The expiration of the U.S.-Canadian Softwood Lumber Agreement, as well as other factors, could lead to an influx of Canadian lumber entering the U. S. market, according to experts.
The agreement, set to expire Oct. 12 after being renewed for two years in 2012, regulates Canadian lumber exports to the United States. Under the terms of the 2006 pact, the United States ended collection of countervailing and anti-dumping duties on imported Canadian softwood lumber, and Canada imposed taxes and quantitative restrictions on softwood lumber exports to the United States.
The two sides have remained far apart in terms of a new agreement.
Canadian officials have made it clear they wanted to extend the agreement in its current form. Steve Thomson, British Columbia’s Minister of Forests, Lands and Natural Resources Operations, said as much in early September. “Our current position is consistent with the industry position, which is we would like to see the agreement extended (in its current form),” said Thomson, whose remarks were reported by the Times Colonist newspaper in Victoria.
U.S. lumber producers, represented by the U.S. Lumber Coalition, have something different in mind. They told an audience in Vancouver earlier this year that they want a new agreement with tighter restrictions on Canadian softwood lumber exports to the country or else they will seek trade sanctions under U.S. law. “The present agreement as structured, from the coalition’s perspective, is not a viable way of moving forward,” said, Zoltan van Heyningen, executive director of the Coalition, as reported by a business news publication in Vancouver.
American lumber producers are concerned that British Columbia’s markets in China may dry up, he said, making more wood available to enter the United States. They also want stronger measures in Canada to establish a more market-based timber pricing system. In addition, U.S. producers are not happy with how they have faired under the dispute resolution process of the current agreement; they challenged Canadian producers three times but won just once.
The U.S. government was prepared to negotiate a new agreement but has received no response from Canada, according to Van Heyningen.
Under the current agreement, the two countries committed to a one-year standstill period after the expiration date, which would likely mean the United States could not impose duties until October 2016.
The expiration of the agreement favors Canadian lumber producers, according to Shawn Church, editor of Random Lengths, which covers the softwood commodity markets. “They will have much better access to the U.S. market for at least a year,” he said.
“Traders are focused on this,” added Shawn. “There could be more supply directed to the U.S. market.” That would be good for Canadian suppliers and also U.S. pallet and container manufacturers that use softwood material, he noted.
A few other factors are impacting lumber markets and the U.S.-Canada dynamic. For example, China has reduced imports, including softwood lumber, which makes more wood available to the North American market. Also, Canada has the benefit right now of a favorable currency exchange rate.
Todd Morgan, director of forestry industry research at the Bureau of Business and Economics Research at the University of Montana, also noted that the strength of the dollar makes the U.S. a very attractive market.
“Come October and November, when the Canadian softwood lumber agreement ends, I think some folks are nervous that the Canadians are going to flood the market with lumber,” Morgan told the Flathead Beacon newspaper in Montana in late August. “In the short run, it could be tough for a lot of U.S. lumber manufacturers.”
