March 24, 2009 / 11:48 AM / in 9 years

UPDATE 1-Tembec to curtail operations in Kapuskasing region

TORONTO, March 24 (Reuters) - Canadian forest products company Tembec TMB.TO announced a temporary curtailment of operations in the Kapuskasing region, which will affect about 510 employees at its sawmill, newsprint and forestry operations.

The shutdown was attributed to the challenging market conditions for lumber and newsprint, the company said in a statement late on Monday.

Lumber demand in North America has been hit by the slowdown in the U.S. housing sector, while the spread of Internet access and the decline in advertising revenue has forced newspapers to cut back on newsprint.

The curtailments are expected to result in lost production of 20,000 tonnes of newsprint and 8 million board feet of lumber, the company said.

Last month, Tembec announced that it would idle several Canadian facilities, affecting about 1,400 employees. It also announced plans to cut about 100 jobs and implement a salary freeze in a bid to conserve capital.

Shares of Tembec and its peers have collapsed, as a slump in demand, tight credit markets and a heavy debt load have weighed on the shares and prompted speculation that a growing number of companies in the sector will likely be forced to seek bankruptcy protection.

Tembec shares closed at 86 Canadian cents on Monday on the Toronto Stock Exchange. (Reporting by Euan Rocha)

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