Could the U.S. Avoid Higher Lumber Prices by Trading with Chile?

on July 3, 2017

53952299 - man chooses boards for the construction of the storeA lot has happened in the lumber industry the last several months, and industry professionals brace for more change as the decision on another tariff draws near. The end of the tariff-free lumber trade between U.S. and Canada occurred in April, raising the cost of lumber for Americans. While the countervailing tariff wasn’t as high as expected, prices are anticipated to climb higher in the wake of an expected additional anti-dumping tariff.

In response, both Canada and the U.S. have been scrambling for alternative lumber relationships. Both countries rely heavily on each other for this particular trade; Canadian lumber imports account for about 28% of the U.S. lumber supply.  In America, one of the primary industries to suffer from the price increase is home building.

In the midst of a housing inventory shortage, the price hike is especially bad news for the home building industry and American home buyers. About 85% of home construction depends on wood, which means that the average U.S. home will be around $3,000 more expensive.

Under strain, the National Association of Home Builders (NAHB) has already been investigating alternate lumber sources. They’re currently working with countries like Chile and Brazil to develop timber relations, which unlike Canada, the U.S. has a trade surplus with both countries.

Currently, wood products are already among the top exports from Chile to the U.S. Lumber is included in the free-trade agreement between the two countries. Chile sends an annual $800 million worth of wood to the US, which makes up about 1.2% of the U.S. lumber market. The Latin American country launched the Chile Timber Council earlier this year, and its goal is to increase timber exports by $100 million or more a year through 2025.

As promising as this all seems, a stronger lumber trade can’t happen immediately. Experts say it could take up to five years for Chile to refine its supply chain and meet U.S. lumber standards. Additionally, Chilean logging zones are experiencing some hardship between a rise in shipment hijacking and also intentional forest fires.

Brazil may also hold potential as a more significant lumber partner. Currently, their primary wood export is pulp. However, the country is starting to develop its wood panel industry, which is growing at significant rate.

For American companies that purchase wood products like pallets and packaging, be sure to keep open communication between you and your vendor. Make sure the company that supplies your wood products is aware of the most current regulations, guidelines, and trends. Packnet’s experts stay on top of all changes related to the lumber and shipping industries. We also work to provide packaging solutions that will save companies money. To explore your options, call us at 952-944-9124 or fill request a free assessment.