There have been fourteen closures and cutbacks already in 2023 in the pulp and paper industry.

Recently, Canfor announced a big capacity shutdown in British Columbia.

It its press release, Canfor stated that "To better align manufacturing capacity in British Columbia with the available long-term fibre supply, Canfor Corporation is restructuring its B.C. operations by permanently closing its Chetwynd sawmill and pellet plant and temporarily closing its Houston sawmill for an extended period to facilitate a major redevelopment on the site. The Company intends to build a new, modern, globally competitive manufacturing facility that employs state of the art technology to produce high value products from the sustainable timber supply in the region. Project planning, scoping, preliminary engineering and budgeting are underway. The Company will undertake a comprehensive evaluation of the availability of economic fibre and a thorough project financial analysis, supporting a final investment decision by the end of the second quarter of 2023. Both facilities will be closed following an orderly wind down of operations that is expected to conclude early in the second quarter of 2023 and will remove approximately 750 million board feet of annual production capacity."

Don Kayne, President and CEO made the following statement:

"We are making these difficult but necessary decisions to create a more sustainable operating footprint in B.C. Our goal is to match our mill capacity with the economically available fibre for harvest to enhance our ability to compete and to operate throughout the market cycles. This is what will ultimately create greater stability for our employees and communities, while ensuring we can continue to provide the high quality, low carbon products that are in demand by our customers around the world."

In an article from BMO Capital Markets, regarding the Canfor shutdown, it states that "Reports of capacity curtailments are mounting. Since 4Q22, the industry has permanently shut ~600mmbf of capacity and announced ~1.0Bbf of temporary curtailments. The vast majority of curtailments are in the B.C. region, not a shock given the fiber supply challenges. At the same time, we are also seeing curtailments in the Pacific Northwest (PNW) and the U.S. South. West Fraser recently announced 100mmbf of an indefinite shut at its Perry sawmill in Florida citing higher fiber costs."

The article goes on to state that "With channel inventories reportedly lean and spring selling season approaching, Canfor's announcement may support/create a short-term rally in lumber prices. Whether the pricing rally can be sustained will depend on housing demand. Any potential recovery in H2 housing demand on the back of easing mortgage rates will be positive for lumber prices. However, if housing demand remains weak, we suspect further curtailments will be needed. With southern mills still cash positive, capacity adjustments will have to come largely from B.C. and the PNW."

We will keep you apprised of further developments.