Canfor Corp. reported “sustained pressure on global lumber market conditions and pricing through most of the fourth quarter” and challenges in “accessing economically viable fibre” in British Columbia. It noted a “moderate uplift in global pulp market fundamentals” in the fourth quarter.
Canfor’s lumber segment posted a wider operating loss, “principally reflecting a challenging period for the Company’s Western Canadian operations, with more modest quarter-over-quarter declines experienced in the US South and Europe. Following the pricing pressure seen in the previous quarter, the current period results were principally driven by a continued deterioration in global lumber market prices.”
“North American lumber market conditions remained fairly subdued throughout most of the fourth quarter as the market softness experienced at the end of the prior quarter continued well into the current period. This, combined with a traditionally slower consumption period, placed further downward pressure on North American benchmark pricing early in the current quarter. However, an unanticipated uptick in housing starts, coupled with the impact of production curtailments, particularly in BC, and steady activity in the repair and remodel sector, gave rise to a slight improvement in North American benchmark pricing towards the end of the current period.”
“Looking ahead, global lumber market conditions are anticipated to remain under pressure through the first quarter of 2024, as near-term challenges of affordability are projected to persist, despite recent declines in mortgage rates in the US. On the supply side, it is forecast that operational disruptions, driven by geopolitical tensions as well as fibre and market-related curtailments, especially in Western Canada, will help reduce inventories to more normalized levels. In the repair and remodel sector, demand is projected to remain relatively steady through the first quarter of 2024, albeit declining slightly from the levels experienced in 2023.”
“Despite the near-term challenges, underlying global lumber market fundamentals in the longer term remain solid, with demographic trends supporting the need for additional new home construction activity against the backdrop of an aging housing stock and low inventories of new homes available.”
On the pulp and paper segment:
A narrower operating loss “principally reflected a moderate improvement in global pulp market conditions, combined with a 20% increase in pulp production quarter-over-quarter.”
“Following a relatively weak second and third quarter of 2023, global softwood pulp markets moderately improved in the current quarter, largely reflecting a slight uptick in demand and purchasing activity in most major regions as global pulp producer inventories returned to a more balanced range, ending December 2023 at 40 days of supply. The positive pricing momentum in US-dollar NBSK list prices to China experienced towards the end of the prior quarter, continued well into the current period, with prices peaking in November 2023.”
“Looking forward, global softwood kraft pulp markets are projected to be fairly subdued through the first quarter of 2024. While global pulp producer inventories are estimated to remain within the balanced range, demand uncertainty is anticipated, driven principally by the deceleration in China NBSK pulp list prices in December and leading up to the seasonally slower spring period in China.”
With “ongoing uncertainty with regards to the availability of economically viable fibre in BC, and a projected weak North American lumber market, Canfor Pulp Products Inc. “anticipates a challenging fibre supply environment for its pulp mills (both for sawmill residual chips and whole-log chips), especially in the near-term. CPPI will continue to monitor operating conditions and will adjust operating rates at its pulp mills to align with economically viable fibre supply.”
Write to Josh Beckerman at josh.beckerman@wsj.com
