Sawmills in Quebec have not turned a profit for more than a year due to the drop in demand for lumber, according to industry experts.
After hitting record pieces during the pandemic of $1,500 US per thousand board feet in 2021, the price of lumber plunged in 2022 and now hovers around $575 for the same amount.
The situation pushed some sawmills in the province to temporarily slow down production in 2023 to limit deficits.
One sawmill in the Quebec region of Lanaudière, the Scierie Saint-Michel, is back to operating at full capacity — but at a loss, said CEO Jean-François Champoux.
"The entire forestry industry has been operating at a loss since the beginning of 2023," Champoux said.
The profitability of sawmills is tied to housing starts, which themselves are influenced by interest rates.
Those rates have tripled in the last two years, according to Francis Cortellino, economist for the Canada Mortgage and Housing Corporation.
Housing starts in Quebec fell by 32 per cent in 2023, he added.
Jean-François Champoux, CEO of a sawmill in the Lanaudière region of Quebec, says his sawmill is losing money despite operating at full capacity. (Radio-Canada)
"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.
However, there is also optimism for 2024.
Jean-François Samray, the director of the Quebec Forest Industry Council, said he expects interest rates to drop, which should mean more housing starts on the horizon.
"[It] looks set to be a good year in terms of market recovery. The American Federal Reserve has already indicated that March should be the month when rate cuts will occur," said Samray.
On Wednesday, the Bank of Canada announced it was keeping its key overnight interest rate at five per cent.