Unprecedented transportation disruptions caused by floods in British Columbia have sent lumber prices soaring, boosting revenues for many North American producers but piling fresh pressure on sawmills in the province that are struggling to get their lumber to market.
Softwood lumber prices have doubled since mid-November after road and rail links across B.C., which accounts for 16% of North American supply, were washed out by record-breaking rainfall.
Even before the floods, a record price rally in 2021 boosted profits for many lumber producers, underpinning a strong year for mergers and acquisitions. And analysts expect more deals.
“We’re probably going to see an outsize number of M&A transactions next year,” said Dustin Jalbert, an economist for commodity price reporting agency Fastmarkets. “The industry is still very fractured and so from a consolidation standpoint there’s a lot of room to run.”
Jalbert said massive cash infusions enjoyed by companies in 2021 were helping fuel deals and the long-term trend of production moving outside of B.C., which used to be the epicentre of the North American industry.
The province faces a dwindling supply of trees for harvest after years of beetle infestations, wildfires and a recently-announced provincial government plan to reduce harvesting of old-growth trees. Analysts predict more sawmill closures in B.C. in coming years.
Lumber remains the most fragmented segment of all the forest products industries, with the top five companies controlling 32% of North America’s production capacity, according to TD Bank.
Last month, Vancouver-based Interfor Corp agreed to buy Quebec’s EACOM Timber Corp for C$490 million ($385.2 million).
“Both our strategy and ambitions are to continue with disciplined growth,” Mike Mackay, Interfor’s vice president of corporate strategy, told Reuters, adding the deal will help diversify its products and open up new markets.
North American forest product and paper industry has seen $10.2 billion worth of deals in 2021, the highest since 2018, according to Refinitiv data.
Lumber climbed above $1,100 per thousand board feet on Monday after hitting a record above $1,600 in May. But some smaller mills cannot capitalise on higher prices.
The latest price spike is only being enjoyed by companies able to ship their product to market, highlighting the divide between large diversified Canadian producers and those still focused entirely within B.C.
“The flooding situation has compounded an already serious logjam in logistics everywhere,” said Roger Keery, president of privately-owned Skeena Sawmills in Terrace, northwestern B.C., which halted operations for a week during the floods, and will shut down again for nearly a month over Christmas.
“We’re struggling with the question of whether we should run,” Keery said.
Skeena has been struggling for months with a trucker shortage and is facing congestion at the Port of Prince Rupert, Keery said.
West Fraser Timber Co and Canfor Corp also reduced production at some B.C. sawmills and pulp mills because of transportation disruptions.
Widespread sawmill closures in 2019 cut B.C.’s production capacity by 14% to around 12 billion board feet, and BMO Capital Markets analyst Mark Wilde estimates another 1 billion board feet will be shuttered in coming years.
A decades-long U.S.-Canadian softwood lumber dispute is also weighing on B.C. sawmills, after Washington doubled tariffs on Canadian imports last month. [
“If you’re a smaller producer and have your business only within Canada, you’re penalised,” said Harry Nelson, a forestry professor at the University of British Columbia. “(They’re) the real collateral damage.”
(Reporting by Nia Williams; Editing by Marguerita Choy)
Bank of Canada prepares for a long fight against inflation – The Globe and Mail
Canada is on the cusp of a series of rapid interest-rate hikes, with the central bank poised to start raising the cost of borrowing as early as next week, beginning a sustained push to bring high inflation back under control.
After nearly two years of extraordinarily low interest rates, the Bank of Canada has arrived at a pivot point. Consumer prices are rising at the fastest pace in three decades, straining the bank’s credibility as an inflation fighter. Meanwhile, there’s growing evidence that the economy is operating at or near full capacity and no longer needs emergency monetary-policy support.
The central bank’s governing council faces the biggest decision since Governor Tiff Macklem took charge in June, 2020: whether to pull the trigger next Wednesday and start the process of normalizing interest rates; or whether to hold off until March to provide additional stimulus through the Omicron wave of the pandemic.
The last time the central bank raised interest rates was in October, 2018. The coming rate-hike cycle, which will see the cost of borrowing rise steadily over the next two years, is needed to tamp down rising inflation expectations and to start building up an interest-rate buffer before the next downturn. But it will also test the strength of Canada’s economic recovery, as well as the vulnerability of heavily indebted households.
