Alberta Forest Industry attempting to weather market storm by reducing production, extending downtime…

Full-Year 2006 Values Down $569 Million as Market Prices Fall Through Year…Continued Downward Trend Expected

Edmonton, March 21, 2007 – Significantly lower market prices for dimensional lumber and panelboard products in the final three months of 2006 resulted in Alberta’s forest products industry showing a year-end product value of just under $3.2 billion, a decrease of $569 million from 2005 and a decline of $1.1 billion from 2004’s value of $4.31 billion. In the final quarter of 2006, shipped forest products were valued at $756.8 million, a reduction of $126.5 million versus the fourth quarter of 2005.

Alberta producers responded to the continuing fall in market prices by reducing their production near the end of 2006 and this trend is continuing in 2007 as US housing starts show no signs of slowing their rapid drop. November 2006 housing starts fell 27.5 percent year over year.

Alberta Forest Products Association President Ken Vanderwell warned the impacts on an already beleaguered forest sector will get worse before they get better, including the possibility of mill shutdowns in Alberta.

"The full year numbers for 2006 actually hide the magnitude of the current market problems because prices were stable at the start of the year," Vanderwell said.

"The last five months of the year saw continuing softening in prices with the result being a 26 percent drop in lumber prices and a 52 percent drop in OSB prices between year-end 2006 and year-end 2005 (based on mill prices reported by Random Lengths)."

The downturn in the market for forest products is not only hurting the forest products industry, a number of rural communities also are feeling the effects. Slave Lake Mayor Karina Pillay Kinnee represents one of many concerned municipal officials.

"Slave Lake Town Council is very concerned about the impact of significantly lower market prices for forestry products," Mayor Pillay Kinnee stated.

"Our town has already been affected by the indefinite shutdown of the local Tolko mill and we are concerned about the long-term implications for an industry with deep roots in our community. The forest products industry is a sustainable resource industry that can benefit our region long after the current economic boom is over. We support the efforts of industry and government to find solutions to this current crisis".

LUMBER – AFPA-member lumber companies shipped 777.8 million board feet* (mmfbm) in Q4-2006 with a value of $C209.9 million, compared to 800.9 mmfbm worth $C300.9 million in Q4-2005. Part of this lumber production came from the secondary manufacturing sector. For the entire year, lumber shipments were 3205.6 million board feet with a value of $1.057 billion. This compares to the 2005 full year results of 3272.7 million board feet with a value of $1.379 billion. The value of Alberta lumber has decreased $C321.8 million year over year on comparable production.

At the current low prices, all Alberta softwood lumber exported into the United States carries an additional cost – a 15 percent export tax added to each lumber shipment at the border. This export tax, which flows to the Government of Canada as part of the Softwood Lumber Agreement, costs Alberta producers between $5 and $8 million each month, depending on volumes.
(*A board foot (fbm) is the standard measure for lumber and is of 1"x12"x12" dimension or 144 cubic inches. An eight foot 2x4 is equivalent to five board feet.)

PANELBOARD – AFPA-member panelboard operations moved 760.4 million square feet of 3/8^th inch equivalent product in Q4-2006 at a value of $C140.9 million. This compares to 699.9 million square feet of production with a value of $219.5 million in Q4-2005. When looking at a year-over-year comparison, 2006 panelboard production was 2818.7 million square feet with a value of $C660.8 million versus 2005 production of 2837.7 million square feet with a value of $C930.2 million.

The average monthly prices for oriented strandboard were $C190.72 in October, $C194.81 in November, then falling to $C183.36 in December. Average monthly plywood prices started the quarter at $C327.25 per thousand square feet, falling to $C320.25 in November then rising to $C332.50 in December. The quarterly price for medium-density fibreboard was $C490.00, down $20.00 from the previous two quarters.

PULP & PAPER – Pulp and paper prices continue to be one of the few positive areas of the forest products market, as a result of more than 23 Canadian mill closures and price increases that have held with large consumers. AFPA’s pulp and paper sector production increased by almost seven percent from the third quarter to 511,200 air dried metric tonnes (ADMt) – almost the same as in Q4-2005. The market value jumped to $406.0 million, up $43.1 million from last year. For the full year 2006, Alberta producers made 1970.0 thousand ADMt of pulp and paper at a market value of $1477.4 million. This compares to 2012.0 thousand ADMt worth $1455.0 million in 2005.

