Canadian sawmills in the US

Canadian companies produce about 25% of the sawn timber in eight southeastern US-States. A decade ago the proportion was only 3%. The influx was triggered due to retrenchment of domestic companies. In addition, a beetle infestation in British Columbia forced producers to look for alternatives.

"It all starts with the trees,” Larry Hughes, chief financial officer of West Fraser Timber, said in an interview with blogs.wsj.com. “What really attracted us, and I think it’s also attracting other Canadians, is the wood basket.”

In 2007, West Fraser was one of the first Canadian companies that invested in this region. At that time the company already operated two mills and purchased another 13 sawmills from International Paper. A resurgent house construction market brings West Fraser, Canfor and Interfor in a good position.

Housing starts increased in June by 12.3%. In July, the building starts increased again by 0.2%, hitting an annual rate of of 1.2 million units. This is the highest level since October 2007.

“If you compare the average margin in the south for a typical, average mill with that in the Pacific Northwest,” Mr. Spelter from Forest Economic Advisors said, “the last couple of years have seen much superior returns for southern mills.”

In Georgia there are approximately 22 million acres (8.9 million ha) of privately owned forests, which largely remained untouched during the construction crisis. “When you take out two or three or four years [of harvesting] … because of the recession, there’s a big bulge of growth that suddenly appears and depresses the market,” Spelter said.

This made the US southeast an attractive low-cost area for expansion. Combined with the strong Canadian dollar investments were more affordable.

Experts predict, that despite the now rising US dollar, the share of foreign companies will increase in the region, due to the low wood costs. In 2Q pine cost 25.6 US-$/t (23 €/t). Ten years ago the price was 15 US-$/t (13 €/t) higher.