UPDATE 1-Dundee cuts pulp price forecast, downgrades Canfor Pulp

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Sept 4 (Reuters) - Dundee Securities lowered its pulp price forecasts and downgraded paper maker Canfor Pulp Income Fund (CFX_u.TO) to" neutral," citing weakening conditions in the pulp market.

"Global pulp markets are finally showing signs of a global slowdown after three years of rising prices," said analyst Richard Kelertas, who cut his pulp price forecasts by 1 percent to US$877 per tonne for 2008 and by 7 percent to US$795 a tonne for 2009.

The company's stock has declined 40 percent from its highs since last year despite rising pulp prices, as high energy costs, rising fibre costs and the strong Canadian dollar have weighed on the company's results, the analyst said.

"With pulp prices now heading south, we believe there is further risk to the downside," Kelertas said.

The analyst also said the company is likely to cut its distribution in 2009 and lowered the price target on the stock to C$11.

Separately, Raymond James downgraded lumber producer Canfor Corp (CFP.TO) to "underperform" from "market perform," on falling commodity prices and the weakening Canadian dollar.

Raymond James analyst Daryl Swetlishoff recommended investors to switch out of Canfor Corp and into "outperform"-rated Canfor Pulp, citing valuation.

The analyst has a "market perform" rating on West Fraser Timber Co (WFT.TO), which is one of the top two softwood lumber producers in Canada along with Canfor Corp.

Swetlishoff, however, raised his price targets to US$9 from US$8 for Canfor Corp and to US$38 from US$34 for West Fraser to reflect the recent strength in the U.S. dollar. (Reporting by Arup Roychoudhury in Bangalore; Editing by Deepak Kannan)