Ottawa— A mini-boom in the Canadian housing market, a slight improvement in American demand, and growing exports to China will bring Canada’s wood products industry back to profitability this year, according to The Conference Board of Canada’s Autumn 2010 outlook for the industry.

“After three years of losses, a surge in prices and demand lined up favourably early this year for the industry,” said Jacqueline Palladini, Economist. “The industry’s rebound will continue in 2011, but the pace of growth will slow. The uncertain short-term outlook for the U.S. housing market remains a key concern for the Canadian industry.”

To meet rising demand, Canadian production is expected to accelerate by 10.6 per cent this year. Years of hard work to diversify away from the volatile U.S. market and break into China appear to be paying off for the industry. Between 2000 and 2010, Canadian exports to China have increased by 3,300 per cent. In fact, Canada surpassed Russia this year as the biggest exporter of softwood lumber to China.

In the U.S., the housing market improved slightly in 2010, but demand remains in flux due to a weak economic recovery. Adding to the uncertainty, the sale of existing homes is being held back by revelations of questionable practices for processing foreclosures – which could delay demand for new homes. In all, Canada’s wood products exports, which are forecast to grow by 2.4 per cent in 2010, will not begin to accelerate until the second half of 2011 and into 2012.

Demand could also be affected by a correction in the Canadian housing market in 2011, following a mini-boom through late 2009 and early 2010. Canadian housing starts will decline by 8.2 per cent in 2011 compared to this year. Despite concerns about housing markets in North America, overall wood products production is expected to increase by 3.7 per cent in 2011.”

Industry revenues are increasing this year for the first time since 2004, and although costs are on the rise too, the wood products industry is expected to post a profit of $476 million in 2010.

Profits are expected to increase again in 2011, and continue to rise as the U.S. housing demand rallies. There are also promising signs on the employment front next year, as an additional 9,700 jobs are forecast to be created in 2011.

SOURCE: The Conference Board of Canada

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