The poor beleaguered forestry sector – can it ever catch a break? After gaining some traction in 2010, Alberta forestry shipments have lost momentum, and as of Q2 this year posted their third straight quarterly drop.

Forest product producers sold a total of $550 million worth of wood products in Q2 2011, down from $576 million in Q1 and $594 million one year ago. Of the $550 million sold, $314 million was pulp and paper, $169 million was lumber and $69 million was panel board. Pulp and paper is the largest revenue generator in the sector, but it has been lower prices for lumber and panel board that have weighed on Alberta’s forestry shipments recently.

The Canadian forestry sector has come under hard times, but the situation has been better in Alberta. In fact, during the recession no sawmills closed in Alberta (in contrast to B.C.) and the province overtook Ontario for the number three spot in lumber shipments. Among the reasons are that sawmills here tend to be newer (i.e. more efficient) and Alberta plants are used to having to compete against the energy sector for labour and capital, which has forced plants here to be productive.

Even though Alberta’s forestry sector pales in size compared to the energy sector, it is still one of the fundamental industries in the province (like energy, agriculture and tourism) that drives economic activity.

As long as the U.S. housing market continues to struggle and the loonie is sky-high, forestry producers will have their work cut out for them. However, considering the U.S. housing market has got to pick up eventually, there is some light at the end of the tunnel.

Dan Sumner

ATB Financial