Canadian Occupational Projection System (COPS)

NAICS 3211; 3212; 3219

This industry comprises establishments primarily engaged in manufacturing products from wood. It is composed of three different segments: sawmills and wood preservation (33% of total production in 2021); veneer, plywood and engineered wood products (33%); and other wood products such as doors, windows and frames (38%). Overall, about 50% of the industry’s production is shipped abroad, mostly to the United States which accounts for 88% of exports. In recent years, Japan has displaced China as the second largest export market, accounting for 5% of total exports in 2021. The three segments of the industry do not face the same degree of exposure to domestic and foreign economic conditions. Sawmills and wood preservation along with veneer, plywood and engineered wood products are highly dependant on foreign demand, with exports accounting for 55% of production. In contrast, other wood products are more sensitive to domestic demand with about three-quarters of production sold within the country. The industry employed 109,000 workers in 2021 (6.3% of total manufacturing employment), with 37% in sawmills and wood preservation, 15% in veneer, plywood and engineered wood products, and 49% in other wood products. Employment is mostly concentrated in Quebec (36%), British Columbia (22%) and Ontario (21%), and the workforce is primarily composed of men (83%). Key occupations (4-digit NOC) include:^[1]

• Labourers in wood, pulp and paper processing (9614)
• Other wood products assemblers and inspectors (9533)
• Supervisors, forest products processing (9215)
• Sawmill machine operators (9431)
• Woodworking machine operators (9437)
• Other wood processing machine operators (9434)
• Lumber graders and other wood processing inspectors and graders (9436)

Wood product manufacturing in Canada experienced positive output growth over the period 2012-2021, although this growth was not consistent throughout the decade. After being severely affected by the recession of 2008-2009, the output gradually recovered from 2010 to 2016, supported by the recovery of the U.S. housing market, solid growth in residential investment in Canada (stimulated by low mortgage rates) and the need to process timber killed by the mountain pine beetle in British Columbia. Production fell back from 2017 to 2020, as the industry faced numerous challenges in the past several years, including the worst-ever fire seasons of 2017 and 2018 in British Columbia; the return of U.S. tariffs on Canadian exports of softwood lumber in 2019; and the significant decline in Canada’s housing starts in 2018 and 2019. Unsurprisingly, the COVID-19 pandemic resulted in another negative year in 2020 before production straightened in 2021 in response to strong housing demand and renovation spending, which sent lumber prices skyrocketing. Indeed, with the increase in disposable income (arising from government support programs and a large accumulation of savings) and the continuation of home confinement and telework policies, many households searched for a bigger house or a new house away from urban areas or turned to home improvements. The resulting pace of growth in the industry’s real GDP averaged 1.9% annually for the entire period 2012-2021. Despite positive growth in output, employment fell at an annual average rate of 1.9% during the same period, with most of the decline occurring from 2016 to 2020. This means that productivity growth was the sole contributor to output growth, averaging a strong 3.8% annually over the last decade. In the past several years, a large number of operations were consolidated, leading to substantial gains in productivity as a result of a significant pick-up in investment in machinery and equipment, technological innovations in sawmills, increasing concentration of businesses, larger economies of scales, and higher value added through product development, particularly for wood fibre.

Over the period 2022-2031, output growth in the wood products industry is projected to weaken significantly relative to the previous ten years, while employment is expected to keep declining, albeit at a much slower pace. Production should continue to increase in 2022, but the surge in housing prices and higher mortgage rates are expected to reduce new home construction and resale activity in 2023-2024, restraining growth in renovation spending on both sides of the frontier. A bit of cyclical recovery in demand for housing is projected in Canada over the longer term in response to higher immigration and stronger pressures on housing supply, but housing starts are expected to stagnate in the United States (where builders currently have a huge backlog of unsold homes). Population aging and the resulting shift in the composition of housing starts from single-unit homes toward multiple-dwellings (duplexes, apartments and condominiums), which require less wood by unit of output, will also temper demand for wood products. The imposition of U.S. tariffs on Canadian softwood lumber will continue to represent an obstacle for the industry, although the reduction of the tariff announced in the summer of 2022 (from 18% to 12%) will bring some relief to U.S. homebuilders and Canadian producers. Such developments mean that future growth in the industry relies on the ability to diversify its export base. While British Columbia has been successful in targeting the Chinese and Japanese markets over the past decade, other provinces have shown little success in targeting markets outside of North America and Canadian exports of wood products to China have dropped significantly in recent years. The industry is also expected to face challenges from timber supply constraints, especially in British Columbia where annual allowable cuts have been reduced as the province works to restore the stocks of commercial timber that were destroyed by the pine beetle, limiting the ability to process lumber.

On a positive note, the increasing use of wood as a “greener” alternative in building construction is expected to support demand for wood products over the long-term horizon. Indeed, mass timber construction represents an important opportunity for the industry, particularly when considering the underwhelming prospects for North American single-family home construction. Several factors are supporting the growing use of wood in mid- and high-rise buildings, including advances in wood product technology, environmental concerns and changing building codes. Under this perspective, the industry could benefit from the acceleration anticipated in non-residential building investment over the projection period, alleviating some of the weakness anticipated in residential investment. On average, the industry’s real GDP is projected to grow by 1.2% annually from 2022 to 2031, while employment is projected to keep declining, albeit at a much slower pace of 0.2% annually as the consolidation and transformation of operations that boosted productivity in the past ten years are largely completed (productivity is expected to increase at a more moderate pace of 1.4% annually). Nevertheless, advancements in harvesting technologies, transport management and data analytics will lead to additional gains in productivity (and further declines in employment), maintaining a competitive advantage on domestic and foreign markets.

Real GDP and Employment Growth Rates in Wood Product Manufacturing

Sources: Statistics Canada (historical) and ESDC 2022 COPS industrial projections.

Sources: Statistics Canada (historical) and ESDC 2022 COPS industrial projections.

^[1]Key occupations for manufacturing industries in general also include: Manufacturing managers (0911); Construction millwrights and industrial mechanics (7311); Material handlers (7452); Shippers and receivers (1521); Transport truck drivers (7511); Industrial engineering and manufacturing technologists and technicians (2233); Industrial electricians (7242); and Industrial and manufacturing engineers (2141).Back to text.