Lumber markets showed signs of improvement in the second quarter of 2012, reflecting stronger underlying demand
in both North American and offshore markets. U.S. housing activity continued the upward trend seen in the prior
quarter, with housing starts for the quarter averaging 739,000 units SAAR (seasonally adjusted annual rate), up over
3% from the previous quarter. Canadian housing starts were also up, increasing 12% from the previous quarter, to
almost 230,000 units SAAR.
In China, markets improved as inventories returned to more normal levels following the
inventory build early in the previous quarter. Japan demand remained solid through the quarter. Pulp markets were
relatively balanced heading into the quarter but saw signs of weakness as the quarter progressed.
As a result of the improved markets, lumber prices rallied during the second quarter. The average North American
benchmark Western SPF 2x4 #2&Btr price rose 11% to US$295 per Mfbm, with similar increases seen for most other
grades, while the spread between Western SPF structural and utility grade pricing also narrowed. Strong prices
through May triggered a reduction in the export tax to 10% for the first time this year in June. Southern Yellow Pine
(“SYP”) prices also saw similar increases over the quarter. As a result, Canfor’s lumber sales realizations saw solid
gains, with a higher value sales mix also having a positive impact. Lumber shipments increased significantly from the previous quarter, up 16% to almost 1.2 billion board feet,
reflecting the additional contribution of two recently acquired mills in the Kootenay region, as well as continued postcapital
project productivity improvements and further operating efficiencies at other mills in the current quarter.