Canada is well known for exporting lumber to other countries to the extent that it only supplies less than 40% of lumber to the domestic market.
The United States has been the most predominant buyer of Canadian lumber. However, over the years the United States placed trade restrictions on Canada, to protect USA lumber producers against Canadian lumber producers. These restrictions strained the lumber industry in Canada despite Canada’s efforts to resolve the issue.
Moreover, International trading between Canada and China had positive and negative effects on the lumber industry.
- The positive impact is that China became an important buyer of Canadian lumber for several decades.
- The negative impact is that China has been demanding more lumber since the 1900s. As a result, the demand became higher than the supply of lumber.
Reasons why lumber is expensive in Canada?
Although the lumber industry in Canada has positively benefited the country, the prices of lumber have drastically increased, which lead to many setbacks.
Please consider some of the reasons why lumber is so expensive in Canada?
- For some time, an infestation of beetles has affected Canadian forests, which has decreased the supply of lumber mainly because the affected trees are not suitable for lumber production.
- When resources such as trees become scarce, they become very valuable, which results in high prices.
- Excessive demand from countries such as China, India, and Korea has strained the Canadian lumber industry.
- Since more lumber is exported, the domestic market faces a shortage in lumber products, which results in unstable lumber prices.
- Landslides in Canada have negatively impacted the lumber supply.
- Due to a decrease in trees, most wood industries including the lumber industry have to wait for trees to fully mature before chopping them. This slows down production and then prices go up.
- Wildfires negatively impacted the supply of lumber in Canada, hence the prices increased.
- Recent decreases in mortgage interest rates by approximately 2%, increased the money in circulation. The main reason for this is that more people got access to home loans, which resulted in the storage of houses as well as an increase in home renovations. All these activities led to a high lumber demand as well as high prices.
- Since Canada is still recovering from the Covid-19 pandemic, there is a high shortage of labor in the lumber industry, which results in low productivity and high prices.
- The demand for lumber is excessively higher than the supply.
- Bad weather conditions affect the supply of lumber. For example, flooding disturbed the shipping lines as well as shipping methods. As a result, prices increased as shipping costs increased.
- Repairing damaged infrastructure after the recent western flood, slowed down production, thus affecting the lumber supply chain in Canada.
- The processing of lumber became more expensive due to the shortage of lumber supply.
- Deforestation has decreased supply.
- Other types of lumber take longer to grow, prolonging the waiting period before the trees are harvested. This increases lumber prices because supply moves at a slower rate as compared to the actual lumber demand.
- The softwood lumber industry has been affected by tariffs set by the United States government. This has negatively affected the growth of the forest sector.
- Inflation has contributed to unstable lumber prices.
- Environmental regulations govern the way forests are used, which results in diminishing volumes of lumber products. Therefore, prices increase as volumes decrease.
Conclusion:
The lumber industry has proved to be a great force behind Canada’s economic growth. Unfortunately, though, the lumber industry in Canada has been drastically affected by many negative factors that occurred in recent years. Even though some of the factors we have discussed are merely short-term challenges, the road to recovery is still uncertain.
Frequently asked questions
- Does a delay in home renovations lead to a decrease in the demand for lumber?
- A delay in home renovations does not contribute to a decrease in lumber demand. Instead, demand stays the same.
- Can we expect lumber prices to decrease in the future?
- Yes, if Canada manages to find sustainable ways to increase lumber supply, prices are more likely to drop soon.
