‘Which Mills are Going to Survive?’: Canada’s Forestry Industry Scales Back Amid Soaring Costs

This is not the kind of cutting Canada’s forestry companies wanted to be doing.

Canfor Corp. announced last week that it will temporarily curtail operations at three sawmills due to current market conditions, following an announcement of further cuts by West Fraser Timber Co. Ltd. on Jan. 14.

The industry-wide move to scale back, is a logical move according to one analyst.

“With the economics not making sense – just because the log costs are so high and the lumber prices so low – the logical outworking of that is curtailment, or outright closures,” Kevin Mason, managing director at ERA Forest Products Research, told BNN Bloomberg in a phone interview.

“West Fraser has always been viewed as the – if not one of the – lowest-cost producers out there and yet, here they’re [reducing production hours]. Canfor’s taking an ounce curtailment and additional extended curtailments. We’re definitely seeing the fact that even traditionally low-cost-producers are realizing that the current situation is untenable and they’ve got to take production offline.”

Rival producer Interfor Corp. and Resolute Forest Products Inc. both scaled back production in the fall, also citing market conditions.

Lumber prices in North America have regained some ground, touching US$418 per 1,000 board feet as of 10:10 a.m. ET on Friday after briefly dipping below US$300 on Oct. 25. The swing was dramatic, with the commodity hitting a 2018 high of US$659 on May 14.

The wild swings, in combination with the devastation wreaked by the mountain pine beetle, slowing U.S. housing demand and high log costs have forced many of B.C.’s producers to do what they must to survive.

“It’s a bit of a battle,” Mason said. “Which mills are going to survive? And we know regions that there’s not enough fibre in particular regions and we know that mills are going to have to shut, but everyone’s going to do what they can to hold on as long as possible.”