Average market prices for the fourth quarter 2006 against 2005 prices for pulp and paper types per metric tonne were:

	BCTMP*	Hardwood Pulp	Softwood Pulp	Newsprint
Q4 2006	$C718.44 up $69.49	$C798.54 up $74.49	$C868.95 up $120.26	$C652.69 up $21.78
Q4 2005	$C648.95	$C724.05	$C748.69	$C630.91

(*BCTMP = Bleached chemi-thermomechanical pulp)

INDUSTRY CHALLENGES – Since late 2006, a number of Alberta producers have taken downtime or curtailed production including:

In addition to ongoing price difficulties for dimensional lumber and panelboard products and the 15 percent export tax being charged to softwood lumber producers, the Alberta forest products industry is also challenged by the large-scale infestations of Mountain Pine Beetle in the south-east and north-east parts of our province.

Considerable efforts have been undertaken during this winter harvesting season to target beetle-infested or beetle-susceptible pine stands and harvest them as a priority. This has meant that some companies have incurred extra costs to revise harvest planning and operations. We will only know how successful these efforts have been later on in 2007 as the beetle larvae matures and flies again in search of new host pine trees.

"Even through this economic crisis facing the industry, the protection and enhancement of the environment, and the safety of our employees and Albertans will not be compromised as these are the values by which the forest products industry operates," said Vanderwell.

"We look to work closely with the government to find efficiencies in the existing system and streamline regulatory requirements which will assist us in meeting the multitude of current challenges while ensuring the sustainability of the forest resource for the long-term."

The Alberta Forest Products Association is a private, non-profit industry organization, representing lumber, panelboard, pulp and paper, and secondary manufacturing wood products companies operating in Alberta. The forest products industry is Alberta’s third largest manufacturing industry and the second largest manufacturing export industry. AFPA member companies are active participants in sustainability advancements that benefit the industry, our environment and society.

Media contact:
Parker Hogan
Director, Public Affairs
p) 780.452.2841 ext 240
c) 780.914.2869

Background Information
Full-Year 2006 Values Down $569 Million
March 21, 2007

Lumber	2005		2006
Year/Quarter	Production(mmfbm)	$C Value(000,000s)	Production(mmfbm)	$C Value(000,000s)
1^st Quarter	777.4	373.3	768.6	298.7
2^nd Quarter	818.6	362.4	885.8	311.9
3^rd Quarter	875.8	342.2	773.4	236.5
4^th Quarter	800.9	300.9	777.8	209.9
Yearly Totals	3272.2	1378.8	3205.6	1057.0

Source: Random Lengths (S-P-F, Western, Kiln Dried 2x4, std&btr, Random, Prices Net FOB Mill)

Panelboard	2005		2006
Year/Quarter	Production (mm sq ft)	$C Value(000,000s)	Production (mm sq ft)	$C Value(000,000s)
1^st Quarter	756.4	278.0	725.9	209.2
2^nd Quarter	684.6	228.2	641.5	168.5
3^rd Quarter	694.7	203.5	690.0	142.2
4^th Quarter	699.9	219.5	760.4	140.9
Yearly Totals	2837.7	930.2	2818.7	660.8

Pulp and Paper	2005		2006
Year/Quarter	Production Thousand Metric Tonnes (Air Dried)	$C Value(000,000s)	Production Thousand Metric Tonnes (Air Dried)	$C Value(000,000s)
1^st Quarter	500.8	364.3	498.9	352.3
2^nd Quarter	478.1	358.2	467.7	339.3
3^rd Quarter	519.4	369.4	492.2	379.8
4^th Quarter	513.5	362.9	511.2	406.0
Yearly Totals	2012.0	1455.0	1970.0	1477.4

Media contact:
Parker Hogan
Director, Public Affairs
p) 780.452.2841 ext 240
c) 780.914.2869

Full-Year 2006 Values Down $569 Million as Market Prices Fall Through Year…Continued Downward Trend Expected

Background InformationFull-Year 2006 Values Down $569 Million March 21, 2007

Background Information
Full-Year 2006 Values Down $569 Million
March 21, 2007