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Nov 1, 2018

Lumber market crash is probably over: Resolute Forest CEO

Resolute Forest

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The plunge in lumber prices is probably over, Resolute Forest Products Inc. (RFP.TO- Chief Executive Officer Yves Laflamme said in an interview.

The market is “close” to a bottom, though prices probably won’t rebound to this year’s highs, Laflamme said. Last week, lumber futures tumbled to a 28-month low and have plunged 50 per cent from the record in May. That spurred Interfor Corp. to announce plans to reduce output by 20 per cent at its British Columbia sawmills. Canfor Corp. on Thursday said it will to cut production 10 per cent in British Columbia in the fourth quarter.

Montreal-based Resolute reduced shifts at some mills in Thunder Bay, Ontario, and Quebec to adjust log inventory, Laflamme said in the telephone interview. “That’s the way we’re managing right now, and if we need to do more, we’ll do more,” he said.

Tight supplies, trade disputes and transport bottlenecks sent lumber futures higher earlier this year. As a Canadian rail logjam eased, the outlook for U.S. housing started to trail some expectation, and the lumber “market started to collapse,” Laflamme said.

Even if prices have bottomed, fourth-quarter results for lumber “won’t be that great” after the slump and the persistent dispute between Canada and the U.S. over softwood lumber, Laflamme said.

Resolute will pay about US$88 million in import duties to the U.S. by the end of the year, and neither side appears to have “any interest” in a deal, he said.

On the outlook for lumber prices, “I’m not expecting to go back to where we were because that was the exception,” though the market will be “better in the next few months.”

On Thursday, lumber futures in Chicago rose by the US$15 exchange limit to US$326 per 1,000 board feet. On May 18, the price surged to a record US$648.50.

Resolute’s shares in Toronto soared 20 per cent, the most in a year, after the company reported adjusted per-share profit in the third quarter that topped the highest estimate by analysts.