West Fraser to permanently shut Eurocan mill in Canada

   Moscow. Oct 28, 2009. /Lesprom Network/. West Fraser Timber Co. said that it will permanently close its Eurocan paper mill in Kitimat, British Columbia, Canada on January 31, 2010. The mill produces about 450,000 tons per year of linerboard and kraft paper.

West Fraser said that after many years of ongoing efforts to reduce operating costs and improve results the Eurocan mill remained unprofitable.

"We deeply regret the impact the mill closure will have on our 535 employees, their families and the community and we will ensure those who are affected are treated with fairness and respect," said Hank Ketcham, West Fraser's Chairman, President and CEO.

According to West Fraser, the 40-year-old mill has historically struggled with high costs and negative returns. A contributing factor to the mill's problems in recent years has been sawmill curtailments in the region, which have reduced the supply of lower-cost residual wood chips to Eurocan and increased the mill's reliance on more expensive whole log chips.

In addition, the mill's situation took a dramatic negative turn during the past year, West Fraser said. Since December of 2008 Eurocan has experienced a drop of approximately 40% in the net selling price of its products. This decline has been driven by the global economic slowdown, the rise of the Canadian dollar and severe competition from low-cost paper producers in other countries.

"A deep and thorough review by the company looked at ways to offset the steep decline in Eurocan's financial results," Ketcham said. "Unfortunately, even with the most optimistic projections the business fundamentals of the operation have deteriorated to the point where permanent closure is the only reasonable alternative."

West Fraser will record an asset impairment charge in the third quarter of 2009 of $138 million related to the property plant and equipment and certain other assets at the Kitimat facility. In addition, the company will incur costs over the next several quarters related to the shutdown of the facility. The total of these costs is estimated to be approximately $70 million.