EL DORADO, Ark. - Conifex Timber, one of British Columbia's biggest forest products companies, announced that it's curtailing all operations at its El Dorado, Arkansas sawmill. 92 employees will be laid off.
The shut down will reduce Conifex's U.S. South lumber production by around 21 million board feet through 2019. The company will phase the curtailment over 60 days.
“We regret this difficult decision; however, lumber prices are simply too modest to justify continued operations at a site that requires further capital expenditures to realize its potential as an efficient, modern mill,” said Ken Shields, Chair and CEO. “While our wish is to restart the mill as soon we can, our immediate priorities are to identity the scope of a Phase two capital investment to help better inform a re-start date.”
Six El Dorado workers will be retained to maintain the mill's equipment in case of a restart. In June, Conifex lowered operations at the mill down to a single shift because of poor market conditions, it said.
The company is facing hard times elsewhere. Its mill in Glenwood Arkansas was also downgraded to a single shift. In March, the company sold its Lignum Forest Products subsidiary to CanWel Building Material Group for $11.5 million. The company has also curtailed production before at a mill in British Columbia.
In an earnings report from this week, Conifex said its second-quarter revenue was $95.7 million - a 31 percent decline from last year. "The lower revenues were largely attributable to the lumber segment, which recorded reduced shipments reflecting lower operating rates at our [British Columbia] and Arkansas mills and a decline in sales realizations due to weaker lumber prices, particularly compared to the second quarter of 2018," the company said.
It's not just Conifex that's facing hard times. British Columbia - Canada's largest lumber-producing province - exported just over 514 million board feet of lumber to the U.S. in October 2018, down from 645 million board feet from the same time 2017. Many Canadian lumber leaders have taken a hit - including West Fraser, Canfor, and Interfor - and restricted lumber production, with West Fraser and Canfor curtailing production more than once.
All cited challenging lumber markets, high log costs, log supply constraints, falling lumber prices, and U.S. import tariffs as factors.
Softwood lumber import tariffs of around 21 percent were levied onto Canada last year. The National Association of Home Builders (NAHB) told MarketWatch that those tariffs are restructuring the entire lumber global supply chain - incentivizing U.S. buyers to import from overseas rather than ship lumber across the Canadian border.
Canada's imports to the U.S. have certainly slipped, as we've covered before. British Columbia - Canada's largest lumber-producing province - exported just over 514 million board feet of lumber to the U.S. in October 2018, down from 645 million board feet from the same time 2017.
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