Canfor Corporation announces major facility closures and production reductions due to market pressures

In a decisive move reflecting the harsh realities of the current market, Canfor Corporation (TSX: CFP) has announced the closure of its Plateau and Fort St. John operations in northern British Columbia. Additionally, the company will implement significant production reductions at its southern US facilities.

Impact on BC Operations:

Canfor Corporation, a key player in the global forest products industry, has revealed plans to shut down its Plateau and Fort St. John facilities. This closure will affect around 500 employees and eliminate 670 million board feet of annual production capacity from its British Columbia operations. The decision follows an exhaustive review of the operational environment, which has been increasingly challenging due to several factors.

Factors Driving Closure:

Don Kayne, President and CEO of Canfor Corporation, attributed the closure to a confluence of issues plaguing the company. “Our company has proudly operated in BC for more than 85 years, supporting jobs and economic activity,” Kayne stated. “However, recent years have presented unprecedented challenges, including increasing regulatory complexity, soaring operating costs, and a dwindling supply of economically viable timber.”

The situation has been exacerbated by recent increases in US tariffs, which are anticipated to more than double next year. These tariffs have imposed severe financial strain on Canfor, leading to hundreds of millions of dollars in losses. Kayne emphasized that continuing operations under these harsh conditions would only extend the negative impact of these anti-dumping duties and place further operations at risk.

Employee and Community Impact:

The closure of the Plateau and Fort St. John operations will be completed by the end of the year. Canfor is committed to providing support to its employees through an extensive transition plan, which includes severance packages and collaboration with union partners. The company acknowledges the profound impact this closure will have not only on its workforce but also on the surrounding communities, First Nations partners, contractors, suppliers, and customers.

As part of its strategy to mitigate the impact, Canfor is considering divesting some of its northern BC tenure. This potential move aims to assist other forest companies in the region that are grappling with similar issues related to timber access.

US Production Reductions:

In addition to the closures in British Columbia, Canfor is adjusting its southern US operations in response to persistently weak lumber markets. The company will indefinitely curtail one shift at its Darlington facility in South Carolina and reduce operating hours at its Estill, South Carolina, and Moultrie, Georgia locations. These adjustments will result in a reduction of approximately 215 million board feet of lumber production annually.

Lee Goodloe, President of Canfor Southern Pine, commented on the changes: “The adjustments we are making will better align our production capacity with current market conditions. We regret the impact these changes will have on our employees and their families.”

Industry and Market Conditions:

The broader forest industry has been facing numerous challenges, including fluctuating demand, changing regulations, and global trade tensions. The increasing tariffs imposed by the US have been particularly detrimental, creating a difficult environment for Canadian producers. Canfor’s decision reflects a broader trend of companies adapting to these market pressures by scaling back operations and seeking new strategies to remain viable.

Company Overview:

Headquartered in Vancouver, British Columbia, Canfor Corporation is a major manufacturer of high-value, low-carbon forest products. Its portfolio includes dimension and specialty lumber, engineered wood products, pulp and paper, wood pellets, and green energy. Canfor operates more than 50 facilities across Canada, the United States, and Europe. The company also holds a 70% stake in Vida AB, Sweden’s largest privately owned sawmill company, and a 54.8% interest in Canfor Pulp Products Inc.

Future Outlook:

Looking ahead, Canfor remains committed to advocating for industry changes that could enable the BC forest sector to recover and thrive once more. The company will continue to evaluate market conditions and adjust its operations as necessary to align with evolving demand and regulatory landscapes.