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WEST FRASER’S HINTON PULP TO REDUCE PRODUCTION CAPACITY AND MOVE TO UNBLEACHED KRAFT PULP

Tue, April 5, 2022, 5:15 p.m.·4 min read

VANCOUVER, BC, April 5, 2022 /CNW/ – West Fraser Timber Co. Ltd. (“West Fraser” or the “Company”) (TSX and NYSE: WFG) announced today that it will permanently reduce capacity at its pulp mill in Hinton, Alberta (“Hinton Pulp”) by the end of this year. One of Hinton Pulp’s two production lines will shut, and the remaining line will produce Unbleached Kraft Pulp (“UKP”) rather than Northern Bleached Softwood Kraft Pulp (“NBSK”).

“Hinton Pulp has been in operation since 1956 and these changes are necessary to simplify our operation, reduce capital requirements and greenhouse gas emissions, and better align with consumer expectations,” said Ray Ferris, President & CEO, West Fraser.

The capacity reduction will see staffing levels transition from 345 positions to 270. West Fraser expects to mitigate the impact on employees through natural attrition, retirements and by offering employment opportunities at other West Fraser operations.

“Our Hinton Pulp team has been engaged in a comprehensive review process and I want to thank them for their creativity and commitment to the mill, our customers and the environment. We remain strongly committed to the community of Hinton, the future of the plant, and to our neighbouring lumber operation, Hinton Wood Products,” said Ferris.

The environmental benefits of moving to a single UKP production line include:

• an estimated 35% reduction in greenhouse gas emissions (“GHGs”), which is equivalent to taking approximately 19,900 cars off the road per year
• an estimated 25% reduction in water use, air emissions and waste generation, and
• elimination of chlorine dioxide emissions

As the world moves away from single-use plastics, UKP is now used increasingly in a wide variety of everyday items including cardboard packaging, grocery bags, fibre-cement board and specialty products.

Since late 2021, the mill has undertaken several product trials and received positive initial customer feedback as to the quality and strength of the pulp produced. Currently, mill employees are preparing for the transition after satisfying all existing customer commitments for NBSK.

It is anticipated that an impairment charge of approximately US$13 million will be recorded in West Fraser’s first quarter 2022 results associated with the write-down of equipment that will be decommissioned permanently as part of the transition to UKP.

About West Fraser

West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States, the United Kingdom, and Europe. From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals, and renewable energy. West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials. For more information about West Fraser, visit www.westfraser.com.

Chip shortage, rising gas prices and inflation hamper auto industry stocks

It has been a rough ride for auto industry investors in recent months: The global semiconductor chip shortage continues to constrain vehicle production and rising costs squeeze company margins, sending share prices in reverse.

Market watchers say higher gas prices and rising inflation are also expected to curb consumption of big-ticket discretionary items like cars and trucks, especially if global economic growth slows, which could happen if interest rates rise too quickly.

Demand for electric vehicles (EVs) is increasing, and more companies are making them. However, their higher price tag and the lack of charging infrastructure in North America are still hurdles for many consumers.

“This is a sector to be cautious on at this time,” says Brooke Thackray, a research analyst with Horizons ETFs (Canada) Inc. of Toronto.

Auto industry investors did have a good run coming out of the pandemic. For example, shares of car maker General Motors Co. and parts supplier Magna International Inc. were each trading above prepandemic levels by the end of 2020 – and both reached record highs in the spring of 2021, driven by increased demand.

Then the semiconductor chip shortage hit after the coronavirus pandemic drove up demand for cellphones, laptops and, later on, vehicles, forcing auto companies to cut production just as consumer demand was steadily recovering.

Russia’s invasion of Ukraine could create more problems for the sector. According to Reuters, Ukraine’s two leading suppliers of neon, which produce about half the world’s supply of the key ingredient for the lasers used to make chips, have halted their operations.

“[The chip shortage] has thrown a big wrench into the ability for the supply side to meet the elevated demand levels that are out there,” says Mike Archibald, vice-president and portfolio manager at AGF Investments.

He points to Toronto-based Magna, the largest Canadian-based auto stock, which posted sales of US$9.1-billion in the fourth quarter of 2021, a drop of 14 per cent from the same quarter of 2020. The company said global light vehicle production fell 17 per cent in the fourth quarter ended Dec. 31, “driven by the semiconductor chip shortages the industry has faced throughout 2021.”

Mr. Archibald has no current investments in the auto space, as concerns around chip shortages and production stops and starts led him to sell his holdings. He’s looking for evidence of recovering production levels before considering buying back into the sector.

“The short term is very uncertain for all of these companies,” he says, but he sees better days ahead for auto companies once production returns.

