a four-day workweek. The move, which was implemented at most of its 11 mills in the states of British Columbia and Alberta on Monday (4 April), were not a result of inadequate demand.
Just like most lumber producers across North America, Canfor Corp. is also facing major supply chain issues, as the firm reports that it is running out of room to store its output which is being ordered by customers at a startling rate. “We are experiencing extreme supply chain challenges,” Don Kayne, chief executive at Canfor, said in a press release on 31 March. “It has become imperative to reduce operating schedules to address our unsustainable inventory levels.”
Other lumber producers across the region are facing a similar conundrum, and have been forced to reduce operating hours at their mills, according to sources who do not wish to be identified. It is believed that the situation is a result of a shortage of rail cars in Western Canada, as Canadian National Railway Co. and Canadian Pacific Railway Ltd. struggle to keep up with the post-pandemic hike in demand for Canadian commodities. This has meant that inventory is being piling up in warehouses as producers wait for railways to clear their backlogs. The situation has had a significant impact on Canfor, which revealed that it had run out of space and has therefore decided to reduce its output by at least 100 million board feet at a time, despite the fact that lumber prices are sitting at a record-high.
The crisis in the industry highlights how supply chain issues continue to disrupt the economy, and contribute towards the expansion of the gap between supply and demand, thereby pushing inflation to its hottest in over three decades in Canada. This has been acknowledged by the Bank of Canada, which says a series of supply issues are mainly responsible for the extreme price pressure and has indicated plans to accelerate interest-rate increases to get the situation under control. “The invasion of Ukraine is adding to inflationary pressures around the world and in Canada,” central bank deputy governor Sharon Kozicki said in a speech on 25 March. “This is primarily because it has caused global prices for oil and other commodities to surge. The result is inflation in the near term that is expected to be higher than we projected in January.”
