Domestic demand will remain low as the Canadian dollar continues to appreciate
Los Angeles, CA (PRWEB) August 31, 2013
The Sawmills and Wood Production industry has experienced rotten conditions during the past decade due to falling prices, a cooling Canadian housing market and, from 2006 to 2011, the US housing market's collapse and slow recovery. The past five years have included severe drops in revenue and welcome rebounds, particularly thanks to record-high demand for lumber from China and the US single-family homebuilding market's resurgence in 2012 and 2013. Industry revenue is expected to have fallen at an annualized rate of 0.7% during the past five years, but this rate obscures the period's volatility: revenue fell 21.5% in 2009, but bounced back 14.3% in 2012. In 2013, industry revenue is expected to fall 2.0% to total $11.2 billion in response to rapid production from the previous year and anemic growth in Canadian housing markets.
“Suboptimal production volumes have lowered profit margins for the average industry company,” says IBISWorld industry analyst Matthew MacFarland. “Profit margins, measured by earnings before interest and taxes, have declined from 4.3% of revenue in 2008 to 2.4% in 2013.” As a result of shrinking margins, many companies have exited the industry, consolidated operations or reduced employment. Consequently, the number of companies operating in the industry is estimated to have decreased at an annualized rate of 5.6% to 1,154 over the five years to 2013.
The Sawmills and Wood Production industry has a relatively low level of concentration. The three largest companies in the industry are Canfor, West Fraser and Resolute Timber Products. Industry concentration has risen substantially during the past five years. As housing demand in the United States and Canada began to improve markedly in 2012, concentration rose rapidly as the industry's larger companies were better able to increase output to match demand.
“Demand for the industry's lumber is projected to remain relatively low during the next five years,” says MacFarland. “While the US housing market is projected to grow rapidly during the next five years, Canadian lumber will find difficulty capitalizing on the market as the Canadian dollar continues to appreciate.” Export markets in China will prove more lucrative, particularly because operators will need to find buyers for lumber affected by the ongoing pine beetle infestation in British Columbia. For more information, visit IBISWorld’s Sawmills & Wood Production in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures boards, dimension lumber, beams, poles, ties, siding and wood chips from logs or bolts. The industry also produces pilings and posts treated with preservatives. Industry wood products may be rough, or dressed by a planing machine to create uniform sizes, but no further shaping takes place. The industry also includes companies apply preservatives to wood from other establishments. The industry excludes veneer or engineered lumber (e.g. plywood) manufacturing.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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