Europeans capturing more U.S. lumber market share while Canada is stuck in the penalty box

By Tony Kryzanowski

For the Canadian forest industry, and particularly softwood lumber producers, it has been challenging over the past four years to try to negotiate a new Softwood Lumber Agreement with the United States when phrases like “alternative facts” and “fake news” have dominated the discourse.

With a new administration in the White House, it’s time for negotiators to start discussing some real facts and how—because of these facts—there is no reason for any tariffs on Canadian softwood lumber. Furthermore, all duties held on account should be returned to Canadian lumber producers.

According to Wood Resources International LLC (WRI), a well-established company that has been compiling facts and figures related to global wood product marketing and export for decades, the lumber supply from Canada to the U.S. has been eroding for years.

In its mid-January report, it says, “despite record-high lumber prices in the U.S. in 2020, Canadian lumber shipments to its southern neighbor have fallen for the fourth consecutive year. A reduction in the Annual Allowable Cut (AAC) in the province of British Columbia has reduced production volumes in that region by over a third in just five years.”

So that’s one-third less lumber being shipped from that region which exports the most softwood lumber to the U.S. by far, according to the Canadian government.

What should be upsetting to Canadian producers is that while we are being unfairly penalized with tariffs, European producers are capturing more market share.

“Although overseas volumes have not reached the same levels in 2020 as in 2005, Europe’s share of the total imports reached a record high of 13 per cent,” according to the WRI report. “The current market share is substantially higher than the 20-year average of only seven per cent.”

So in other words, Europe is now shipping more than double its average volume of softwood lumber to the U.S. while we are being penalized for shipping substantially less.

Something seems seriously askew here.

It is obvious that the current volume of shipments from Canada represents no threat to American producers and removal of any tariffs on softwood lumber will actually help the American middle class by reducing the cost of purchasing a home built with Canadian lumber.

No doubt the first priority of both American and Canadian politicians is to ramp up distribution of the COVID-19 vaccine, and in the short term it will be difficult to capture their attention to want to discuss anything else. But by later spring, with more vaccine needles in arms, the economic situation will begin to normalize with both nations getting back to business starting with a hard date on the reopening of the border.

The current state of play has yielded a reduction but not an elimination of the tariffs. According to Global Affairs Canada, the new softwood lumber tariff is about 9 per cent instead of about 20 per cent for most companies based on the latest administrative review by the U.S. Department of Commerce. Unfortunately, some companies will actually see their duties increase based on these duties, but the majority will follow these new guidelines.

But that’s still too much because the whole point of softwood lumber tariffs in the first place was to penalize Canadian producers if total exports from Canada exceeded a set threshold. Those conditions no longer exist because of sawmill shutdowns in the B.C. Interior. The numbers don’t lie.

The argument by American negotiators that they consider low stumpage fees for Canadian producers a subsidy that gives Canadian producers a competitive advantage has been dismissed repeatedly by adjudicators at both the World Trade Organization (WTO) and the United States Mexico Canada Agreement on Trade (USMCA). This argument is nothing more than an attempt at payback by some American-based forest companies, who own millions of hectares of privately-held forests in the U.S., for not allowing them to do the same in Canada. It would be easy to argue that some aren’t really serious lumber producers at all but real estate managers based on the volume of private forested lands on their books. They are simply attempting to influence Canadian public land management policy and this has to stop. Most of Canada’s forest has been, and will always be, managed as a public resource—end of story.

So, what are the key phrases to listen for over the next six months as it relates to current softwood lumber tariffs? The most important phrase is, “we need time to study the current state of negotiations before we can resume.” This is code for, “it’s not a top priority with us and we’ll get to it when we get to it.”

It would be helpful if the Canadian government finally made settling this issue with the U.S. a higher priority—especially now that there is a new American administration. After all, wood is a green, sustainable building product, which seems to be a hot topic in the American White House these days.

Logging and Sawmilling Journal

March/April 2021

On the Cover:
The Spruce Products sawmill in Swan River, Manitoba is proving that it pays to invest in targeted efficiency and optimization. Most recently, the sawmill has increased its log throughput at the front end of its main breakdown line by 20 per cent with a $3 million investment. They can now process about 4,000 logs per 10-hour shift, as compared to about 3,300 logs per shift previously, with a new log sorting system supplied by mill equipment manufacturer, Carbotech. Read all about the improvements beginning on page 8. (Cover photo courtesy of Spruce Products)

Biomass from forest fires now firing power plant
Two First Nations groups in the B.C. Interior recently began a collaboration to utilize woody biomass left in areas impacted by forest fires, which is being used to fire a power plant—and produce wood pellets.

Targeted mill upgrades
Manitoba’s Spruce Products sawmill has been able to increase its log throughput by an impressive 20 per cent, thanks to targeted upgrades.

Mill upgrade delivers recovery gains—and flexibility
B.C.’s Porcupine Wood Products recently wrapped up a mill upgrade project that is all about achieving gains in recovery, and flexibility in production—and the future of the mill.

Duz Cho takes on Site C dam logging
Duz Cho Logging is taking on some challenging harvesting that’s part of the construction effort for B.C.’s massive Site C dam power project—a job that includes walking across the Peace River with their equipment.

Canada’s Top Lumber Producers
Logging and Sawmilling Journal’s authoritative listing of Canada’s Top Lumber Producers, produced in association with leading forest industry consultants Forest Economic Advisors (FEA).

Short logging season = maxing out production
Alberta logger SK Trucking looks for every edge to maximize production in all ground conditions—and to work within a very short winter logging season.

THE EDGE
Included in this edition of The Edge, Canada’s leading publication on research in the forest industry, are stories from the Canadian Wood Fibre Centre (CWFC) and FPInnovations.

The Last Word
European lumber producers are capturing more U.S. lumber market share while Canada is stuck in the penalty box, says Tony Kryzanowski.

DEPARTMENTS

Tech Update

Supplier newsline


For all the latest industry news, subscribe to our twice monthly newsletter!

Subscribe

* indicates required