“Private-sector debt is something that the Bank of Canada has to keep an eye on, particularly because the rate hikes that we’ll do in the next two years could affect the rates that people pay in renewing mortgages in 2024 and 2025 that they may have taken out at very low interest rates,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in an interview.
“And while we’ve put households to a [stress] test to ensure that they will be able to pay those higher rates, it will still put a big squeeze on their spending power,” he said.
Bank of Canada officials said in December that they did not expect to raise the policy rate – which has been held at 0.25 per cent since early in the pandemic – until April at the earliest. Since then, however, they have received a string of data releases showing the strength of the labour-market recovery, a record jump in home prices and a sharp rise in expected inflation and wage growth.
A central-bank survey of businesses, released Monday, found that two-thirds of respondents expect inflation to remain above 3 per cent for the next two years – a potent signal for policy makers. Meanwhile, 80 per cent said they intend to raise wages faster next year compared with last year to attract scarce labour. On Wednesday, Statistics Canada reported that the consumer price index rose 4.8 per cent in December, the fastest annual pace of growth since 1991.
This data pushed a number of analysts to revise their interest-rate forecasts. Economists at Bank of Nova Scotia, National Bank and Laurentian Bank pencilled in a rate hike for Jan. 26. Other private-sector economists expect a March liftoff, although most say a rate hike next week is possible.
Market pricing for overnight index swaps suggests an 83-per-cent chance that the bank moves next week, according to Refinitiv data.
“The bank basically has a free option [to raise rates next week],” National Bank rates strategist Taylor Schleich said. “The economy is screaming that we need interest-rate normalization, and now the banks and the markets are kind of allowing them to do it. So you may as well take it.”
Mr. Macklem has not spoken publicly since mid-December. But he used his last speech to tee up a possible shift in January, noting that inflation was “well above our target, and we are not comfortable with where we are” – strong language for a central banker.
The bank’s latest projection shows the rate of inflation falling to close to 2 per cent by the end of 2022, and bank officials believe that many of the supply chain problems that have been pushing up consumer prices will normalize over the coming year.
At the same time, Mr. Macklem and his team expressed concern in December that higher wage growth and rising inflation expectations could feed into “second-round” price pressures and become baked into higher inflation.
The Bank of Canada is not alone in manoeuvring into place for rate hikes. After spending much of last year arguing that high inflation would be relatively short-lived, central bankers in many advanced economies changed their tune in the final months of 2021. The most significant turn came from the U.S. Federal Reserve, which is dealing with the highest inflation of any advanced economy and strong wage growth.
At its December meeting, the Federal Open Market Committee decided to accelerate the end of its massive asset purchase program. Minutes from the meeting released in early January showed Fed officials expected to raise rates “sooner or at a faster pace than participants had earlier anticipated,” setting up a possible March rate hike.
This change in the Fed’s narrative spurred a sharp repricing in global markets. Fixed-income securities sold off in expectation of rate hikes. Equity markets stumbled, with notable declines in growth stocks that greatly benefit from ultralow interest rates when calculating future cash flows.
“The BoC probably does not look to the Fed for validation and they make decisions based on their policy frameworks and analysis,” Jason Daw, Royal Bank of Canada’s head of North America Rates Strategy, said in an e-mail. “But one area that a hawkish Fed makes it slightly easier for the BoC to raise rates is less appreciation pressure on the Canadian dollar than otherwise.”
It’s taken a long time for the Bank of Canada to get to the point where rate hikes are a possibility. It began shrinking its government bond-buying program, known as quantitative easing, in the fall of 2020, and ended the program in October. It is now in what it calls the “reinvestment” phase, where it’s only buying government bonds to replace maturing assets it already owns.
The central bank’s next move depends largely on whether it wants to wait until after the current COVID-19 lockdowns in Ontario and Quebec are lifted, said Mr. Shenfeld of CIBC. He added that the trajectory of rate hikes over the next few years matters more than whether the bank starts hiking in January or March.
“The exact timing of these rate hikes is important to people doing high-frequency trading. But not of that much importance to where the economy ends up a year or two down the road, which is what the Bank of Canada is really targeting,” he said.