There’s also strong growth potential for the industry as it moves aggressively into EV production. In Canada, suppliers like Magna and Linamar Corp. are also gearing up their EV offerings.

“The tailwinds in that part of the market are there,” Mr. Archibald says, citing Tesla, the EV “poster child,” and the more traditional auto makers that are continuously rolling out EV models and have ambitious plans for EV fleets in the future.

Investors looking for Canadian-based auto industry stocks could look to aftermarket parts provider Uni-Select Inc., which Mr. Archibald has previously owned. The stock has done well amid the increased demand for used cars in recent months, as the supply of new cars was limited.

He also points to dealership company AutoCanada, which sells new and used cars, as an alternative for investors in the sector.

“The stock has come off,” alongside other car companies, he notes, as vehicle sales slow. “But if you want exposure to the auto segment, this is a way that you could get it directly.”

Mr. Thackray says investors looking to buy auto stocks outside of Canada could turn to the large auto manufacturers like GM and Ford Motor Co., both listed on the New York Stock Exchange. Another option is the First Trust Nasdaq Global Auto Index Fund (CARZ-Q), which is more of a technology play. CARZ’s top holdings include Tesla, chip maker Nvidia Corp., Apple Inc. and Alphabet Inc. – the last two are working on autonomous vehicles.

Still, Mr. Thackray notes the exchange-traded fund (ETF) is small, with about US$70-million in assets. The ETF was down 3 per cent year-to-date, as of March 31, and returned 2 per cent over the past 12 months.

Overall, Mr. Thackray warns that the auto industry is cyclical and suggests investors tread carefully whether buying the new, innovative side or traditional auto makers.

Wes Ashton, co-founder, director of growth strategy and a portfolio manager at Harbourfront Wealth Management Inc. in Vancouver, says most investors who buy a U.S. index fund today own Tesla, given its US$1-trillion-plus market share.

Tesla recently announced a plan to increase its share count to enable a stock split to attract more investors. The highly cyclical stock currently trades at around US$1,000 and has traded between about US$545 and US$1,243 over the past year.

“What investors need to understand is that some of these EV stocks can be very volatile,” he says, citing the example of Tesla, a stock his firm owns for some clients.

“For a lot of clients, it’s fun making money when the stock rises,” he says, “but when the stock corrects, it’s not as pleasant. So you have to be more patient and diversify your overall approach.”

Mr. Ashton says he wouldn’t load up on these EV names, “but I think owning some forward-looking innovative stocks in the auto sector isn’t necessarily a bad thing because that’s where the industry is going.”

CI Financial to spin out U.S. wealth business in new IPO

C I Financial CIX-T is spinning out its U.S. wealth management operation with plans to sell as much as 20 per cent of the division in an initial public offering.

The investment giant, which manages about $370-billion in client assets, announced Thursday that it intends to submit an application this year to the U.S. Securities and Exchange Commission to launch an IPO for its U.S wealth business, which now accounts for more than half the company.

CI will remain the majority shareholder and said in a release that it currently has “no intention of spinning out or otherwise divesting” its remaining ownership interest. Proceeds of the IPO will be used to pay down debt.

The company has spent the past several years trying to restore its stock price, which at times has plummeted more than 45 per cent from its peak in 2014. Chief executive Kurt MacAlpine, who stepped into his role in 2019, has been busy implementing a new turnaround strategy that includes boosting CI’s presence in the U.S. market.

Throughout the pandemic, the financial services company has been on an acquisition spree, buying more than 25 registered investment adviser firms in the U.S. since January, 2020. Eight of those deals closed in the last quarter.

Once all outstanding acquisitions are completed, CI’s U.S. wealth management assets will total about US$133-billion – more than twice the assets of the Canadian wealth business, which was about $80.6-billion at the end of 2021.

Mr. MacAlpine said the steady growth of the U.S. business has positioned it with “sufficient scale to stand alone as a public company.”

“The growth in our U.S. wealth management business is incredible; however, in our opinion, the value we have created isn’t reflected in our share price today,” he said in a statement.

“After a thorough evaluation of our strategic options, we are confident that a U.S.-listed subsidiary IPO is the best route to shareholder value creation.”

Bank of Nova Scotia analyst Phil Hardie said in a research note that the IPO transaction is positive, providing an “avenue to better reflect the value of CI’s U.S. Wealth Management business.”

Mr. Hardie believes the spun-off U.S. business could trade at an enterprise value – or market capitalization plus net debt – of 9.5 to 12.5 times its earnings before interest, taxes, depreciation and amortization (EBITDA), similar to the valuation of U.S. wealth manger Focus Financial Partners, which launched an IPO in 2018.

Parent CI Financial currently trades at less than six times EBITDA, he said, with the shares having fallen 40 per cent from their November, 2021, high.

