West Fraser Timber (NYSE:WFG) said Tuesday it will indefinitely curtail its Perry Sawmill in Florida later this month, citing high fiber costs and softening lumber markets.
West Fraser (WFG) said the curtailment will affect 126 employees and reduce its U.S. lumber production by 100M board feet; it expects to take an unspecified impairment charge in Q4 associated with the action.
High fiber costs at Perry and a low-price commodity environment have hurt its ability to profitably operate, the company said.
The weak housing market is causing pressure on the prices of OSB and lumber, so West Fraser Timber’s (WFG) EBITDA is falling fast, Valkyrie Trading Society writes in an analysis published on Seeking Alpha.
We need more curtailments across North America to take enough volume out of the market to cause buyers to have a strong comfort level that the demand outstrips supply and then we will see prices increase to the point were so many mills in North America can be profitable again. Especially in Canada and the Pacific Northwest. SYP mills still have the lowest log cost in North America so they are positioned to weather lower prices a lot better than any other region in North America. Hopefully we will see many more announcements like this in the coming few days and weeks.
Great comment @David_Stallcop. In this chart we can clearly see how log prices in the North West (Orange + Brown) have sky rocketed, while SYP pine log prices (yellow) have remained flat. Do you have any idea what explains this?
Over 80% of the timber supply in the Southeast is privately held timber and log supply availability still outpaced demand. So, when all the SYP sawmills in the Southeast were making record profits from June 2020 to June 2022 the timber owners didn’t see any ability to raise log prices on the sawmills. Now that lumber production with new sawmill capacity is online the private timber owners are now trying to increase log prices slowly but the mills are not seeing the ability to increase what they are paying at current lumber market prices. So, that may force more sawmill curtailments. The log supply in the Pacific Northwest is decreasing dramatically with the majority being State and Federal timber and both Oregon and Washington have just passed new laws to further limit the amount of timber that can be cut whether it is privately owned or State/Federal owned. There is zero chance that we will see a new sawmill start up in the Pacific Northwest anytime soon. There just are not enough logs even for the current sawmill capacity that exists.
Given that all the rad was that the USA South was still growing in real estate building and new home construction, vs the rest of the country and especially the North East and Canada, it’s a dramatic development in terms of economic industry indicators …
