First Cut: Challenging 2017
Feb. 10, 2017 - If the experts are right and history is repeating itself, 2017 is shaping up to be a pretty tough year for Canadian wood businesses. The good news? We knew it was coming.
No one was surprised in December when the U.S. launched antidumping duty and countervailing duty investigations of certain Canadian softwood lumber imports in response to petitions from the U.S. Lumber Coalition. The investigations mark the next step in the cycle of U.S. taxing Canada’s softwood lumber following the end of the softwood lumber agreement. According to the U.S. Commerce Department, a countervailing duty will be in place as early as February, and the antidumping duty in May.
When the last softwood lumber agreement expired in 2001, repercussions lasted until the next agreement was reached in 2006. Even then, the U.S. was required to pay back just $4 billion of the $5 billion it collected in duties; meaning there is a $1-billion incentive for the U.S. to do it all over again.
Lumber companies in Western Canada have not been idle since 2006. Many companies have gained access to markets in Asia, and some have secured assets in the U.S. to buffer the effects of a tax. But in Central and Eastern Canada where more than 90 per cent of softwood lumber produced is shipped to the U.S., duties are especially worrisome. Resolute Forest Products CEO Richard Garneau calls loudly for free trade between Canada and the U.S., suggesting that managed trade leads to market volatility. “Indeed, that was the whole point of the Canada-U.S. Free Trade Agreement and NAFTA. Just about every industry enjoys free trade, except for softwood lumber,” Garneau said in a news release in October.
To help bring some insight to this issue we are running a North American lumber outlook for 2017 supplied by International WOOD MARKETS Group Inc.’s Russ Taylor. It’s not all bad news. Russ predicts that Canadian export duties will lead to a volatile U.S. market that may result in record high lumber prices.
It might be tempting to be resigned about the U.S. duties – there was, after all, a 10-year countdown. But just because it has happened before, doesn’t mean we should sit back and let it run its course. Sawmillers and loggers alike have a responsibility to be informed and engage in the conversation. Despite geographical and governmental differences, Canada’s forest products industry needs a strong, united voice.
It just so happens that we at Canadian Forest Industries are stepping up in 2017 too. We are offering more and more platforms for industry members to chime in with their thoughts, concerns and suggestions. Our website, www.woodbusiness.ca, is mobile friendly and allows for reader comments. Our social media pages on Facebook (facebook.com/CanadianForestIndustries) and Twitter (@CFImag) are ideal public hubs for comments and sharing. And on LinkedIn.com we recently started a private discussion group for industry members only. By keeping the group private, we hope to encourage frank discussions about what’s coming down the pipeline for Canadian companies in 2017. Send us your request to join by searching for Canadian Forest Industries magazine, or sending us an email.
Market uncertainty means now, more than ever, it’s important for mills to optimize their returns, thereby maximizing profit. To that end, this year we will once again host OptiSaw – our sawmill optimization and automation forum – in Western and Eastern Canada. Check out optisaw.com for updates as we get closer to the western show date of April 25, taking place in Richmond, B.C.
A belated Happy New Year from all of us at the magazine – let’s together make it a good one in spite of all the challenges that lay ahead.