HispanicBusiness

Markets

Global softwood pulp markets showed a small improvement through the first quarter of 2013. Global softwood pulp shipments and printing and writing demand were relatively flat(18), with global softwood pulp producer inventory levels in March 2013 at 29 days supply, in line with December 2012, and up 1 day compared to March 2012 inventories(19).

(18) As reported by Pulp and Paper Products Council ("PPPC") statistics.

(19) World 20 data is based on twenty producing countries representing 80% of world chemical market pulp capacity and is based on information compiled and prepared by the PPPC.

Sales

The Company's pulp shipments in the first quarter of 2013 were 308,000 tonnes, an increase of approximately 10,000 tonnes, or 4%, from the previous quarter, principally reflecting higher shipment volumes to China. Compared to the first quarter of 2012, shipments were down approximately 20,000 tonnes, or 6%, with the increased volumes to China more than offset by lower volumes to all other regions.

Global softwood pulp markets saw modest price increases through the current quarter with average NBSK pulp list prices to all regions moving up US$15 to US$30 per tonne. The NBSK pulp list price to North America averaged US$897 per tonne for the quarter, up US$34, or 4%, from the previous quarter. Sales to China and Europe were also up through the quarter, with Canfor Pulp's list price to China up US$16 per tonne and pricing to Europe up US$29 per tonne. Current quarter NBSK pulp sales realizations did not match the full list price increases due to increased volumes into lower-margin regions, principally China. Bleached chemi-thermo mechanical pulp ("BCTMP") average sales realizations showed a modest decline compared to the previous quarter, reflecting a decrease in prices in the last month of the current quarter. Pulp sales realizations benefitted from a weakening of the Canadian dollar against the US dollar, which was down 2% compared to the previous quarter.

Compared to the first quarter of 2012, NBSK pulp sales realizations were largely unchanged, with a 3% gain in the average NBSK pulp list price to North America offset by increased volume to lower-margin regions. The North America average NBSK pulp list price increased US$27 per tonne from the previous quarter, while NBSK pulp list prices to China and Europe were in line with the same period in 2012. Higher energy sales under the EPA at Canfor Pulp's Prince George Pulp Mill reflected improved operational performance in the current quarter. Pulp sales realizations were also favourably impacted by the 1% weaker average Canadian dollar compared to the first quarter of 2012.

Operations

Pulp production in the current quarter was 317,000 tonnes, up marginally from the previous quarter, and in line with production in the first quarter of 2012. Production levels reflected steady improvements in operating rates through the quarter.

Pulp unit manufacturing costs decreased slightly from the previous quarter, driven largely by the timing of maintenance spending, coupled with the marginal increase in production levels, partially offset by seasonally higher energy costs. Fibre costs were up slightly compared to the previous quarter, reflecting a modest increase in sawmill residual chips, where prices are linked to NBSK pulp sales realizations, as well as a greater proportion of higher-cost whole log chips. The current quarter results also included a one-time non-cash $1.5 million benefit from scientific research and development tax credits.