June 19, 2009 / 8:56 PM / 9 years ago

UPDATE 1-Tembec says not to idle British Columbia pulp mill

* Says planned two-week shutdown not to happen

* Sites recent positive changes in operating environment

* Move follows Canada’s C$1 bn aid to paper mills

June 19 (Reuters) - Canadian forest products company Tembec Inc TMB.TO said it cancelled its planned two-week shutdown at its Skookumchuck pulp mill in view of the uptick in the overall operating environment and the Canadian government’s C$1 billion aid for the pulp and paper producers.

“While market conditions remain difficult, the recently announced Green Transformation Program and some modest improvement in pulp pricing and in fibre economics have sufficiently altered operating conditions to the point where running the mill is a better course of action,” said Yvon Pelletier, executive vice president of the company.

“However, the operating environment remains challenging. In particular, the availability of economically viable fibre continues to be an issue,” Pelletier said in a statement.

Canada unveiled a C$1 billion plan on Wednesday to help pulp mills counter the impact of a U.S. tax credit that has become a financial windfall for their American rivals and pushed down pulp prices.

On June 11, the company said it would idle its pulp mill located in Skookumchuck, British Columbia, for at least two weeks, amid lower demand for paper and packaging products and a strong Canadian dollar. [ID:nBNG499768]

The company also had said that it will continue to monitor economic and market conditions closely and will adjust operating rates accordingly.

Shares of the company closed down 6 cents at 65 Canadian cents Friday on the Toronto Stock Exchange. (Reporting by Ashutosh Joshi in Bangalore; Editing by Gopakumar Warrier)

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