The company has not yet determined the size and timing of the IPO but said it will be subject to market conditions.

U.S. Congress votes to revoke Russia’s trade status, ban oil and gas imports following atrocities in Bucha

Ukraine’s Foreign Minister Dmytro Kuleba met with G-7 and NATO leaders in Brussels, one day after the U.S. announced new penalties on Russia that included a ban on all new investment in the country and sanctions on President Vladimir Putin’s daughters.

“I came here today to discuss three most important things: weapons, weapons, and weapons,” Kuleba said in a tweet.

Reports of rape and torture against civilians by Vladimir Putin’s forces drew strong condemnation from G-7 members, who voted to remove Russia from the U.N. Human Rights Council.

The atrocities also galvanized action in the U.S. where the Congress voted to strip Russia of its most favored nation trading status and to ban its oil and gas imports. U.S. President Joe Biden is expected to quickly sign both into law.

Ukraine’s Foreign Minister Dmytro Kuleba (L) and NATO Secretary General Jens Stoltenberg give a press conference before a meeting of NATO foreign ministers at NATO headquarters, in Brussels, on April 7, 2022.Dursun Aydemir | Anadolu Agency | Getty Images15 MIN AGO

Congress votes to ban oil and gas imports from Russia

The U.S. Congress voted to ban oil, gas and coal imports from Russia as part of a governmentwide effort to squeeze Russia’s economy in response to Moscow’s brutal invasion of Ukraine.

The House approved the bill in a 413-9 vote. The Senate passed it unanimously earlier in the day. It will head to Biden’s desk for his signature.

The legislation codifies an executive order Biden issued last month to bar energy imports from Russia. The bill would make it more difficult for a future president to reverse Biden’s action.

Secretary of State Antony Blinken downplayed concerns that the U.S. was withholding weapons explicitly requested by Ukraine.

“They’re coming forward with new systems that they think would be helpful and effective,” Blinken told reporters at NATO headquarters following a two-day ministerial meeting.

“We put our own expertise to bear, especially the Pentagon to help determine what indeed we think could be effective. What Ukrainians will be ready to use as soon as they get it, and what we actually have access to and can get to them in real-time,” he said, adding that the U.S. is working expeditiously to get appropriate weapons to Ukraine quickly.

Blinken’s comments echo those of U.S. Secretary of Defense Lloyd Austin and Chairman of the Joint Chiefs of Staff U.S. Army Gen. Mark Milley. Austin and Milley told lawmakers this week that some weapons systems on Ukraine’s wish list require months of training in order to operate.

Earlier in the day, Ukrainian Foreign Minister Dmytro Kuleba told reporters that he urged allies to catalyze the delivery of their arms commitments.

“Either you help us now, and I’m speaking about days not weeks, or your help will come too late,” Kuleba said.

Canada to Ban Foreigners From Buying Homes as Prices Soar

Canada will ban most foreigners from buying homes for two years and provide billions of dollars to spur construction activity in an attempt to cool off a surging real-estate market. 

The measures will be contained in Finance Minister Chrystia Freeland’s budget on Thursday, according to a person familiar with the matter, asking not to be named because the matter is private.  

The move signals that Prime Minister Justin Trudeau is becoming more assertive about taming one of the developed world’s most expensive housing markets — and that the government is growing more concerned about the political backlash to inflation and the rising cost of housing. 

Home prices in Canada have soared more than 50% over the past two years. The market saw a record monthly increase in February as buyers acted ahead of rate increases by the Bank of Canada, taking the benchmark price of a home to C$869,300 ($693,000). 

The foreign-buyer ban won’t apply to students, foreign workers or foreign citizens who are permanent residents of Canada, the person said. 

“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada. “I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”

Several billion dollars in Freeland’s budget will be allocated to building affordable housing and to helping local governments update their systems to allow faster construction of new properties. 

Yet the government plans other measures that could potentially boost demand, ostensibly to help new home buyers. Freeland will introduce legislation that allows Canadians under the age of 40 to save as much as C$40,000 ($31,900) for a home downpayment within a new tax-exempt vehicle, the person said.

Blind Bidding

During last year’s election campaign, Trudeau’s party also proposed a ban on “blind bidding” for houses — the prevailing system by which offers are kept secret when someone is auctioning a home. 

The industry body for the country’s real estate agents has now backed away from its defense of the practice. The Canadian Real Estate Association announced a pilot project Wednesday to display offers in real time on properties listed on its own listing website, Realtor.ca. 

“Multiple-offer scenarios have become increasingly commonplace in today’s real estate environment,” Michael Bourque, the association’s chief executive officer, said in a statement. “Canadian property buyers and sellers seek greater confidence in the process.” The pilot will begin in select markets this summer, the press release said.

