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Canfor reducing Canadian lumber production

“It looks like one wave of temporary curtailments after another,” said Jeff Bromley, United Steelworkers Union wood council chairperson. “I just got wind that Tolko (Industries) is taking some down time as well, throughout its B.C. plants.”

The latest production cuts, however, come at the end of a year in which inflation and higher interest rates have threatened to spark a recession and “markets have dropped off a cliff,” said Bromley.

“It’s funny, because less than a year ago, we were talking about unbelievable spiking of lumber markets with (lumber prices) that’ve never been seen before,” Bromley said. “And now, we’re down into where they’re losing money.”

The price for 1,000-board-feet of Western spruce/pine/fir two-by-fours — the industry benchmark — fell to US$400 at the end of last week from $475, according to tracking by Madison’s Lumber Reporter.

That is below production costs of around $500 per thousand board feet for most mills, so it isn’t surprising to see some of them taking some down time now, said Keta Kosman, publisher of Madison’s Lumber Reporter.

Kosman said B.C.’s lumber producers have done a better job of adjusting production to meet market demand, particularly over the last 18 months during wild swings in lumber prices, which peaked above $1,734 per thousand board feet in July of 2021.

Canfor cited the need to “align with market conditions,” in making its announcement Monday that it will take down time at its B.C. and Alberta operations, the sixth time this year that the company has reduced work schedules or curtailed operations to trim production.

This round of curtailments will see mills shut down for at least one week and up to four weeks, depending on their location, with the expectation that “B.C. facilities will operate below full capacity in the New Year.”

Canfor CEO Don Kayne said managers will work “to mitigate the impacts on our employees by providing support and identifying meaningful work during the downtime.”

Canfor was still profitable, earning a net profit of $87 million in the third quarter of 2022, but that was down from $210 million in the same quarter of 2021.

Some of Canfor’s cuts were related to the B.C.’s other chronic problem of declining timber supplies, such as the Feb. 15 decision to cut a shift of employees from the operations of its Plateau sawmill in Vanderhoof.

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And Canfor hasn’t been alone. West Fraser Timber Co Ltd., in August was cutting shifts at its Fraser Lake and Williams Lake sawmills, eliminating 92 jobs, plus a shift at its Quesnel plywood mill for a loss of 55 jobs.

“So, an industry that was making nothing but money here over the last two years is all of a sudden coming to a grinding halt over the Christmas holidays, it seems,” Bromley said.

Bromley said that in the case of Canfor, the company has done well so far to mitigate the impact on its employees by scheduling maintenance and cleanup work to cover some of the difference.

“Now, it sounds like the narrative is changing,” Bromley said.

B.C.’s stumpage rates, referring to the fees the province charges for access to timber, are also a factor in operating costs for mills, said industry analyst Russ Taylor.