Remi Lalonde will take over as chief executive officer of Resolute Forest Products Inc. on March 1, 2021.Handout
Resolute Forest Products Inc. chief financial officer Remi Lalonde recalls tense times for the company last spring, when the outlook seemed bleak for lumber demand.
“I think that when you look at 2020 and the pandemic-induced challenges that we had, there were some pretty scary moments, especially in March, April and May,” he said in an interview, days before he becomes Resolute’s new chief executive officer next week.
Mr. Lalonde remembers the forestry sector’s widespread fears last spring that U.S. housing starts would plummet in 2020, as they did during the 2008-09 recession.
Instead of crashing, however, lumber markets soared in the second half of 2020 amid a surprisingly brisk pace of U.S. housing starts.
Mr. Lalonde said while there is bound to be volatility in commodity prices in the cyclical forestry industry, he sees promising signs for the momentum in North America’s lumber sector to carry through 2021. “There’s going to be a tailwind in lumber markets for at least some time to come,” he said.
The lumber rally in the second half of 2020 more than offset weak demand for Resolute’s newsprint production and a lacklustre performance on the pulp and paper side.
“It turns out that with folks having to work remotely and adjust in the pandemic, it really pushed an increase in demand for housing starts,” Mr. Lalonde said. “It also drove a lot of demand into repair and remodelling activity.”
Benchmark two-by-fours made from Western spruce, pine and fir sold in mid-February for US$992 for 1,000 board feet, compared with US$402 at the same time last year, according to industry newsletter Madison’s Lumber Reporter.
“Home builders continue to see strong demand,” CIBC World Markets Inc. analyst Hamir Patel said in a research note last week.
Montreal-based Resolute’s gains on the Toronto Stock Exchange over the past 10 months reflect the company’s strength in wood products, with lumber prices hitting record highs this month.
Resolute’s share price on the TSX closed at $11.63 on Friday, down from its 52-week intraday high of $14.10 on Feb. 16, but still seven times higher than the record low of $1.63 in April, 2020.
“Folks are realizing that they’re going to be spending more time at home,” Mr. Lalonde said. “They’re building decks, they’re building fences – all to make the more time that they spend at home more comfortable.”
Mr. Lalonde, 44, will be taking over on March 1 as CEO from the retiring Yves Laflamme, a long-time Resolute executive who rose to the top job three years ago.
Mr. Lalonde joined Resolute in 2009 and has filled a wide range of roles over the years, including serving as general manager of its pulp and paper mill in Thunder Bay.
A franco-Ontarian, he graduated with an engineering degree from the University of Ottawa in 1999 and then earned his law degree from the same university in 2003.
Sylvain Girard, a former chief financial officer at SNC-Lavalin Group Inc. , will join Resolute to become its new CFO on March 2.
A major lingering concern for Mr. Lalonde and Mr. Girard will be the long-running trade dispute between Canada and the United States over softwood lumber.
In the latest round of the cross-border fight, the U.S. Department of Commerce began imposing duties on Canadian lumber in April, 2017. By the end of 2020, Resolute alone paid duties totalling US$243-million.
“The dispute has been very costly to the Canadian lumber sector,” Mr. Lalonde said. “Our perspective is that when we look at the past, international bodies have almost always sided with Canada throughout the dispute resolution process.”
The issue of Canadian lumber shipments into the U.S. is not a direct part of the North American free-trade agreement nor the U.S.-Mexico-Canada Agreement. But under NAFTA’s Chapter 19, Canada and the U.S. agreed to set up trade panels to settle disputes.
The USMCA, which took effect on July 1, 2020, retains that appeal process.
It remains to be seen whether the Biden administration will be motivated to resolve the softwood battle that dates back to the early 1980s. “But we think that with the new administration, there is an encouraging signal of change in tone,” Mr. Lalonde said. “We need them to embrace the rule of law and to be a fair, good-faith collaborator. Canada and the U.S. have a special relationship, and we need that to be restored.”
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Brent Jang