Blind bidding has been blamed for accelerating price gains in a hot market, with properties sometimes selling for hundreds of thousands of dollars over the asking price. Some believe that secret bidding forces each potential buyer to offer as much as they can. 

Trudeau approves Equinor’s $12-billion offshore oil project: report

Federal Environment Minister Steven Guilbeault gave the green light to the Bay du Nord oil project off the coast of Newfoundland and Labrador.

It’s a politically risky move for Prime Minister Justin Trudeau that complicates his efforts to hit aggressive emission targets for the oil and gas sector and could potentially alienate the pro-environment bloc within the governing Liberal Party. Yet Russia’s invasion of Ukraine has also prompted policy-makers to reconsider the importance of the nation’s vast oil reserves to Canada’s economic security.

In the case of Bay du Nord, the government is expected to argue that the project’s emissions are lower than other methods of oil production.

Domestic politics are also at play in the decision. While the Liberals do poorly in Canada’s western oil-producing regions, they place a high value on seats in the Atlantic provinces and several cabinet ministers are from the area.

https://financialpost.com/commodities/energy/oil-gas/trudeau-approves-equinors-12-billion-oil-project-cbc-says

Stopped trucks, foldable beds for workers: What European businesses face with China’s Covid surge

• Shanghai, home to the world’s largest container shipping port, began a two-part lockdown on March 28 and has yet to announce when restrictions will lift.
• EU Chamber members estimate Shanghai port volumes are down by about 40% week-on-week, Bettina Schoen-Behanzin, Shanghai chapter chair and a chamber vice president, said Wednesday.
• Two days after a lockdown in Shenzhen lifted, EU Chamber South China Chapter Chair Klauz Zenkel said a company he visited still had “many, many foldable beds” — which the business planned to keep on hand because they weren’t sure whether they’d need them soon again.

https://www.cnbc.com/2022/04/07/what-european-businesses-face-with-chinas-zero-covid-policy.html

Oil falls as IEA nations ready big release from reserves

Oil futures fell on Wednesday following a surprising rise in U.S. crude stocks and after news that large consuming nations would also release oil from reserves in conjunction with the United States to counter supply worries.

Member states of the International Energy Agency (IEA) will release 120 million barrels from strategic reserves, including 60 million from the United States, according to two sources familiar with the matter. That U.S. 60 million commitment is part of Washington’s plans to release a million barrels a day for the next six months for a rough total of 180 million barrels.

Brent crude futures declined 5.22% to $101.07 per barrel. U.S. crude settled 5.6% lower at $96.23 per barrel.

Crude markets have been through weeks of volatility, with prices surging on supply concerns after Russia’s invasion of Ukraine and subsequent sanctions on Moscow by the United States and its allies.

Lately the market has been pulling back following reserve releases along with expectations that demand in China will slip as a resurgent pandemic has prompted lockdowns of cities including Shanghai.

U.S. crude stocks rose by 2.4 million barrels in the latest week, the U.S. Energy Information Administration said, while analysts had expected a drawdown. Output also rose, hitting 11.8 million barrels a day, most since late 2021, and output is expected to continue rising. The United States also released nearly 4 million barrels from its strategic reserve in the week.

“The SPR release was huge which does raise confidence that they can move a lot out of the reserve on a weekly basis,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The United States and its allies on Wednesday prepared new sanctions on Moscow over civilian killings in northern Ukraine, which President Volodymyr Zelenskiy described as “war crimes.” Russia denied targeting civilians.

“These concerns have no doubt fed into the oil price trending higher, with volatility expected to continue as the geopolitical situation unfolds,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

Proposed EU sanctions, which the bloc’s 27 member states must approve, would ban buying Russian coal and prevent Russian ships from entering EU ports.

The head of the EU’s executive Ursula von der Leyen said the bloc was working on additional sanctions, including on oil imports.

Britain also urged G7 and NATO nations to agree a timetable to phase out oil and gas imports from Russia.

Demand worries also mounted after authorities in top oil importer China extended a lockdown in Shanghai to cover all of the financial centre’s 26 million people.

https://www.ctvnews.ca/politics/federal-budget-to-include-10b-housing-plan-8b-for-defence-1.5850968

As Canadians face a cost of living crunch, tackling housing affordability is going to be a main feature of Thursday’s federal budget, CTV News has learned.

From moving to make it illegal for foreigners to buy any residential properties in Canada for the next two years, to rolling out a tax-free savings account for first-time buyers, the government is looking to make good on a series of 2021 Liberal campaign commitments in the 2022 budget.

Coming at a time of considerable economic and international instability, Deputy Prime Minister and Finance Minister Chrystia Freeland appears to have focused considerably in this budget on what the government can do to counter the housing crunch, the lack of inventory, and the skyrocketing prices. Click Link Above