Weak lumber prices prompt production cutbacks.

• Author: GOULIQUER, DIANNE

Weak lumber prices have forced at least one major Canadian forest products company to cut back on its production levels indefinitely.

Tembec Inc. has announced it has reduced the operating rate at five of its Ontario and Quebec softwood lumber mills by one-third in response to low lumber prices. Production at the Hearst, Kapuskasing, Beam, Cochrane and Timmins sawmills has already been cut from the normal operating rate of three shifts per to day to two. Nearly 135 employees will be affected.

"When you have a difficult situation like this, cutting back on production in a way is helping us, because it's lowering the loss," Tembec vice-president for Northern Ontario Martin Michaud says. "It's not a solution in itself, it's just a way for us to control the damage cause by the market situtation."

Current lumber prices have declined to levels not seen since the late 1980s and early 1990s. Wood costs have risen significantly due to higher stumpage and environmental regulations, and the recent rise in energy costs has reduced margins to "unacceptable" levels in spite of a major cost-reduction program the company currently has underway.

Pulp prices have not been affected.

Michaud says there are a "multitude of factors" that have put the lumber market in a state of over-supply. In particular, the dompany is blaming the Softwood Lumber Agreement (SLA) for the situation According to a company press release issued Feb. 7...