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Canadian lumber producers boosted by U.S. housing upswing

The sawmills of three major Canadian lumber producers are expected to enjoy brisk orders this year, especially as housing markets in the United States perk up.


The sawmills of three major Canadian lumber producers are expected to enjoy brisk orders this year, especially as housing markets in the United States perk up.

West Fraser Timber Co. Ltd., Canfor Corp. and International Forest Products Ltd., which report their fourth-quarter results this week, have regained their swagger during the long road to recovery over the past four years.

B.C. Interior sawmills operated by West Fraser, Canfor and Interfor are working their way through limited timber inventories that must be processed after mountain pine beetles decimated forests in the region, but there is an abundance of wood supply in the U.S. Southeast, said Mark Kennedy, an analyst with CIBC World Markets Inc.

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Interfor will release its fourth-quarter earnings on Thursday, while West Fraser and Canfor will announce their financial results on Friday. Analysts forecast the three Vancouver-based companies will generate impressive margins for earnings before interest, taxes, depreciation and amortization (EBITDA) because lumber prices climbed sharply in the final quarter of 2012.

West Fraser's U.S. operations are in Texas and seven U.S. southeastern states – Arkansas, Louisiana, Alabama, Georgia, North Carolina, South Carolina and Florida. Canfor, which has mills in North Carolina and South Carolina, recently disclosed it will expand its mill in Conway, S.C., to boost the production of southern yellow pine products this summer.

Interfor will be making its first foray into the U.S. Southeast in March, when it closes a deal to purchase three sawmills in Georgia.

With many U.S. mills located near key American south housing markets, it reduces transportation costs for moving lumber, Mr. Kennedy said. There were an estimated 780,000 U.S. housing starts in 2012, and he is forecasting 950,000 starts this year and 1.15 million in 2014.

Demand from China is expected to remain strong this year, helping keep prices at healthy levels for producers. Lumber cash prices for two-by-fours made from Western spruce, pine and fir were $382 (U.S.) for 1,000 board feet last week, up by one-third since October, according to data compiled by industry newsletter Madison's Lumber Reporter.

"I think this is a real recovery that we're in. This is an upswing that could last another four years or more," Mr. Kennedy said.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More


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