Canadian foresters warned to expect more "blood"

By Allan Dowd

VANCOUVER, British Columbia (Reuters) - Canada's lumber industry, already battered by the weak U.S. housing market and the strong Canadian dollar, was warned on Thursday to expect more "blood on the floor."

The industry will likely not see a lumber market recovery until at least 2010, and financial returns for firms based in western Canada will hit record lows this year, said Craig Campbell, a forest industry advisor at PricewaterhouseCoopers.

The North American lumber market is still oversupplied "even though it seems like we're reading an obituary weekly for a sawmill," Campbell told an industry gathering in Vancouver.

"There's going to be more (closures), more cash burn, more blood on the floor," Campbell said.

Canada supplies about one third of the softwood lumber such as spruce, fir and pine used for housing construction in the United States, and about half of that comes from the western province of British Columbia.

The industry conference was also told not to expect a recovery in the U.S. housing market in the near future, because of the large inventory of unsold homes and overall weakness of the U.S. economy.

Patricia Croft, chief economist at the Canadian investment firm Phillips, Hager and North, said she believes the U.S. fell into a recession in December and recovery will take longer that many people predict.

She thought the weak U.S. dollar, which has also hurt the profits of Canadian export firms, would recover slightly through the year.