VANCOUVER — West Fraser Timber Co. Ltd (TSX:WFT) is now the largest producer of softwood lumber in Canada, replacing a position Canfor Corp. (TSX:WFT) held for the past decade, a report released Wednesday shows.
The International Wood Markets Group’s 2008 annual ranking of top lumber producers said West Fraser also displaced Washington-state-based Weyerhaeuser Co. (NYSE: WY) from its “perennial position” as North America’s largest softwood lumber producer.
West Fraser, whose holdings include Sundre Forest Products and West Fraser LVL near Rocky Mountain House, ranked No. 2 in the industry in 2007. It switched spots with Canfor because it was able to cut less production in 2008, said Gerry Van Leeuwen, vice-president of the forest consultant group behind the report.
“Companies with less downtime are perceived to be lower cost producers,” Van Leeuwen said.
“The highest cost mills should be shutting down. Highest cost, greatest loss.”
The report shows West Fraser’s production at 12 mills fell four per cent to 3.4 million board feet in 2008, compared to Canfor’s 20 per cent production drop at 15 mills to 3.3 million board feet.
Van Leeuwen said West Fraser also surpassed Weyerhaeuser because the U.S. company is purposely shifting away from manufacturing.
While lumber producers lost money in 2008 as a result of the U.S. housing collapse, Van Leeuwen said West Fraser’s top spot shows its commitment to lumber production and its strength in Canada, “relative to economic times.”
Analysts say West Fraser’s rise to the top isn’t surprising because the company is considered one of the most cost-efficient lumber producers in Canada.
“Historically, they have had better margins than Canfor,” said BMO Capital Markets analyst Stephen Atkinson.