Prince George, B.C. - Canfor is reporting a total net income of $40.4 million dollars for the second quarter of 2010. That’s up from $32.5 million for the first quarter of 2010 and $12.1 million for the same quarter of 2009.

 

 

For the six months ended June 30, 2010, Canfor’s net income was $72.9 million, compared to a loss of $57.8 million for the comparable period in 2009.

 

The  company says the solid wood price rally that started early this year, 2010 came to an abrupt end mid-way through the second quarter. After peaking at their highest levels in several years in April and early May, Western SPF and SYP lumber prices fell off sharply over the balance of the quarter as a combination of higher industry production, slowing inventory replenishment orders and a stalling U.S. housing recovery weighed heavily on the sector.

 

By the end of the quarter, the benchmark price for Western SPF 2x4 #2&Btr had fallen below US$200 per thousand board feet for the first time this year, after peaking at US$320 earlier in the quarter.

 

The higher lumber market prices in March, April and early May resulted in export tax rates on Canadian lumber shipments to the U.S declining from 15% on B.C. shipments to 10% in May and 0% in June. Prices to offshore markets, the majority of which are negotiated quarterly in advance, showed solid quarter-over-quarter gains.

Average Northern Bleached Softwood Kraft ("NBSK") pulp prices continued to benefit from tight global supply, and list pulp prices for U.S. delivery exceeded US$1,000 per tonne for the first time on record during the second quarter.

Lumber production in the second quarter of 2010 continued to reflect significant mill curtailments, with the Company operating at two-thirds of capacity in the quarter. The Company restarted its Chetwynd and Quesnel sawmill operations in May and June, respectively, with production for the latter being dedicated to the China market.

Commenting on the results, Canfor's President and CEO Jim Shepard said, "As encouraging as it has been to see another quarter of improved results, the significant decline in solid wood prices in the latter part of the quarter clearly highlights the fragility of the U.S. housing sector." Shepard indicated that Canfor would maintain its cautious approach for the foreseeable future.

Looking ahead, the company predicts  North American lumber demand to improve slightly as the seasonal fall building season gets underway in August and September. However, mortgage delinquencies, home foreclosures and continued weak U.S. employment are expected to continue to hinder the U.S. housing recovery.

 

The resilience of the offshore market is expected to persist as strong lumber demand continues in China and Japan for both housing construction and remanufacturing and Do-It-Yourself markets. For pulp, the supply/demand balance of global softwood pulp is still in favour of producers, but there is currently downward pressure on market prices, particularly from China. A reduction in market pulp consumption from Asia, combined with a typical seasonal slowdown during the summer months, may exert further pressure on NBSK pulp prices over the next three to six months.