Rising dollar yet another worry for the Island's forestry industry
Stronger currency means Canadian products pricier to Americans
Robert Barron, Daily News
Published: Thursday, June 04, 2009
The surging Canadian dollar is just the latest bad news for the troubled B.C. forest industry.
The dollar has risen from 78 cents (American) in March to about
92 cents today, mostly because of rising crude oil prices. The stronger dollar means products sold by Canadian forest companies to the U.S. are more expensive and less competitive in the already dwindling American housing market, traditionally the largest market for B.C. forest products.
Duncan Kerr, chief operating officer for Western Forest Products, which has already curtailed its production by 65% (including the indefinite closure of the company's two Nanaimo sawmills and reman facility) until markets improve, said the rising dollar is "not a good trend."
However, Harmac president Levi Sampson said pulp prices are rising from all-time lows, helping to offset the impact of the higher currency for Harmac. The Nanaimo mill's main customers are in Asia.
"The Canadian dollar has increased 15% in value in just a few months, which means a 15% cut in profits for Canadian companies selling to markets in the U.S. and around the globe, and it's anybody's guess when the dollar's surge against its American counterpart will stop," said Gerry Leeuwen, an industry analyst with Vancouver-based International Wood Markets.
"There's no doubt the rising dollar is compounding the market problems that already exist in the forest industry. However, the demand for pulp has come on very strong in China over the last month, which have pushed prices up and that's good for operations like Harmac, despite the rising dollar."
Most of the lumber sold by Canadian foresters, with the majority based in B.C., is to the housing market in the United States, where the large supply of existing homes and the recession discourage the construction of new homes, leaving lumber prices at historical lows.