New Brunswick lumber companies quietly shattering income records - Action News
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New Brunswick

New Brunswick lumber companies quietly shattering income records

After years of struggling with up-and-down markets and fighting U.S. duties and subsidy allegations, New Brunswick lumber companies are almost certainly shattering their own sales recordsand posting record profits.

Salisbury sawmill owner flooded with calls for wood

Softwood logs are loaded for processing at the JD Irving Ltd sawmill in Chipman. The facility is one of New Brunswick's most important. (Submitted by Gerard Sirois/GNB)

Demand for lumber has been so highat Randy MacNichol's independent sawmill in Salisbury, N.B.,he has difficulty taking time on the phone to answer questions about it.

"There is no stockpile of lumber in my yard,"MacNicholsaid during a five-minute conversation about the daily parade of callers asking for wood.

"It hasn't slowed. I've had six beeps since you called me"

MacNichol sells lower-grade unstamped or milled lumber that's meant for smaller scale-projects.

Unrelenting demand

His operation is modest.But with unrelenting demand and record prices for wood across North America, all lumber production businesses, including his,are having a banner season.

"My guys in the woods are going to get a little bit more this year and old Randy is going to get a little bit more this year," he jokes.

MacNichol is open about the success he is having, but others in the province are not offering as much information.

Industry groups like Forest NB and New Brunswick Lumber Producers have said little about thechange in fortune that has hit theirindustry, and last week did not respond to requests for comment about how well the province's mills are faring.

Randy MacNichol said demand for lumber 'hasn't slowed.' (Tori Weldon/CBC)

But after years of struggling with up-and-down markets and fighting U.S. duties and subsidy allegations, New Brunswick lumber companies are almost certainly shattering their own sales recordsand posting record profits.

One measure of that came in a Statistics Canada report last month that showed the value of treated and untreated lumber production in New Brunswick in January and February was $286.1 million, an unheard of figure.

The amount is not just a New Brunswick record, but $140 million more than the industry has ever made in those two months according to figuresthat extend back to 1992.

Runaway cost of softwood lumber

The windfall is almost entirely caused by the runaway cost of softwood lumber in North America that in February was trading on markets at averageprices 169 per cent higher than in 2019.

Those prices then jumped higher again in March, and went higher still in April, with every working sawmill in the country earning record amounts on every board they can push out and get to market.

Wood chips are piled high at the J.D. Irving sawmill in Sussex in March. (Submitted by Ronnie Davis)

Last week, two of Canada's top-five lumber producers, Vancouver-based Canfor Corporation and Montreal's Resolute Forest Products, reported their own results for the first three months of 2021.

The companies, which had lost a combined $84 million on their lumber businesses during the first three months of 2020, made $828 million during the same 90 days this year, a sign of how dramatic the improvement has been.

Bank of Montreal analyst Mark Wilde marvelled at the volume of money, and on Canfor's earnings call questioned company CEO Don Kayne about whether an industry not used to such large profits was prepared to deal with the sudden riches.

"It's a lot of sailors hitting the town with a lot of money in their pockets, so silly things can happen," said Wilde.

Kayne said the company is still evaluating how to deal with itswindfall."We're taking a really cautious approach before we make any decisions at all."

Several provinces have increased royalty charges for logs being used by sawmills to match price increases in the lumber made from them, but not New Brunswick. Royalty rates set in 2015 are still in force. (Graham Thompson/CBC)

Other large Canadian lumber companies are scheduled to report earnings thisweek, but, in New Brunswick, most operationsare privately held and do not report their results publicly.

JD Irving Ltd is Canada's fifth-largest lumber producer, according to a ranking released last week by Forest Economic Advisors. JD Irving Ltd did not respond to a request for comment on its recent sales experience.

Surge has lasted a year

Overall, New Brunswick ranks fifth among provinces as a wood products manufacturer, but on a per capitabasis is close to the biggest, just ahead or behind British Columbia from one month to another.

New Brunswick lumber companies have experienced surges in product prices before, like brief spikes that occurred in the summer of 2018 and in the spring of 2002, but nothing as large or as long lasting as the current wave that is in now its 12thmonth.

Precisely how well individual New Brunswick companies are doing in the current market is unknown. (Sara Jabakhanji/CBC)

Companies like Canfor and Resolute have to pay rising royalties for timber they use in provinces like British Columbia, Alberta and Ontario as the price they get from lumber made from those trees goes up. But companies in New Brunswick are not facing the same rising expenses.

"Those(royalty) prices reflect local demand and supply factors," Nick Brown wrote on behalf of New Brunswick's Natural Resources and Energy Development Department last month, explaining why royalty charges for timber in the province are not growing to match record prices for wood products.

"Because overall stumpage supply has remained generally constant and overall mill capacity has not increased, there has not been a significant increase to the demand or the supply of stumpage locally."

Preciselyhow well individual New Brunswick companies are doing in the current market is unknown, but, according to MacNichol,it's a good time to be in the business of selling lumber.