Canfor to close Isle Pierre sawmill

The Isle Pierre sawmill will be permanently closed later this year.

It will occur in the third quarter following an orderly wind down, Canfor Corp. said Wednesday, and cited a lack of economically-viable timber as a result of the mountain pine beetle epidemic and a worldwide downturn in demand for lumber due to the COVID-19 pandemic as the reasons.

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The closure will affect 94 employees. The sawmill also works with many contractors and consultants.

"We are committed to doing everything possible to redeploy people to other opportunities throughout the company," Canfor communications director Michelle Ward said. "We’ll also be putting in place a process to work with our contractors and assess the replaceable volumes associated with the mill."

Canfor also said it will curtail production at its Prince George Pulp and Paper and Intercontinental Pulp mills for four weeks starting July 6, also due to the scarcity of timber and the pandemic.

Production at Isle Pierre has been off and on for the past several months. It was reduced to a single shift in September. Following a temporary closure on March 30, it is schedule to resume operating on Friday.

Based on its one-shift operation, the sawmill had an annual production capacity of about 120 million board feet. Curtailments at the pulp mills, in turn, will reduce Canfor Pulp's NBSK production by 38,000 tonnes and kraft paper production by 12,000 tonnes.

In a note, Paul Quinn, an analyst at RBC Dominion Securities Inc., questioned whether the closure will improve access to timber.

"With the closure of Isle Pierre, we expect that the already tight fiber situation will become worse," he said. "In the B.C. Interior, we estimate that over two billion board feet of capacity has been permanently curtailed since the beginning of 2019. "While Canfor noted that it has already entered into a long-term fiber supply agreement in the region, we think the investor focus will increasingly turn to whether a pulp mill (Canfor Pulp or a competitor) could close or reduce operations."

It is the company's third announcement of an indefinite or permanent closure over the past year, Quinn also noted, with Vavenby permanently closed and Mackenzie indefinitely idled.

Nechako Lakes MLA John Rustad said the provincial government needs to start calculating stumpage on a monthly basis, like Alberta does, to better reflect the current price of lumber. As it stands, he said it's done once a year with minor adjustments made on a quarterly basis.

"For the first three months of this year, lumber was trading at over $400 a thousand board feet... and it wasn't until the COVID problems in February and March that we started to see the prices drop off," Rustad said. "Prices today are in the $350 range but stumpage is still based on $400."

On the flip side, if the price goes up, so does stumpage, he noted "but I think it's much healthier if the system is reflecting current market conditions as opposed to what we're currently doing, which can be anywhere from six to 18 months out of date."

Forests Minister Doug Donaldson called the closure "additional bad news" in "especially challenging times" brought on by the mountain pine beetle and the COVID-19 pandemic.

“In this situation, as always, our first priority is to support forest communities, workers and families, and we will be reaching out to the United Steelworkers and Canfor to determine what supports are needed," he said.

He said all employees impacted will be able to access the government's $69 million forestry worker support fund. Announced in September, the fund's centrepiece is $40 million over two years for an early-retirement bridging program for older forest workers. It is contingent on cost-sharing with workers' respective employers.

Canfor recorded an $88.8-million operating loss for the first quarter of 2020.

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