Timber Shortage and US Tariffs Push Canfor to Shut Down Vital BC Mills
Canfor Corporation (TSX: CFP) announced the permanent closure of its Plateau and Fort St. John operations, leading to the loss of 500 jobs and will remove 670 million board feet of annual production capacity from its operations in the province. For many, it marks the latest sign of a deepening crisis within BC’s forest industry—a sector that has long been central to the region’s economy.
Don Kayne, Canfor’s President and CEO, expressed the gravity of the decision, explaining that the company, which has operated in BC for over 85 years, is facing unprecedented challenges.
“We are devastated by the decline in our province’s foundational forest industry,” Kayne stated, acknowledging the significant impact these closures will have on employees, First Nations partners, contractors, and local communities.
The closures come after years of mounting financial losses and operational difficulties. The company cited “high operating costs, increasing regulatory complexity, and the inability to reliably access economically viable timber” as reasons for the shutdown.
The recent decision was compounded by a sharp increase in punitive tariffs imposed by the United States on Canadian lumber, which were introduced in August and are expected to double again next year.
The tariff increases, coupled with what Kayne called “punishing anti-dumping duties,” created an unsustainable business environment for Canfor’s northern operations. The company emphasized that continuing to operate under these conditions would not only result in further financial losses but also threaten the viability of other facilities.
Canfor’s move to divest some of its northern BC timber tenure is aimed at alleviating the challenges facing other forest companies in the region.
Decline of the timber supply
The immediate cause of Canfor’s struggles is a dramatic reduction in the available timber supply, a problem exacerbated by several converging factors. One of the main drivers is the mountain pine beetle infestation that ravaged millions of hectares of BC’s forests over the last two decades. The beetle epidemic has severely depleted the supply of economically viable timber, leaving many mills unable to operate at full capacity.
Adding to the problem are strict provincial regulations aimed at conserving BC’s remaining old-growth forests, which further restrict the amount of timber available for commercial logging. While these policies are crucial for preserving BC’s ecosystems, they have placed additional pressures on an industry already struggling to maintain profitability.
Climate change has also played a critical role in reducing timber supplies. Increasingly frequent wildfires, droughts, and other extreme weather events have made it more difficult to predict and plan long-term timber harvests. These factors have pushed many forest companies into financial peril, as the cost of extracting what remains of the timber supply has skyrocketed.
Fort St. John Mayor Lilia Hansen responded to the news with dismay, pointing to the ripple effect the closures will have on the local economy.
“We have always relied on forestry as a pillar of our community’s economic stability. These closures will leave a massive void—not just in employment, but in the vitality of our town,” she said in a press statement.
US Tariffs
The US tariffs on Canadian softwood lumber have long been a contentious issue, but the recent hikes have proven especially punitive for companies like Canfor. The United States has accused Canada of unfairly subsidizing its lumber industry, leading to a protracted trade dispute that has spanned decades.
In response, the US imposed anti-dumping and countervailing duties on Canadian lumber imports, adding significant costs to Canadian producers.
On August 13, 2024, the US Department of Commerce announced a sharp increase in these tariffs, nearly doubling them from previous levels. For Canfor, this meant an already tough operating environment became untenable.
“The operating challenges we face have been further exacerbated by increases in the punitive US tariffs announced on August 13th – tariffs that are expected to more than double again next year,” Kayne lamented. “Continuing to operate under these conditions would prolong the punishing anti-dumping duties and put additional operations at risk.”
The effects of the tariffs are not limited to Canfor; they are affecting the entire Canadian softwood lumber industry. Experts predict that if the duties continue to rise, more mill closures could follow across BC and other provinces. The Forest Products Association of Canada has urged both the Canadian and US governments to find a resolution to the ongoing trade dispute, calling the tariffs “an existential threat” to the Canadian lumber sector.
Despite the bleak outlook, Canfor has committed to supporting its displaced workers. “We are committed to supporting our employees and will work with our union partners on an employee transition plan, including severance,” Kayne stated.
The company has also hinted at divesting some of its northern BC timber tenure, which could provide other forest companies with an opportunity to access the limited timber supply that remains.
Canfor last traded at $14.76 on the TSX.
Information for this briefing was found via Sedar and the companies 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.
