Closure of our Quesnel Sawmill
Canfor has announced that we will be permanently closing our sawmill in Quesnel, British Columbia in March 2014. We made this difficult decision based on the decreasing fibre supply in the Quesnel area as a result of the mountain pine beetle epidemic. All of the lumber manufactured at our Quesnel facility is shipped to China, and this closure will not impact any of our supply arrangements with North American customers.
The North American forest products industry has been preparing for the impacts on supply resulting from the mountain pine beetle for some time, and over the next couple of years we are likely to see some rationalization of production in affected regions. The good news is that Canfor is advanced in adjusting our production capacity to the post-mountain pine beetle fibre supply, and we are confident Quesnel is the only closure we will need to take in response to the mountain pine beetle. We have expanded our BC operations in areas with strong fibre supplies and through capital investments, acquisitions and increased operating time, Canfor’s production capacity over the last few years has and will continue to increase.
Canfor is committed to serving our customer’s product needs for the long term. We will continue to manufacture more than 5 billion board feet of dimension lumber and have sufficient capacity at our other North American facilities to continue meet our customers’ requirements.
Customers are always encouraged to contact myself or their sales contacts with any questions you may have about our operations.
A View of the Russian Log Market
I recently had the opportunity to travel to the Russia – China border, to learn about the trade in forest products between these two countries.
The specific area we visited was Manzhouli – a busy port of entry into China. When we arrived, we were fortunate to meet an arriving Russian train loaded with logs and lumber. Traders rushed to negotiate for purchase of the goods right on site – a system the local government recognizes as being antiquated and inefficient, but plans for a more sophisticated lumber market have yet to be finalized.
The trade in forest products between Russia and China has changed dramatically since the application of Russian export taxes on raw logs: historically, shipments were approximately 70% logs and 30% lumber, and at present time at this port the reverse is true.
We were able to examine the logs and lumber on the arriving train. It is clear that the Russian fibre resource is excellent – the logs were sound and straight. The lumber was clearly manufactured from this type of high quality fibre; however, it was shipped green, rough and with inconsistent sizing.
The transportation distances and inefficiencies in the Russian transportation system mean that delivery costs are quite high, and this is expected to worsen as logging operations move further from the border. In speaking with traders and mill operators on the China side of the border, it was clear that the stumpage and procurement system within Russia is extremely complex and mired with grey areas that make foreign investment difficult and uncertain. In short, there is high quality fibre available but it is difficult to access and expensive.