Madison’s Weekly Submission to Stockhouse

Lumber producers face rail transportation nightmare

As brutal weather patterns continued across the most populated parts of North America, lumber and panel traders reported mostly flat prices on solid wood commodities, writes Keta Kosman, publisher of Madison’s Lumber Reporter http://162.213.156.131/~madisonsreportMost commonly-traded dimensions maintained price levels from last week, or were slightly down. Wider sizes, specifically 2×10 and 2×12 took large corrections downward due to total lack of demand. On the other hand, utility grades, particularly in the west, popped somewhat as program buying from China took significant amounts of production out of the market.Benchmark dimension lumber item WSPF KD 2×4 #2&Btr lost $8, or 2.1 per cent, from last week to close at US$368 mfbm. Players had little inquiry until Wednesday. Buying was described at “hot” on Thursday before Americans abandoned their offices Friday for the looming President’s Day holiday Monday. For it’s part, Western 2×4 #3/Utility prices jumped $4, or 1.7 per cent, to finish the week at US$236 mfbm.Sawmills in the US experienced continued demand despite the bad weather, as customers needed to fill holes in their inventory. In Canada, lumber producers entertained orders both from the US and overseas, but it was the large buys from China that had everyone’s interest this week. On both sides of the border, mills reported comfortable order files out for two weeks or longer.

Transportation on the rails continued to be a complete nightmare in Canada as most rail cars failed to materialize.

Canadian National Railway Co. (TSX: T.CNR, Stock Forum)and Canadian Pacific Railway Ltd. (TSX: T.CP, Stock Forum) both claimed the terrible weather was responsible, but mills wondered as to the absolute inconsistency of service. Most operators struggled to find trucks to replace their missing rail cars.

Those in the east suffered the most from these ongoing transportation woes.

US sawmills produced 27.66 billion board feet (bbf) of softwood lumber in the first 11 months of 2013 – up 5.7 per cent from 26.161 bbf a year earlier, according to the Western Wood Products Association’s Lumber Track, released Monday.

Canadian sawmills produced 22.726 bbf of softwood lumber in the 11 months – an increase of 5.4 per cent year-over-year from 21.569 bbf.

In lumber company news, International Forest Products Ltd. (TSX: T.IFP.A, Stock Forum), or Interfor, out of Vancouver, BC, Thursday reported net earnings of $11.4 million or $0.18 per share in 4Q 2013, compared to net losses of $0.1 million or $0.00 per share in 3Q and $3.8 million or $0.07 per share in 4Q 2012.

Also this week, Interfor agreed to purchase operations including two Georgia sawmills for US$180 million from Ilim Timber Continental SA to expand in the US Southeast. Interfor said its annual capacity to produce lumber will increase by about 20 per cent with the purchase of Tolleson Ilim Lumber Co. Interfor will pay US$129.9 million in cash and retained liabilities, plus 3.68 million shares for the Perry, GA-based business.

The company plans to evaluate international marketing initiatives with Ilim Lumber, including serving as a sales agent in North America and cooperation in China, Japan and the Middle East.