Major export challenges for B.C. forest industry

Friday 3 Feb 2017

 
New U.S. duties on lumber imports will leave Canada with excess production that could be difficult to sell. Russ Taylor, president of International Wood Markets Group Inc., said lumber shipments to the U.S. will likely drop by 15% next year. The new duties will come into effect on 4 May following the expiration of the softwood lumber agreement on 12 October 2015, and the termination of a subsequent yearlong grace period.

At the same time that the new tariffs create another barrier to U.S. market access, B.C. lumber production is expected to fall by 20% as a result of the years of mountain pine beetle devastation in B.C.’s Interior. Meanwhile, “the U.S. is the only market that is growing and growing steadily,” Taylor said.

The American market rose 4% in 2016 and is expected to expand by 6% in 2017. Taylor attributed the rising lumber demand to increased housing construction as well as repair and remodeling projects. But while lumber demand in the U.S. is increasing, the expected associated increase in demand for Canadian lumber will likely be muted because of its higher price.

“In the B.C. Interior we’ve had 26 mills close since 2007 because of market conditions and available timber supply,” Taylor said. “We still have another four, five to close over the next six years.” While the tariff percentage is still unknown, Taylor said it will likely be somewhere around 27%, if previous duties are any indication.

The new duties will likely hit coastal mills with high-value lumber hardest. Taylor said higher-priced woods were previously protected from high duties because of a cap that froze the tariff rate for products selling for $500 or more per 1,000 board feet. But even with these additional duties, the U.S. market shows some promise for Canadian log and softwood lumber producers because U.S. consumption is expected to exceed the country’s domestic supply. The annual growth rate of U.S. lumber consumption parallels growth during the industry’s boom from 1991 to 2006.

“The U.S. cannot produce enough lumber for its own market, and that’s why Canada has had traditionally about a 32% to 34% market share. The U.S. is going to have to keep its imports at a steady level, if not increasing them, if there’s a stronger demand.

Source: www.biv.com

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