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The price of wood: big industry gets richer, others pay more

For the past two years, the “do-it-yourselfers” have been confused. Materials are so expensive and in short supply, renovation projects are being abandoned. Worried, they may begin to wonder, “Are we running out of wood?”

“People think there is a shortage, but the yards are full. We just have more demand than we are able to saw in a week,” says Christian Théorêt of the Scierie Ormstown sawmill. Eric Pharand, of the Scierie Carson sawmill in Havelock, is experiencing the same phenomenon.

The has been much talk of an increase in home renovations during the pandemic. People have a surplus of time as a result of the restrictions on outings and travel. However, a much more significant factor to the scarcity of wood is the surprising increase in residential construction in the United States, coupled with the fact Americans are consuming more wood than is being produced domestically and are now importing large amounts. Canadian sawmills are taking advantage of such strong demand and are raising prices.

The situation is far from beneficial for many players in the field. The huge increase in the price of wood has not impacted the two local sawmills, as both have only slightly raised their prices. “By 15 per cent,” says Pharand, “and this is because I have kept the same prices since I bought the business in 2017.” Similarly, Théorêt maintains his prices are competitive. But for private forest producers and hardware stores, none of the prosperity is trickling down.

Since 2017, the Syndicat des Producteurs Forestiers du Sud du Québec has been involved in collective bargaining with sawmills. The aim is to establish a fixed price for all producers in the Montérégie and Estrie regions, as opposed to the current situation where sawmills can ask different prices of producers.

 

The owner of the Scierie Ormstown sawmill says he is keeping his prices competitive amid a construction boom that has seen demand for wood skyrocket.  PHOTO Sarah Rennie

 

In 2018, Domtar, a Quebec-based paper, pulp and packaging giant, as well as the Forestry Industry Council, officially opposed this request by the union before the Régie des marchés agricoles (Agricultural Marketing Board). A decision is expected to be rendered in the fall of 2021. In the meantime, the situation has stagnated to the extent that private forest producers have yet to see an increase in their profits, despite the ongoing boom in construction and subsequent demand for wood.

For example, private forest producers’ earnings per thousand board feet or MBF has remained the same throughout this time at $100, while sawmills that were selling their lumber at $150 per MBF just a few years ago are now asking $1,400. According to the union, the net profit for producers has been declining over the past 15 years due to inflation.

The price of materials has risen by 300 per cent, but this is far from good news for hardware store owners who decide to cut into their own profit margins to ensure the price offered to customers is not overly exaggerated.

In other words, small business owners such as Justin Machabée, who owns the Home Hardware store in Saint-Antoine-Abbé, are making less selling a sheet of plywood for $40 now than they were when the price was set at $23. Machabée says that while his margin is usually 15 per cent, they are settling for five per cent to cover their expenses.

He explains that it is not easy to get supplies as his store does not have a lumber yard and he has to work with a broker, who can turn on a dime to ask a higher price should another buyer order a larger volume. It’s the Wild West in lumber yards.

On April 7, the Association québecoise des quincailleries et des matériaux de construction (AQMAT) sent a letter to Premier François Legault arguing that “The current laissez-faire approach only benefits a few large forestry operators. [We are] all victims of the scarcity of materials from local forests, often even public forests, which should serve the interests of the local construction ecosystem first.”

As big industry appears to be opposed to this kind of discourse, it would seem smaller players will continue to experience very little benefit. Various experts seem to agree that a drop in prices is not in the foreseeable future. The construction boom will continue as there is demand for new homes and a need for more housing in general.

 

 

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