An analyst says B.C.-based lumber producer Interfor Corp.’s decision to divest its assets in Quebec and wind down operations in the province was influenced by supply shortages following widespread forest fires in recent years.
Daryl Swetlishoff, head of research at Raymond James, told BNN Bloomberg in a Thursday interview that wildfires are just one of the many headwinds Quebec’s lumber industry is facing.
“Quebec has challenges in their forest industry… there’s a shortage of wood fibre,” he said, citing the recent “terrible fires” in the province as the main reason for the lack of supply.
“Up to 25 per cent of that land base has now been torched. That leads to less wood available for these sawmills... you have a situation where there’s too many sawmills chasing too few trees, essentially.”
Interfor announced on Wednesday that it’s selling three manufacturing facilities in Quebec and closing its Montreal office to focus on other parts of its business in Canada and the U.S.
Another challenge Interfor has been facing in Quebec more recently, Swetlishoff said, is the fallout from an ongoing trade dispute between Canada and the U.S. over softwood lumber duty charges.
“In August we saw the duties roughly doubling to 15 per cent for Canadian (companies), on average, shipping to the U.S., and that’s been a big factor along with just the low lumber pricing environment that we’ve seen,” he explained.
“Duties are set to double again by our estimates in August 2025, so they’re going to be running on average at 30 per cent. We think there’s more closures to come in Canada, and more closures to come specifically in B.C. and Quebec.”
Swetlishoff said that despite these headwinds, the lumber industry is interest-rate sensitive, and Interfor should benefit from Bank of Canada rate cuts in the coming months.
“If you believe rate cuts are going to materialize and that’ll flow through to lumber demand, Interfor (is) a pure-play lumber producer so they have the most operating leverage,” he said.
“They also have financial leverage. They had at the end of last quarter almost $900 million in debt, so you get a double push there.”
With files from The Canadian Press