Quebec sawmills face financial losses amid declining demand for lumber.

Sawmills across Quebec have been operating at a loss for over a year due to the decline in demand for lumber, as per industry experts.

Following a peak price of $1,500 US per thousand board feet in 2021 amid the pandemic, lumber prices plummeted in 2022 to approximately $575 for the same volume.

This situation prompted several sawmills in the province to temporarily scale back production in 2023 to mitigate losses.

One such example is Scierie Saint-Michel in Quebec’s Lanaudière region, where CEO Jean-François Champoux reported operating at full capacity but incurring losses.

“The entire forestry industry has been operating at a loss since the beginning of 2023,” Champoux said.

The financial success of sawmills is closely linked to the initiation of housing projects, which, in turn, are affected by interest rates.

Francis Cortellino, an economist at the Canada Mortgage and Housing Corporation, noted that these rates have tripled over the past two years.

Additionally, housing starts in Quebec experienced a significant decline of 32 percent in 2023.

“When interest rates are high, financing conditions are difficult and projects that were previously profitable are no longer profitable,” Cortellino said.

“So projects are delayed. Projects are cancelled.”

“During the pandemic, we had a lot of purchases and renovations [but now] we have a more restricted market, because interest rates completely cancel out the construction market,” he said.

The Bank of Canada announced on Wednesday that it would maintain its key overnight interest rate at five percent.