Derek Burleton deputy chief economist at Toronto-Dominion Bank, said he expects the bank to bring its policy rate back up to around 2 per cent over the coming years, although policy makers could move haltingly.
“There may be a bit of probing, they may have to hike a few times, see how it plays out on the economy,” Mr. Burleton said.
“I think one of the questions, and this is more directed at central-bank tightening globally, is whether we go through periods of financial-market turbulence, and that could be a factor that could delay a steady tightening.”
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Evive Nutrition recalling smoothie product because of cyanide poisoning risk – CP24 Toronto's Breaking News
OTTAWA — Evive Nutrition Inc. is recalling its Immunity Super Functional Smoothie because it contains raw elderberries that may cause cyanide poisoning.
The Canadian Food Inspection Agency says the recall of the product sold online was triggered by consumer complaints, noting there have been reported illnesses associated with the product.
The agency says raw elderberries naturally contain cyanogenic glycosdies, which can release cyanide after being eaten.
It says that while the body can process small amounts of cyanide, larger amounts can result in poisoning and could lead to death.
Symptoms of cyanide poisoning include weakness and confusion, anxiety, restlessness, headache, nausea, difficulty breathing and shortness of breath, loss of consciousness, seizures and cardiac arrest.
The agency says it is conducting a food safety investigation that may lead to the recall of other products.
This report by The Canadian Press was first published Jan. 22, 2022.
COVID-19 antiviral treatment arrives in Nova Scotia – CBC.ca
Nova Scotia says 900 treatment packages of the COVID-19 antiviral drug have landed in the province, but plans for prescribing Paxlovid are still being finalized.
The Health and Wellness Department said it is working to make the supply available “as soon as possible,” and details about the distribution of Pfizer’s Paxlovid are still being worked out with stakeholders including Nova Scotia Health.
Earlier this week, Health Canada approved the oral antiviral treatment designed to help the body fight off the virus, reduce symptoms from an infection and shorten the period of illness.
Dr. Lisa Barrett, who treats COVID-19 patients and will prescribe the therapeutic once it starts rolling out, said a plan for distribution could take another few weeks.
But she said the first 900 treatment packages will help 900 people. The drug is taken twice a day for five days.
It will be made available to the most vulnerable, including those who are not fully vaccinated for one reason or another and people over the age of 50 who have a risk factor such as being a transplant or cancer patient.
“We’re hoping that it’s going to make a difference for the most vulnerable people,” said Barrett in an interview on Thursday.
“This is for people at the highest risk of disease and we don’t want them to have to shield anymore at home.”
Barrett noted the medication is designed to reduce hospitalization and death. The hope is that it will help alleviate pressures on the health-care system, she said.
Recognizing the limitations
She also said the fact that the drug is only trickling into the province at this point does not concern her because it was studied on unvaccinated people who were at high risk with the Delta variant.
“It’s not clear yet if there is as much of a benefit to preventing hospitalization and death in people who are partly vaccinated, but not fully, against Omicron,” said Barrett.
“I want people to be aware we’re not completely devastated that we don’t have hundreds of thousands of doses of this because we think it’s helpful but not for the whole population.
“It’s good to recognize the limitations of the data and where we sit right now.”
Barrett said those in the vulnerable population group should be tested as soon as possible if they have symptoms and report any positive results to Public Health and their doctor.
Doctors will be able to refer their patients to receive the drug. Those referrals will be reviewed and the patient will be contacted about how to receive the treatment.
She said outbreaks in hospitals and long-term care homes will also be monitored as a way of identifying people at risk who may need the treatment.
Recent approval of drug ‘great news’
On Monday, Canada’s Chief Public Health Officer Dr. Theresa Tam said Health Canada’s approval was “great news” because Paxlovid could drive down severe outcomes in the current wave and beyond.
Paxlovid combines a new drug developed by Pfizer called nirmatrelvir with an existing antiretroviral drug named ritonavir, a low-dose HIV drug that helps nirmatrelvir remain active in the body longer.
After months of clinical trials, Pfizer reported in November that Paxlovid reduced the risk of hospitalization or death by 89 per cent compared to a placebo in non-hospitalized high-risk adults with COVID-19.
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