West Fraser Timber Co Ltd T.WFG

RBC

[retiredcf]

January 22, 2024

West Fraser Timber Co. Ltd. 
Announces closure of Fraser Lake Sawmill

NYSE: WFG | USD 82.98 | Outperform | Price Target USD 97.00

Sentiment: Neutral

Closure of Fraser Lake sawmill in British Columbia. West Fraser announced the closure of its Fraser Lake sawmill in British Columbia, driven by its inability to access economically viable fibre in the region. The company expects Fraser Lake's closure to reduce its lumber capacity by ~160 mmfbm (equivalent to ~2% of the company's total lumber capacity as of YE22). The Fraser Lake mill sits ~170km (~106 miles) west of Prince George, BC and ~140km (~87 miles) east of Houston, BC; we wonder to what extent its closure will take fibre procurement pressure off of other mills in the area at the margin, including Canfor's Houston mill (which is being rebuilt) and Plateau mill. West Fraser noted that it anticipates $81MM in restructuring and impairment charges in Q423 "related to facility closures and curtailments due to availability of economic fibre sources in British Columbia."

West Fraser had reduced capacity at its Fraser Lake mill in each of 2022 and 2018. The company announced in August 2022 that it would permanently curtail ~170 mmfbm of combined production at its Fraser Lake and Williams Lake sawmills through the elimination of a shift at each facility (please click here). In November 2018, The company announced that it would permanently curtail ~300 mmfbm of combined production at its Fraser Lake and Quesnel sawmills through the elimination of the third shift at each sawmill (please click here).

Fraser Lake's closure follows West Fraser's announcements on Maxville, Huttig. As announced on January 9, West Fraser is proceeding with the closure of its Maxville sawmill and an indefinite curtailment of its Huttig sawmill. These actions totalled a 270 mmfbm reduction in its lumber capacity; combined with today's announcement, this amounts to a combined ~430 mmfbm reduction in capacity (~6% of its total lumber capacity as of YE22).

We expect more lumber capacity to go down in B.C. At our Forest Products Conference in December, comments from across the industry seemed to suggest there could be another ~1 Bbf of capacity reductions in B.C. over the near-to-medium term, driven by fibre availability challenges.