WEST FRASER TIMBER CO., LTD

Operations

Anticipated shipment levels assume no significant change from current market demand conditions, sufficient availability of logs within our economic return criteria, and no further indefinite or permanent curtailments. Our operations and results could be negatively affected by increasing or elevated interest rates, duties and tariffs, softening demand, the availability of transportation, the availability of labour, disruption to the global economy resulting from the conflicts in Ukraine and the Middle East, inflationary pressures, including increases in energy prices, adverse weather conditions in our operating areas, intense competition for logs, elevated stumpage fees, and production disruptions due to other uncontrollable factors.

The Lumber segment is expected to experience a modest demand recovery in 2025, though significant unknowns exist surrounding the potential demand impacts from sweeping tariffs threatened by the U.S. administration. Based on what we can see today, including the mill closures and indefinite curtailments we announced last year and the uncertainties around the impact of tariffs, offset in part by the ongoing reliability and capital improvement gains across our lumber mill portfolio, we are targeting 2025 SPF shipments to be 2.7 to 3.0 billion board feet and SYP shipments to be 2.5 to 2.8 billion board feet. As the new U.S. administration’s tariff and other policies evolve, we will evaluate the impact of the tariffs on our operations and consider whether any revisions to our shipment estimates are warranted. On January 1, 2025, stumpage rates increased slightly in B.C. from reasonably modest levels due to the market-based adjustments related to lumber prices, with inflationary pressures on development, logging and delivery costs continuing to provide upward bias to total fibre costs. Given the recent commodity price environment, B.C. stumpage rates are expected to track higher through Q1-25. In Alberta, Q1-25 stumpage rates are also expected to be above Q4-24 levels as these rates are closely linked to the price of lumber but with a quicker response to changing lumber prices. Recent sawmill capacity curtailments across the U.S. South have continued to create opportunities for lower log costs with the pace of cost reductions varying by region. We expect average 2025 log costs across the U.S. South will be largely similar to those of 2024, though region-specific log costs are likely to vary depending on the unique conditions in each procurement zone.

In our NA EWP segment, we expect somewhat stronger demand in 2025. However, as for the Lumber segment, we acknowledge risks to our demand forecasts given the near-term threat of potential trade tariffs. In light of the uncertainties around the impact of tariffs, we are targeting 2025 shipments in the range of 6.5 to 6.9 billion square feet (3/8-inch basis). Start-up of the Allendale mill is progressing well and we continue to anticipate a ramp-up period for the mill of up to three years to meet targeted production levels. As the new U.S. administration tariff and other policies evolve, we will evaluate the impact of the tariffs on our operations and consider whether any revisions to our shipment estimates are warranted. We expect our overall OSB platform to be better and lower cost with a modern Allendale facility operating, and as with all our wood products operations, demand is a key input in determining our operating schedules across our manufacturing footprint. Input costs for the NA EWP business are expected to be relatively stable through 2025. Recent sawmill curtailments across the industry have in some instances created chip shortages for pulp producers, although to-date we have not experienced increasing demand tension for pulp logs, the primary fibre source for OSB production.

In our Europe EWP segment, we expect demand to improve for our MDF, particleboard and OSB panel products in 2025, but recognize the ongoing macroeconomic uncertainties surrounding interest rates and economic growth in the region. As such, we are guiding for 2025 OSB shipments in the range of 1.0 to 1.25 billion square feet (3/8-inch basis). Input costs for the Europe EWP business in 2025, including energy and resin costs, are expected to stabilize near 2024 levels.

On balance, we experienced relatively stable costs for inputs across our supply chain again in Q4-24, including resins and chemicals, while contract labour availability and capital equipment lead times showed significant improvement. We expect these trends to largely continue in 2025.

We will continue to regularly evaluate the factors above as well as evolving market conditions in making production decisions across the business.

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