Weakness in the lumber market has led Canfor Corp (TSX: CFP) to cut back on planned investment in the industry, while also closing certain BC-based operations.
The company has made the decision to permanently close the Polar sawmill in Bear Lake, BC. The facility, capable of producing 300 million board feet annually, has seen production curtailed since January 2024, following a shortage of economically available fibre in the region.
“The ability to reliably access enough economic timber to run our manufacturing facilities is critical for our business. Unfortunately, while our province has a sufficient supply of timber available for harvest as confirmed by the Allowable Annual Cut set by BC’s Chief Forester, the actual harvest level has declined dramatically in recent years. In 2023 the actual harvest was 42 percent lower than the allowable cut, a level not seen since the 1960s,” commented CEO Don Kayne.
The closure is expected to impact 180 employees. The company says it will work with the union in coming weeks to develop a transition plan, including severance, for impacted employees.
Concurrently, Canfor has also indicated that it will suspend a planned expansion at its operation in Houston, BC. Announced last September, Canfor had planned on spending $200 million to build a new state of the art manufacturing facility in the region, capable of producing 350 million board feet annually. Demolition and site preparation was set to begin this spring, with the planning, construction, and commissioning of the new facility expected to take up to 32 months.
“With the policy and regulatory landscape in BC continuing to shift, it’s difficult to predict the operating conditions that we will face going forward. As such, we have made the difficult decision to suspend our plan to build a new state-of-the-art sawmill in Houston, as we are not confident that an investment of this magnitude can be successful at this time,” continued Kayne.
At the same time, Canfor’s subsidiary company, Canfor Pulp Products (TSX: CFX) this morning indicated that it will be indefinitely be curtailing one production line at its Northwood facility in Prince George, BC. The company again cited the lack of available economic fibre in making the decision.
“While the region has a substantive supply of sustainably grown timber, harvest levels are well below the Allowable Annual Cut partly due to natural disturbances, but increasingly because of the impact of a range of policy choices and regulatory complexity,” commented Canfor Pulp CEO Kevin Edgson.
That closure is expected to remove 300,000 tonnes of market kraft pulp from the market annually, while impacting 220 employees. The subsidiary as a whole is expected to now have total annual capacity of 480,000 tonnes of market pulp.
Lumber futures are currently sitting at $494.50 under the May contract, compared to highs of as much as $1,686 during the pandemic.
Canfor Pulp last traded at $15.41 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
