Forest products: Export value

April 22, 2013

Since 1995, the export value of Canadian forest products has dropped from $33.9 billion to $22.2 billion.

Between 1999 and 2005, Canadian forest products exports rode the demand created by the US housing boom wave and the strong performance of softwood lumber and structural panels. In combination with a paper sector that had yet to feel the effects of competition from electronic media, Canadian forest sector exports averaged over $35 billion per year, and broke $40 billion in 2000. The dip in 2003 can be partially attributed to the softwood lumber tariffs following the expiration of the past softwood lumber agreement.

But by 2006, exports had started to drop. Both softwood lumber and panels peaked in 2004, and were dropping off quickly as the U.S. housing boom started to unravel. Newsprint was already feeling strong competition from the rise of the internet, and fliers and other printing and writing papers started sharper drops in 2006. Then the global recession in 2009 added a general drag on all forest products trade, and exports plummeted to about half the value of what they had been only 9 years previously. The significant rise in value of the Canadian dollar reduced commodity prices in Canadian dollar terms, and export revenues suffered further.

Exports of Canadian forest products (by value)

The largest drop in exports has been in softwood lumber and panels, due to the U.S. housing market bust. These are now showing signs of growth, with softwood lumber prices up 75% over the past 12 months, and exports rising. While exports are unlikely to attain the highs of the U.S. housing boom, a healthy U.S. market in combination with continued strong demand from China is forecast to provide strongly profitable years for solid wood products through the medium term. However, newsprint and many printing and writing paper grades are facing a structural decline in demand that appears impossible to reverse. This decline, in addition to the cyclical nature of commodity products more generally, have motivated changes in the sector. Industry is in the midst of a transformation that is creating new, higher value products in combination with more traditional commodities to provide additional revenue streams and increase the competitiveness of the industry through the long term.

One notable bright spot in exports is the continued increase in export value of several products in the “other” category. Although smaller in absolute values, their market share has increased: ‘other’ forest products now account for 29% of forest product exports against 13% in 1995. Amongst these, logs, semi-mechanical pulp, dissolving pulp, packaging and housing & sanitary household paper are increasingly important.