Conifex Timber Inc. of Vancouver announced Tuesday that it is "indefinitely curtailing" operations at its El Dorado sawmill.
Spokeswoman Sandy Ferguson said that means Conifex is ceasing the operations there for an unspecified amount of time but intends to restart the mill at some point in the future.
The curtailment will be phased in over the next 60 days, the company said, and it will affect 92 workers. It is also expected to reduce Conifex's U.S. South lumber production by about 21 million board feet this year.
"We regret this difficult decision, however, lumber prices are simply too modest to justify continued operations at a site that requires further capital expenditures to realize its potential as an efficient, modern mill," CEO and Chairman Ken Shields said in a news release. "While our wish is to restart the mill as soon we can, our immediate priorities are to identify the scope of a Phase 2 capital investment to help better inform a restart date."
Conifex also announced earlier this month the extension of a "temporary curtailment" of its Mackenzie, British Columbia, sawmill operations until Sept. 3, citing continued high log costs and lumber market conditions.
Conifex also operates the Caddo River sawmill in Glenwood. That mill, which the company purchased in May 2018, employs 106 people and is not affected by the curtailment.
In addition, Shields had words of praise for Arkansas' timberlands in November when Arkansas Business interviewed him about the state of the industry. "I have visited timberlands in Europe and in Siberia, and in New Zealand and Australia, and I haven't come across timberlands that are as attractive as they are in south Arkansas," he said then.
The company bought the shuttered Georgia-Pacific sawmill and related facilities in El Dorado for $21 million in 2015. Conifex announced in January 2017 that it would invest $80 million in modernizing and re-starting the sawmill in El Dorado, creating 120 full-time jobs.
The company received a $2 million Community Block Development Grant through the Arkansas Economic Development Commission, according to AEDC spokeswoman Brandi Hinkle.
Ferguson, the Conifex spokeswoman, said the company's objective in 2017 was to make the El Dorado complex "like new," but it "didn't have, at the time, sufficient capital to do the entire project in one go." So the project was split into phases.
“We got most of what we wanted to do around an efficient, modern mill in Phase I,” she continued. “But not quite all of it. So the intent was that we would work on that this year. ...Unfortunately, the lumber market has completely dropped.”
Steve Anthony, president of Anthony Timberlands Inc. in Bearden, confirmed that lumber prices have been "far, far below where they were last year, around this time."
"Last summer, the prices were at extremely high levels, and it was about last fall, whenever it started to rain so much, that the prices really took a tumble. They're pretty volatile, and pretty cyclical, so they'll trend up and down. But, by and large, we are way behind," he said.
Matthew Pelkki, associate director of the Arkansas Forest Resources Center, added that there had been an expansion in Southern timberland, with a lot of Canadian investment in it recently. But demand has not kept up with supply because the housing market didn’t grow as it was expected to. That mismatch has resulted in low prices, he said.
Anthony and Pelkki agreed that the industry has had a good few years, though.
"We've been on about a six-year period of pretty good economic expansion,” Anthony said. “Our market has been, I don't know how to describe it, other than it's been very favorable for almost the last six or seven years, which is highly unusual."
He explained that the sawmill business tends to be cyclical, and the industry was hit hard in 2006, just before the Great Recession. It lost much of its capacity, then rebounded when the economy did in 2012. Pelkki agreed that the industry had rebounded, but not to pre-Recession heights.
About what he’s seeing now, Anthony said, "Our industry tends to be a leading economic indicator. ... So I've been a little bit concerned that perhaps what we have been seeing has been an omen that we are entering a recession. I hope I'm wrong.
“But, like I said, six or seven years of good market is highly unusual for us. It would be strange for us not to be expecting a recession at some point.”