New York, NY (PRWEB) June 30, 2014
The Sawmills and Wood Production industry in Canada has experienced challenging demand conditions over the past five years due to a cooling Canadian housing market and slowly recovering US housing market. In addition, the mountain pine beetle infestation in British Columbia, which is home to a third of industry establishments, is damaging a significant share of the province's timber. Despite ongoing obstacles, industry revenue has improved as a result of record-high demand for lumber in China over the period, and the resurgence of the US single-family homebuilding market in 2012. For these reasons, industry revenue is forecast to grow at an annualized rate of 5.4% over the five years to 2014. Following a decline in revenue in 2011, brought on by an anaemic US construction sector, strong growth is projected to continue into 2014. Therefore, industry revenue is anticipated to rise 10.0% to $12.1 billion over the year due to a more robust US housing market, and increased expenditure on nonresidential construction and residential renovation projects in Canada.
Suboptimal production volumes hurt industry profitability in the early part of the period. In response to shrinking profit margins, many companies exited the industry or consolidated operations by closing facilities and reducing staff. Moreover, larger operators acquired smaller players to bolster their customer base and benefit from economies of scale. Consequently, the number of companies operating in the industry is projected to fall at an average annual rate of 3.4% to 1,388 operators over the five years to 2014. As companies cut costs and unprofitable participants exited the industry, the average industry profit margin, measured as earnings before interest and taxes, recovered from an operating loss over the five years to 2014.
Over the next five years, the Sawmills and Wood Production industry will benefit from strengthening demand for lumber, both domestically and internationally. The US housing market, which accounts for 62.1% of industry exports, is projected to grow rapidly over the period. In addition, increasing construction activity in emerging markets, particularly in Asia, will further contribute to export revenue. Moreover, rising construction and renovation expenditure in Canada will bolster domestic demand for lumber. Therefore, industry revenue is forecast to grow over the five years to 2019.
The Sawmills and Wood Production industry has a relatively low level of concentration. The four largest companies in the industry are Canfor, West Fraser, Western Forest Products, and Resolute Forest Products. Industry concentration has risen substantially over the past five years, as smaller operators exited the industry or were acquired by other players. As housing demand in the United States began to improve markedly in 2012, concentration rose rapidly as the industry's larger companies were better able to increase output to match demand. Market share concentration will increase over the next five years as the industry continues to consolidate.
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IBISWorld industry Report Key Topics:
The Sawmills and Wood Production 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 that 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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