Weak prices, soft demand, over supply, American import duties and increased foreign competition made 2019 a challenging year for Alberta’s forest products sector. 

After several years of strong growth, the value of international forest product exports—including logs, wood and paper—from Alberta shrank by 15 per cent ($637 million) in 2019. Wood exports were down by 20 per cent compared to 12 per cent for paper products.

Early forecasts suggested 2020 would be a better year for Alberta’s forestry sector with lumber prices rising by around 10 per cent. Unfortunately, the rise in prices that took place in January and February has been erased by a steep decline likely due to concern that the coronavirus outbreak will slow global demand. Prices reached US $463 per 1,000 board feet on February 20, but fell below US $400 as of February 28.

The United States is Alberta’s largest customer, buying 66 per cent of our forest product exports last year. It bodes well that U.S. housing starts hit a 13-year high in December and, while down somewhat in January, were off to a relatively strong start in 2020. Although U.S. economic growth is forecast to slow slightly this year, it is still expected to expand by around 2.0 per cent. At the same time, today's interest rate cut by the U.S. Federal Reserve will make purchasing a home more affordable.

China is our next largest customer at 20 per cent of our forestry exports in 2019. As the epicentre of the coronavirus outbreak, the Chinese economy is expected to slow. This will reduce demand for forestry products in the short-term, though the length of the disruption remains unknown.

While the forest sector is hoping to put 2019 behind it, challenges remain in the form of the coronavirus and a slowing global economy. Hopefully, U.S. demand will be strong this year and, while a long-shot, the Canada-U.S. softwood lumber dispute will get resolved, removing the associated tariffs on our lumber.