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| Canfor closing three sawmills for two weeks |
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2006/6/28
by GORDON HOEKSTRA Citizen staff Canfor Corp. announced Thursday it is temporarily shutting down three of its sawmills in B.C. in order to cut costs in the face of sliding lumber prices and the increasing value of the Canadian dollar.
The company said the closures will last two weeks at each mill.
Two of the sawmills are in northern B.C. -- in Mackenzie and Fort St. John -- but Prince George mills were spared.
The other sawmill is Radium in the southern Interior. In addition, Canfor's Houston sawmill is dropping to two shifts from three.
"The announcement today is in response to some pretty unique market conditions we haven't seen in quite some time -- the combination of the dollar and lumber prices together," said Canfor spokesman Lee Coonfer. "It's strictly a matter of not incurring any unnecessary costs, or operating at a time when our margins will be severely eroded," said Coonfer. "This is just prudent management."
The temporary shutdowns will reduce Canfor's lumber production by 50 million board feet, less than one per cent of the company's 5.1 billion board feet of production in 2005.
The two-week downtime periods will be rotated through the sawmills, said Coonfer. "No one particular mill will take the burden of this," he said.
One Mackenzie resident, who didn't want to be identified, said the temporary closure will hit the community hard, including loggers and log truckers. Workers had been told to prepare for a two-week shutdown in August, but this announcement, delivered to workers during a coffee break Thursday morning, came as a surprise, said the resident.
It will impact loggers and truckers because the shutdown -- which workers were told starts immediately and runs until July 17, when it will be re-assessed -- also delays the start-up of logging and hauling, said the Mackenzie resident.
Mackenzie, located 190 kilometers north of Prince George, has a heavily forest-based forest economy.
Although temporary shutdowns were common during a lumber trade agreement between the U.S. and Canada that ran from 1996 to 2001, since then, temporary shutdowns have been rare. After the trade agreement ended, the U.S. imposed softwood lumber tariffs on imports to the U.S. of 27 per cent, which were reduced to 11 per cent through subsequent reviews.
In response, forest companies in the Northern Interior -- including Canfor -- have run their sawmills flat out, also adding third shifts, to reduce the per unit cost of lumber. The sawmills have also been operating around the clock to help salvage large volumes of beetle-killed timber.
However, the value of the Canadian dollar compared to the U.S. currency has gained since 2002, breaking the 90-cent level last month, its highest rate since 1978.
Since lumber is sold in U.S. dollars, an increase in the loonie comes directly off the bottom line of the sales of Canadian lumber companies.
Although lumber prices were strong in 2004 and 2005, they have been sliding recently as the U.S. housing market has softened.
Madison's Lumber Reporter publisher Laurie Cater wasn't surprised by the lumber production curtailment. "I was wondering when it would happen," he said.
Although some small lumber manufacturers in the U.S. northwest have also taken curtailments, and there have been Eastern Canadian shutdowns, there is still an excess of lumber supply in North America, said Cater.
He noted that American housing demand has been dropping recently, and he had heard from several sources that a 3,000-home project in California had been postponed indefinitely.
However, Cater said Canfor's 50 million board feet production curtailment is only a drop in the bucket, and he did not expect it to have any impact on lumber prices, which he does not expect to increase soon.
United Steelworkers local 1-424 president Frank Everitt said he did not know the details of Canfor's temporary sawmill closures, but noted it's obvious the combination of dropping lumber prices and the increasing value of the loonie is putting pressure on Canfor.
He said it's too early to say how the shutdowns will impact the unionized workforce. The three sawmills employ hundreds of workers.
Everitt said he expected to know more next week after he sat down with Canfor management. |
| Source:http://www.princegeorgecitizen.com |
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