Lumber Consolidation

Keta K has an interesting article on the consolidation of Abitibi and Bowater, two competitors in the lumber industry in Canada.

Once again confimring what Herr Dr. Marx had to say about the nature of centralization of competing capitals.

That production rests on the supreme rule of capital. The centralization of capital is essential to the existence of capital as an independent power. The destructive influence of that centralization upon the markets of the world does but reveal, in the most gigantic dimensions, the inherent organic laws of political economy now at work in every civilized town. Marx

And the merger of Abitibi and Bowater is only the begining of consolidation in the lumber industry in order to compete globally. Having been hewers of wood for America, the lumber industry in Canada failed to develop secondary and tertiary industries and markets that could meet global demand. It was easier to just sit back and sell to the Americans.

Watch for Canfor to be the next tree to fall in the M&A forest.

Newsprint maker Abitibi-Consolidated's merger with Bowater, announced Monday, may seem like the union of two dying elephants in a dying industry. A less cynical view would be that it continues a healthy trend. Domtar's big cross-border deal with Weyerhaeuser, set to close this month or next, will double the Montreal firm's sales. In B.C., West Fraser Timber forked out $325-million (U.S.), one-quarter of its market capitalization at the time, for 13 mills in the southern United States. There's more deal making to come because all of these companies are still too small, and for investors, one question lingers: Where's Canfor?

So why isn't Canfor larger already? For that matter, why doesn't any domestic forest company rank in the top 20 on PwC's global ranking? The Finns are there, as are the Japanese, the Aussies and the Singaporeans. Sweden's Svenska Cellulosa has a market cap of about $15-billion (Canadian) -- that's more than Canada's largest nine forestry companies put together.



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