Atlantic Forestry July 2024

Building confidence

An upbeat vibe prevailed at the 85th AGM of the Maritime Lumber Bureau (MLB), but not because sawmillers are making money hand over fist. FranНois Robichaud, with Forest Economic Advisors (FEA), was the lead speaker at the June 4-6 event in Charlottetown, P.E.I.,

providing a market report that made it clear the pandemic bonanza is long gone. “Lumber prices are at rock bottom,” he said. “We see growth, but very slowly. I’m sorry for not being the messenger of any better news, for now.”

So why the buoyant mood? Apart from the camaraderie that arises at any forestry gathering, there was a sense, among MLB delegates, that this region’s lumber sector is on solid ground – with good prospects for stability, if not champagne-popping levels of profitability. The industry is not on the defensive, and it may even be on the right side of history.

Robichaud, for his part, offered what he called a “glass half full” forecast. Despite high interest rates, economic fundamentals look strong in the U.S. – so there is no recession on the horizon, and the construction sector is expected to keep chugging along. “There are not many homes on the market. The inventories right now in the U.S. are at historical lows,” he said, adding that FEA believes there is currently a deficit of about five million housing units, though some analysts say the shortfall is as high as eight or nine million. Furthermore, existing housing stock is old, with a median age of 42 years – and that number is increasing, driving both rebuilds and renovations.

One factor helping to boost demand is demographics, with a large population cohort between 30 and 35 years old, when home ownership becomes a priority. “The U.S. housing market this year is turning much more toward single-family units,” Robichaud said. “When you build a home, it consumes about three times as much lumber as when you build an apartment – or 2.5, depending on where you are – so this is why we see a slight uptick in lumber demand in 2024.”

In Canada, affordability is a big problem. “It’s very expensive to buy a home, unless you can afford to get rid of a kidney or a liver. It’s pretty complicated for young people right now,” Robichaud said. He noted that high housing prices reflect insufficient supply, and this is partly a function of rapid population growth in Canada – largely through immigration, which tends to drive demand for multi-family units.

FEA is currently predicting that North American lumber consumption will increase modestly in 2024, reaching 60 billion board feet in 2025. European imports will continue to grab a share of that market. “We don’t see much of them in Canada, but we see a lot in the U.S. – clear wood, no wane, no knots…. It’s about 10 percent of their market in volume, and 20 percent in value – so Europeans do ship very high-grade lumber,” Robichaud said. He pointed out that even when transportation costs are factored in, Germany and southern Sweden are lower-cost lumber producers than Canada. “Europe is certainly stiff competition to our sawmillers.”

Robichaud said there are opportunities to increase our domestic lumber market by advocating the use of light frame construction for multi-family and non-residential buildings. “No reason why you shouldn’t build a Tim Hortons in light frame. There are thousands of these buildings that we can convert to light frame,” he said.

But the more exciting trend is mass timber, which he compared to the craft beer movement – starting out as a very small niche, but expanding rapidly. “If you look at CLT (cross-laminated timber), it was 19 million board feet in 2022. We’re probably, in 2024, twice as much as that. It’s 83 percent growth in just two years. The mass timber market looks insignificant in terms of volumes of lumber right now, but in terms of growth, it’s going fast … and if we extend that forecast to 2035, we’re much more enthusiastic.”

Robichaud advised getting behind this movement. “People who are able to process mass timber products – glulam blanks, CLT blanks – that value-added type of industry still does not exist very much in North America, so I think that, collectively, if we want to support the industry, we also need to invest in reprocessing capacity. This is something that I think proposes a very good economic development path for the Atlantic,” he said. “There is a bit of ‘build it, and they will come,’ in terms of market development for mass timber. If we improve the capacity and the promise to deliver, architects are ready to work with us.”

BIOPHILIA

Wisely, the MLB had also booked an architect to speak. Craig Applegath, with Dialog Design, talked a bit about the concept of “biophilia” – the innate human desire to connect with nature – and how mass timber buildings provide that sense of well-being, or even reverence. “You can smell it,” he said. “One of the things that I was most amazed at when I started to build with mass timber 10 years ago was that all of the trades are much more respectful of the process. There was no garbage lying around…. It was clean. It was like they were walking into a church. They really cared about it. It was beautiful. That’s the biophilia – it gets into our brains, like walking in a forest.”

The concept is catching on in a big way. “The lower carbon footprint, … and its beauty, make mass timber very attractive to institutional clients. Universities, colleges, insurance bodies – hospitals are a little tricky because there are infection issues, but there are ways of working around that – they’re all very interested in mass timber because it locks up carbon, it’s biophilic, and it’s considered to be very responsible,” Applegath said. “Mass timber construction is growing exponentially…. As these projects get out there and people see them, there’s increased demand.”

He noted, however, that this surge of interest has had an unintended consequence. “There’s this thing about mass timber being pure mass timber. It’s almost become like a culty religion, where it’s as pure as possible…. There’s now a competition among architects around the world of who can do the tallest mass timber tower – all mass timber.”

According to Applegath, it would be more practical to advance hybrid construction, with mass timber replacing some of the steel and concrete components. This pragmatic approach could result in more projects getting built, and more wood being used overall, with the attendant benefits for our environment and for the forest industry. “In a tall building, 60-75 percent of all the building materials are in the floor system,” he said. “So you can have steel on the outside, and you can have the concrete core, but you might make the floor system CLT.”

He also talked about addressing the shortage of medium-density housing. “There’s what’s called ‘the missing middle,’ which is the scale of four stories to 10 stories. That’s a perfect scale for housing people – imagine cities in Europe. That’s a perfect scale for mass timber, and one of the ways for doing that is through modularization.”

Peter Moonen, national sustainability manager with the Canadian Wood Council, delved further into the ways procurement has changed in recent years. “There is an emphasis on ‘What does the building do to us? Is it healthy or is it harmful?’ Buildings are not neutral; they’re either advantageous for our health, or disadvantageous,” he said. “That is now becoming apparent, and designers are now considering that.”

Wood construction has much to offer, not only in terms of our well-being, but also to achieve urban densification, while minimizing environmental impacts. One of the challenges, Moonen said, is labour. Light frame construction technology has not changed much in the past century. With virtually no gains in productivity, growth depends upon a larger workforce – but construction workers are currently retiring faster than they are being replaced. Off-site construction is part of the solution, he said, but it still hinges on attracting workers. For this to happen, the sector needs to be seen as sophisticated and progressive.

Increasingly, the environmental credentials of various building materials will need to be verified and documented, Moonen said. This will involve calculations of “embodied carbon” – which includes emissions from extraction, transportation, manufacturing, use, demolition, and recycling. It will vary by region, based on factors such as renewables on the electrical grid, and the use of biomass to meet energy needs at mills. Procurement systems and building codes will eventually require “environmental product declarations” (EPDs) for all materials. “It’s like a nutritional label that you find on a box of cereal or a can of soup, but it’s basically saying, ‘This is the impact of this product.’ It’s not designed to be a competitive tool, but it inevitably does get used as a competitive tool. We have a very good story to tell.”

The Canadian Wood Council will continue surveying sawmills to collect data, including on lumber shipping, because this will be important for maintaining access to the U.S. market. “Overall, this is good for wood,” Moonen said. “You don’t have to like gathering all this information – I know it’s a pain … but it’s important for us because it demonstrates that Canadian lumber has really superlative qualities.” DL