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March 2004

LUMBER PRODUCERS 2003

The Big get Bigger

The last year saw the larger Canadian lumber producers get even bigger in terms of production, and more of the same is expected in 2004, especially with further industry takeovers.

By Russell E Taylor

The annual survey of Canadian softwood sawmills—carried out for Logging & Sawmilling Journal by R E Taylor & Associates Ltd—has found that most of the larger Canadian producers posted production gains in 2003, despite the different challenges confronting companies as a result of US duties and a strong US dollar. In the first 11 months of 2003, Canada’s lumber output was up only 1.5 per cent (exports to the US had only increased by 0.8 per cent), while US lumber production also posted minor gains (of 0.8 per cent) over 2002. The year 2003 was truly a year of the big companies getting bigger: all of the increase in production in the Top 30 Lumber Producers list came from the top 10 companies’ output (a gain of over 900 million board feet from 2002).

By comparison, a net decline of 50 million board feet was recorded by the remainder of the Top 30 in Canada. And there are two already announced acquisitions that will shift even more production into the Top 10 for 2004. Production in Eastern Canada was flat as duties and low lumber prices during the first half of 2003 prevented most mills from running at full capacity. In Western Canada, it was a mixed bag of events; some mills in BC went to three shifts taking advantage of available beetle-killed wood, while others were constrained by forest fire disruptions as well as a brief IWA strike on the West Coast.

Overall, the biggest factor constraining Canadian production in 2003 was the US countervailing and anti-dumping duties coupled with the 17 per cent appreciation of the Canadian dollar against the US dollar. Record-breaking US housing starts fuelled the demand for lumber and this pushed lumber prices and output higher in the second half of the year and into 2004. Overall, 2003 turned out to be a much better year than anyone was expecting, as the improving economy and soaring market demand gave the industry a real bonus. BC-based Canfor Corporation was Canada’s largest lumber producer in 2003—for the fifth year in a row. Canfor’s production of 2.89 billion board feet in 2003 was off 80 million board feet from 2002, but still left it well ahead of second place West Fraser, which had production of 2.3 billion board feet.

Comparing year over year rankings, the order of the top ten Canadian producers did not change and although positions may have changed for those ranked 11 through 30, the names of the players remain the same. The Top 30 lumber producers accounted for 24.4 billion board feet, or 74 per cent of Canada’s total production of approximately 33 billion board feet in 2003. As in 2002, consolidations and acquisitions continued to play out in 2003: Tembec purchased two Quebec sawmills from Nexfor and one Ontario mill from Weyerhaeuser; Canfor expanded into Eastern Canada and the US northeast with the purchase of two existing Quebec sawmills—Daaquam Lumber and Produits Forestiers Anticosti—and Daaquam’s proposed new mill in Maine; Canfor signed an agreement to buy Slocan Forest Products, which currently holds number five spot on the Top 30 list.

CANADA’S TOP 30 SOFTWOOD LUMBER PRODUCERS · 2003

Rank  Rank   No. of Prodn
2002 2003 Company Mills (Million bf)
         
1 1 Canfor  14 2,893
2 2 West Fraser Timber 2 14 2,293
3 3 Weyerhaeuser Canada 1 14 2,229
4 4 Abitibi-Consolidated 2 21 2,000
5 5 Slocan Group  9 1,693
6 6 Tembec 1 19 1,335
7 7 Weldwood 2 7 1,181
8 8 Buchanan Lumber 1 7 1,100
9 9 Tolko 6 1,038
10 10 Domtar 13 994
12 11 JD Irving 1 8 726
14 12 Bowater 12 720
13 13 Riverside 5 709
11 14 Interfor  7 637
15 15 Doman   6 615
17 16 Pope & Talbot 3 509
16 17 Nexfor  2 455
29 18 Carrier Lumber 4 340
18 19 Kruger  5 334
22 20 Millar Western 2 325
21 21 Barrette Entreprises 1 292
20 22 Uniforet 2 288
27 23 Dunkley 1 280
26 24 The Pas 1 269
23 25 Lignum 1 237
28 26 Materiaux Blanchet 2 205
24 27 Gerard Crete & Fils  3 202
25 28 Chantier Chibougamau 1 1 200
30 29 S&R Sawmills 1 5 160
NA 30 TimberWest 1 133
    Total Top 30 196 24,391
    Total Canada   33,000

Note: Includes lumber produced only at primary sawmills and excludes all US production.
1 Estimate
2 Includes joint venture volumes

Source: R.E. Taylor & Associates Ltd., & International Wood Markets Research Inc. (Publishers of WOOD Markets Monthly newsletter & WOOD Markets 2004 - The Solid Wood Products Outlook to 2008), Vancouver, BC. Ph: 604-801-5996; e-mail: retaylor@woodmarkets.com; www.woodmarkets.com  Copyrighted © by International WOOD Markets Research Inc.

While the agreement to acquire Slocan has not yet been voted on by Slocan shareholders, it is expected to be approved later this year, raising Canfor/Slocan’s mill count to 23 and its production to roughly 4.6 billion board feet—or double the output of number two spot holder West Fraser. The Canfor/Slocan merger will also strengthen Canfor’s position as North America’s second largest lumber producer, just behind Weyerhaeuser’s equivalent 7.1 billion board feet of production in 2003. The other recent transaction that will show up in the future 2004 survey is Riverside’s merger with Lignum in BC.

In 2003, nine companies produced more that one billion board feet with number 10-ranked Domtar close to that level, at 994 million board feet. These top 10 companies produced 69 per cent of Canadian softwood lumber in 2003, indicating that you have to be big to grow (and survive) in the competitive commodity lumber business. All in all, 2003 was a year of significant change on the Canadian sawmilling landscape and could very well turn out to be a precursor to further interesting developments for 2004. The annual list of the Top 30 Canadian Lumber Producers is researched and compiled by RE Taylor & Associates Ltd, and every attempt is made to obtain the best information from the mills.

Russell E Taylor is president of R E Taylor & Associates Ltd, & International Wood Markets Research Inc (Publishers of WOOD Markets Monthly newsletter & WOOD Markets 2004 - The Solid Wood Products Outlook to 2008), Vancouver, BC. Ph: 604-801-5996; e-mail: retaylor@woodmarkets.com; www.woodmarkets.com 

Copyrighted © by International WOOD Markets Research Inc.

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