The problem with this is it can lead to a death spiral as they sacrifice contribution margins... as the same fixed costs now have to be paid for with less units of production.

My guess would be overall storage costs for unsold production would be greater than any unit cost savings made by maintaining production levels?

Eagleone
You make some valid accounting points. At this stage of the game it actually has more to do with the fact that companies need to protect their cash and having cash tied up in unsold/unsellable inventory is a huge problem.

Take amortization for example. Sure your cost per unit will increase, but it is a non-cash cost. So when forest companies are fighting to survive cash costs per unit and cash flow become more important.

I am thinking that you are either a student or a moderately affluent investor. When Canfor and Westfraser release their annual reports later in Feb take care to consider the cash flow/working capital issues. I used to ignore these issues and focus on 1)income statement and then a distant 2) balance sheet while ignoring the cash flow. Start ups and companies in survival mode (and investors and banks of these companies) will focus almost entirely on the cash flow.

This is one of those; damned if you do or damned if you don't scenarios.
Not much use in the old reducing costs stratedgy by increasing output when the market is so flooded that it just keeps pushing the prices lower. So cutting costs and producing more is largely responsible for why this cycle is so bad.
Curtailment is the only hope of effecting US prices at this point and the sooner the better IMO.
The; "lesser of the evils"

It's interesting to me that Canfor announces their closures late Monday (after stock exchange closed) then Tolko follows suit on Tuesday (private company)

I almost wonder if they get together and agree to trim production by x amount of board feet?

It,s inspiring to see some companies out there who actually care about their employees trying to keep some people employed through any means possible. In Mackenzie Canfor, P&T and Abitibibowater did not for an instant consider the HRDC option or shorter work weeks.

To put it another way "A BUILDING WITH LUMBER PROCESSING EQUIPMENT HOUSED INSIDE IS NOT A SAWMILL, AND WILL NOT MAKE A SAWMILL UNTIL YOU ADD THE MOST IMPORTANT INGREDIENT, PEOPLE". Many companies seem to have forgotten how important this last ingredient is and tend to throw "THE BABY OUT WITH THE BATH WATER".

Good luck to you all in Quesnel, we in Mackenzie know how you feel and our hearts are with you.

It's just a matter of time and Tolko will shut down completely.

This might sound like doom and gloom, but I believe the real doom and gloom will start after Carol James' NDP is elected to run this province.

Hopefully the new saviour Obama will turn things around in the US but I doubt it.

"This might sound like doom and gloom, but I believe the real doom and gloom will start after Carol James' NDP is elected to run this province."

LOL HD, but that begs the question...Who was running this province when we ended up where we are now?

They did a fine job alright.

Why do people still keep on blameing the NDP after all these years is beyond me!

Have you seen the latest free press...I dont remember a patient stuck in a shower stall when the NDP ran this government.

Thats right Jonnypg!
Most of the NDP bashers are those with vested interests in keeping thier corporate loving politicians in power.

A patient stuck in a shower?
How come unionized labour did not prevent that to happen ??

Born In BC I like your thinking. I agree at this time all that matters is the cash flow. Cash flow is king in these markets. Income is almost a meaningless number now days considering the substantial write downs all the corporations will be taking creating a mirage of earnings where none really exist.

For example a write down from a mill closure making the company appear profitable on paper, but in reality the hypothetical company is in the death throws of a death spiral of illiquidity. In fact I would say it wouldn't surprise me to see some companies still reporting positive earnings going into receivership in this market.

This is news- at least two more mills shut down in the states today and one more in Canada- if you cann't sell your product then shut down will happen.

I seem to recall not much more than 10 years ago the NDP had driven this province to it's worst state of economic downtown in memory. How quickly we forget how bad it was under them.
I'm not defending the liberals but do know the NDP is not the ultimate answer. I'd settle for any party that would actually listent o the North for once.