Headaches over the supply and price of North American lumber likely will persist for several years, the CEO of the National Association of Home Builders told lumberyard executives today, adding that one solution he's working on is to promote imports from Chile and perhaps Brazil.
"I think it's going to take four to five years to have a resolution to the Softwood Lumber Agreement (SLA)," Jerry Howard told members of LBM Advantage, a buying co-op, at its annual meeting in Orlando. He was referring to the now-expired trade pact between Canada and the United States that is expected to result in tariffs of as much as 30% being imposed this spring.
In the meantime, "builders are telling me they are having trouble getting commitments for the lumber packages for some of their products," Howard said. "The lumber issue is one that's extremely relevant and is slowing down the spring selling season."
The SLA actually expired in October 2015, but it contained a one-year ban on either side taking any action against the other. Starting in October 2016, American lumber producers filed complaints against their Canadian counterparts, claiming Canadian lumber was being sold in the United States at unfairly low prices. Howard said Canadian lumber accounts for 28% of the framing material used in new homes; other estimates put Canada's contribution at up to a third of American wood consumption.
Howard noted that recent rulings in the United States appear have backed the American side, and the new Trump administration's views also cloud the outlook. While having Donald Trump in the White House is good for construction on many fronts, "on Canadian lumber, President Trump's administration is likely to be protectionist," Howard said. "And that means there's likely to be a long fight."
Howard said his goal is to have a consistently priced, steady supply of lumber. Given these times, his first preference for achieving that would be for Congress to ease regulations so that more lumber could be harvested from American forests. But the GOP-controlled House and Senate will have trouble opening up as much forest land as would be needed to overcome a reduction in Canadian imports, he said. Thus, his second preference is an agreement that allows sufficient supplies of Canadian lumber to continue to enter the United States.
But Howard is hedging his bets on those prospects. He noted that last fall he visited Chile, which ranks only behind Canada for exports to the United States, albeit at much smaller volumes.
"I spent 10 days down there meeting with ministers and the industry," he said. "They're very interested in producing Chilean lumber to U.S. standards ... and becoming a permanent solution for Canadian lumber." It might take four to five years for this to happen, he said, but given how long the Canadian impasse is likely to last, "it's worth pursuing Chilean lumber." And by the way: He said he plans to visit Brazil this year.
Finally, Howard suggested to domestic lumber producers that they export less and shift their sales to the United States.
"I don't see the lumber issue going away but like the labor issue we're making inroads," Howard said. "It will continue to impact the housing recovery."