Lumber Still Hot Issue as Fires and SLA Disagreements Continue

tariffAny American or Canadian who depends on the latter’s lumber supply has been playing one agonizing waiting game after another since spring. The latest issue, a new softwood lumber agreement (SLA), has been especially confusing to follow. If you’ve been reading news on the matter, reports from both sides of the border reveal different predictions. Here’s a rundown of what’s happened so far:

The last SLA ended in October of 2015, beginning a mandatory year of freedom from countervailing duties. Obama did not make any new moves on this in October 2016. Trump promised to reprise the anti-dumping tariff, the first of which was established in April and the second in June. Total duties are reportedly between 17% and 31%, averaging 27%.

British Columbia is the world’s largest exporter of softwood, providing over 28% of America’s supply. The duties have impacted prices for American buyers, most significantly affecting the US housing industry, driving the cost of new homes up.

In early July, British Columbia declared a provincial state of emergency due to fires spreading across the land. As of August 3rd, 1.2 million acres of forest, bush and grassland had been destroyed by fire, making it the second most destructive wildfire season in B.C.’s record and among the worst in more than six decades.

The fires are threatening the lumber supply during peak season, another factor making it difficult for US buyers to obtain wood and at a price that isn’t well beyond their budget. This again hits the housing industry especially hard.

New NAFTA negotiations are scheduled to begin August 16th, and many are concerned that a new SLA won’t be reached before then.

The Canadian Press for the Vancouver Sun wrote in this August 1st article:

“A Washington trade observer explains why the governments might be in more of a hurry to get this resolved.

“It involves a U.S. desire to reform the Chapter 19 dispute-settlement process in NAFTA. This process has been a key weapon in Canada’s arsenal in fighting softwood duties, and U.S. negotiators would be asking Canada to give it up in the middle of a lumber fight.

‘It would be quite important to get that out of the way before the NAFTA negotiations begin — because of the importance of Chapter 19 to dumping claims,’ said Laura Dawson of the Wilson Center’s Canada Institute.

‘If you also had an active dispute with softwood lumber during a Chapter 19 negotiation it would make it very difficult.’”

However, Reuters published in this article on August 3rd:

“U.S. lumber mill owners said on Thursday they were “in no hurry” to reach a softwood lumber deal with Canada that fails to limit Canadian producers’ share of the U.S. market to a strict percentage.”

Reports from each country continue to match the conflicting attitudes of the above examples.

The two countries have reportedly already agreed upon a 70-30 split for the American lumber supply, America getting the 70%. This is about the same is it’s been. What’s reported as a major hang-up in the negotiations is who fills in when America cannot deliver its share. It seems that Canada has to fight to win the rights over Germany, Sweden, Chile, Brazil and Russia.

The Vancouver article mentioned above states:

“In such an event, Canada is adamant that the agreement should contain what’s called a hot-market provision…the basic point is to allow Canadian exporters to surpass that regular cap of 30 per cent, rather than have other countries fill the gap. Other countries, including Germany, Sweden, Chile, Brazil and Russia, currently supply a minuscule share of U.S. imports.

“The issue that is outstanding at the present moment is when there is a hot market. … It’s got nothing to do with putting people out of work in the U.S. It’s got to do with making sure we’re not having mills idled in Canada in order to create jobs in Russia and Brazil.”

As the debate drags out, Americans buying lumber from Canada continue to manage lumber orders amidst volatile prices and supply. For information replacement lumber or other alternatives to wood for pallets and containers, talk to Packnet. We specialize in alternative solutions and stay current on all laws and news pertaining to lumber: 952-944-9124.