Lumber firms fear housing slowdown

Canadian lumber producers Wednesday expressedconcerns that weak U.S. home sales could further delay a recovery in demand for home building materials.

"AbitibiBowater is concerned by these numbers," spokesman Pierre Choquette said after the U.S. Commerce Department reported that sales of new homesdropped sharply in July to their slowest pace on record.

New home sales fell 12.4 per cent from June to a seasonally adjusted annual total of 276,600.

That was the lowest monthly total dating back to 1963, and the latest sign that the economic recovery is fading.

Choquettesaid Montreal-based AbitibiBowater, which sells lumber in addition to newsprint, fears that the recent drop in housing starts signals that increasing prices and demand in the second quarter of the year were mainly due to low inventory.

AbitibiBowater, which hopes to exit creditor protection in October, said it has slowed production of some wood products operations in Quebec and related woodlands, affecting 50 workers.

Tembec, based in Montreal, said last month that it expects prices will continue to be volatile, as demand will only return in mid to late 2011.

Vancouver's West Fraser Timberrecently said it expected that low U.S. housing starts would decrease lumber prices in the second half of the year.

Relying on domestic demand

The producer noted, however, that housing starts in Canada would likely support "reasonable demand" for plywood.

The past three months have been the worst ever for new home sales in the U.S., even with bargain prices and the lowest mortgage rates in decades.

The median sales price in July was $204,000. That was down 4.8 per cent from a year earlier and down six per cent from June.

The report came one day after the National Association of Realtors released data showingthat sales of previously occupied homes plunged in July by 27 per cent from the month earlier, to their lowest level in 15 years.