The high Canadian dollar, rising energy costs, high US duties on lumber exports and government cutbacks to the allowable timber cut have all combined to cause grief to eastern Canadian forest product companies.

Major producers are forecast to report losses for the third quarter, with some resorting to mill closures to soften the financial blow.

Among the casualties is West Fraser Timber which reported a sharp decline in earnings to C$18m compared to profits of C$78m in the same period in 2004.

West Fraser chief executive officer Hank Ketcham has called on Ottawa to stand firm in its dispute with the US over softwood lumber and its demand that the US return C$3.5bn in duties.

He said it was important for the industry and the government to remain firm in defending its rights under the NAFTA agreement which has ruled against the US International Trade Commission’s threat of injury claim and said the duties charged to Canadian softwood companies were illegal under US law.

Meanwhile, US secretary of state Condoleezza Rice refused demands by Canadian prime minister Paul Martin to return the duties while on an official visit to Ottawa. She said her government wanted to negotiate an end to the dispute.