Canfor expects North American lumber demand and prices to soften later in Q3

Lumber operations return to profit

Canfor Corporation expects North American lumber demand and pricing to moderate later in the third quarter of 2026, after tighter supply, seasonal demand and transportation constraints lifted benchmark prices during the second quarter. According to Lesprom, markets are expected to remain firm early in the quarter because field inventories are lean and transport capacity remains constrained. Later in the period, housing affordability problems and wider economic uncertainty are likely to weigh on demand.

North American lumber markets strengthened through most of the second quarter despite elevated mortgage rates, geopolitical uncertainty and pressure on housing affordability. Lean inventories, transport limitations and greater substitution between lumber species supported benchmark prices, with Southern Yellow Pine products receiving the largest benefit.

The average Western Spruce-Pine-Fir 2x4 benchmark increased 5% from the first quarter to $488 per thousand board feet. The Southern Yellow Pine 2x4 benchmark gained 4% to $517, while the 2x6 benchmark rose 8% to $457.

Sales, shipments and production increase

Higher prices, greater production and lower unit manufacturing and product costs lifted Canfor’s lumber operating income to C$41 million, compared with a C$44 million loss in the previous quarter. Adjusted lumber operating income reached C$57 million after an adjusted loss of C$64 million.

Lumber sales rose 16% quarter on quarter to C$1.38 billion. Shipments increased 8% to 1.35 billion board feet, supported by higher volumes from Western Canada and Europe. Southern Yellow Pine shipments were broadly unchanged because trucking constraints limited deliveries. Production advanced 6% to 1.29 billion board feet as European mills operated for more hours following winter weather disruptions and North American planer productivity improved.

Conditions outside North America were mixed. Weak housing starts, lower import volumes and increased use of domestic fibre continued to reduce Japanese demand. Subdued construction activity also limited demand in China. European markets improved from the first quarter as lean inventories supported modest price gains, although underlying demand remained muted.

Swedish sawmills close as fibre supply tightens

Canfor permanently closed its Urshult and Orrefors sawmills in Sweden because production capacity exceeded the available fibre supply in southern Sweden. The company recorded C$14 million in asset write-downs and C$9 million in restructuring costs related to the closures.

Canfor expects European lumber markets to remain relatively balanced in the third quarter. Steady demand, constrained supply and exports are projected to support prices. Asian demand is forecast to remain weak, with domestic species continuing to pressure Japanese imports and limited construction keeping Chinese consumption subdued.

Pulp weakness drives further capacity cuts

Global softwood pulp markets weakened further in the second quarter as subdued demand and elevated producer inventories pressured prices. The Northern Bleached Softwood Kraft pulp list price delivered to China averaged $658 per tonne, down 4% from the first quarter and 10% from the second quarter of 2025. Producer inventories ended May at 47 days of supply, one day above March and at the upper end of the balanced range.

Canfor’s pulp and paper segment posted a C$23 million operating loss, widening from C$16 million in the first quarter. Pulp shipments declined 18% to 96 thousand tonnes and production fell 17% to 85 thousand tonnes, mainly because of scheduled maintenance at the Intercontinental mill. Segment sales decreased to C$144 million from C$166 million.

The company plans to close its Northwood Northern Bleached Softwood Kraft pulp mill in Prince George, British Columbia, by the end of 2026. The closure will remove about 300 thousand tonnes of annual capacity. Canfor expects additional global capacity, subdued demand and high inventories to keep softwood kraft pulp prices under pressure during the third quarter.