Ottawa – A healthier US housing market and the better macroeconomic outlook is expected to offset domestic uncertainty, supporting output and profitability in the Canadian wood products industry, according to new research from the Conference Board of Canada.
The US housing market is showing signs of an entrenched recovery from the collapse in prices and activity during the 2008-2009 recession. Total housing starts in the US have averaged over 1 million a month recently, their strongest pace since early 2008. Domestically, wood producers have benefited from the resilient Canadian housing market. In the long run, heavy debt loads, uneven labour market performance and an eventual rise in mortgage rates will limit domestic residential construction activity.
Paper products industry
The Canadian paper products industry, meanwhile, is attempting to overcome the long-term decline in demand for many paper grades due to the ongoing shift from print to digital media. For example, over the past decade, ad spending for print newspapers in the US fell by more than 60%, while for digital newspapers it rose by 180%. The result was a sharp decline in newsprint demand.
Sales of pulp, sanitary paper, and non-paper byproducts are expected to offset the contraction in demand for communication papers this year. But with these products still representing 50% of the industry’s sales, the long-term outlook for the paper product industry remains weak.