February 3, 2009 / 2:23 PM / in 9 years

UPDATE 2-Tembec to idle mills; shutdown affects 1,400

(Adds production details, company comment)

VANCOUVER, British Columbia, Feb 3 (Reuters) - Tembec (TMB.TO) will idle several Canadian facilities, affecting about 1,400 employees, due to the depressed markets for lumber, pulp and newsprint, the company said on Tuesday.

The forest products company had said last week that it expected to take steps to preserve the liquidity position that it built up last year when it recapitalized.

In British Columbia, sawmills in Canal Flats and Elko and its finger joint lumber mill in Cranbrook will all begin an eight-week shutdown on Feb 9.

The Elko and Canal Flats mills have a combined annual capacity of 450,000 mbf of lumber, while Cranbrook’s capacity is 25,000 mbf, and all have been idled several times over the past 12 months.

Tembec said its Hearst, Ontario sawmill, which has an annual capacity of 160,000 mbf of lumber, will also begin a six week shutdown on Feb. 9.

Tembec and other forestry firms have been suffering for over a year from the collapse of the U.S. housing market, but they were also hit at the end of 2008 by a dramatic fall in the price of pulp.

“It’s as if the pulp market just vanished,” said Richard Fahey, a Tembec spokesman.

Tembec said its high-yield pulp facility in Chetwynd, British Columbia was idled on Monday and will remain shut down until markets improve. The firm’s softwood kraft pulp mill in Skookumchuck will close for six weeks starting Feb. 23.

The Chetwynd facility has an annual production capacity of 240,000 tonnes, while Skookumchuck’s capacity is 270,000 tonnes.

Tembec’s newsprint mill in Pine Falls, Manitoba, will also be shut down for two weeks, effective Feb. 10.

Tembec shares were down 10 Canadian cents at C$1 on the Toronto Stock Exchange following the news. (Reporting by Krishna Chaithanya and Allan Dowd. Editing by Jeffrey Hodgson)

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