OTTAWA — A bond ratings agency has cast doubt over the sustainability of the better-than-expected recovery in Canada’s forest products industry.
The Dominion Bond Rating Service said in a report that while forest products companies have performed above expectations recently, the uptick in price and demand for the products is likely temporary.
As a result, there is a higher chance that forest products companies could face negative rating actions in the coming months, it added.
DBRS said prices have soared as of late but all of that could change as prices begin to come off their recent high levels.
On the upside, it said the worst is over for forestry companies, which were perhaps the most battered industry during the 2008-2009 economic downturn.
But DBRS said the recent upswing is not sustainable at its current levels, with the U.S. economic recovery sputtering and home construction still stalled, demand in China softening, and more supply coming on stream.