U.S. lumber interests cheered, Canadians protested, home builders were distressed, and LBM dealers urged compromise following the Commerce Department's announcement Nov. 2 of final determinations affirming its conclusion that Canadian softwood lumber companies are selling their products in the U.S. at unfairly low, government-subsidized rates.
That decision is expected to bring antidumping and countervailing duties that combined to total roughly 10% to 24%, depending on the producer. Those duties are a bit less than the top rate of 26.75% imposed earlier this year as a result of preliminary findings, a factor that could put a cap on the generally steady increases in lumber prices since June.
Lumber market analyst Matt Layman said he believes the announcement won't by itself generate a price increase because he believes traders have priced in the impact of the duties since last spring. Indeed, futures prices were slipping a bit today. And prices on the futures market have neared record highs, Layman noted, so "At [a futures price like] $470, it better be built in," he said of the duties.
Indeed, late today, Random Lengths reported its newest framing lumber composite price had slipped to $431 from $431 the week before, while the framing lumber price had sunk to $509 from $527. "Lower duty levels ... sent the futures market plummeting through the day," the service reported. "But the announcement had little if any impact on the cash market."
The actual duties to be paid vary by timber company. According to the U.S. Lumber Coalition, which helped bring the antidumping case to the U.S. government, the combined final determination rates are: for West Fraser, 23.76%; Canfor, 22.13%; Tolko, 22.07%; Resolute, 17.9%; Irving 9.92%; and all others 20.83%. In general, the findings affected most the timber companies in western Canada. Irving, which operates in New Brunswick and Quebec, faced lower duties, while timber companies in the Atlantic provinces of Nova Scotia, Newfoundland, and Prince Edward Island were cleared of any charges.
The U.S. imported $5.66 billion worth of softwood lumber from Canada in 2016. That's close to a third of all the softwood lumber used in the U.S. Antidumping duties will be imposed as soon as Commerce's ruling gets published in the Federal Register. Duties for unfair subsidization must be approved by the International Trade Commission before they can be imposed. (See fact sheet summarizing the findings.)
The duties come about 13 months after the expiration of a Softwood Lumber Agreement (SLA) between the U.S. and Canada in which a previous system of duties were imposed on Canadian softwood. Talks to revive the SLA have faltered, particularly since Donald Trump became president and began demanding renegotiation of many trade agreements.
Building material dealers stand to gain from the duties because high prices for lumber mean higher revenues for them. Construction industry experts such as Ivy Zelman have told dealers that builders have no choice but to accept the higher prices. But dealers also have close relations with timber interests and with builders, so groups such as the National Lumber and Building Material Dealers Association (NLBMDA) have stressed more the need for ending the dispute than whether one side or the other is right.
"NLBMDA urges both sides to work together to reach a new agreement on the longstanding softwood lumber dispute as quickly as possible," NLBMDA President and CEO Jonathan Paine said. "Duties are a lackluster substitute for a long-term agreement that would bring much needed stability and predictability to the pricing and availability of softwood lumber in the United States. It is time for serious discussions by policymakers to resolve this issue once and for all. The longer this dispute lasts the greater the burden there will be on the affordable housing community, which is already in crisis."
U.S.-based lumber producers who organized as the COALITION--the Committee Overseeing Action for Lumber International Trade Investigations or Negotiations--applauded Commerce.
"The COALITION is hopeful that the duties imposed by today’s decision will begin the process of creating a level playing field for the future and allow for U.S. manufacturers to make essential investments and expand the domestic lumber industry to its natural market and protect and grow the jobs that are so essential to our workers and our communities,” Cameron Krauss, senior VP of legal affairs at Seneca Sawmill in Eugene, Ore., said in a statement.
On the other hand, Granger MacDonald, chairman of the National Association of Home Builders (NAHB), called the duties "a thinly disguised tax on American home buyers, home builders, and consumers."
"Unfortunately, the administration is taking protectionist measures to support domestic lumber producers at the expense of millions of U.S. home buyers and lumber consumers," MacDonald's statement continued. "This is an especially hard blow at a time when the housing sector is still struggling to regain its footing and grappling with rebuilding efforts following these natural disasters."
Susan Yurkovich, president of the British Columbia Lumber Trade Council, told the television network CTV that the trade action is being driven by a "protectionist lumber lobby" intent on driving up prices for their own gain.
“We see, for the foreseeable future, very good markets for softwood lumber, which is why the claim of the U.S. industry that they’re being injured is absolutely ridiculous,” she said. “While the rates are lower, the fact that duties remain in place is extremely disappointing.”
"The U.S. Department of Commerce's decision on punitive countervailing and anti-dumping duties against Canada's softwood lumber producers is unfair, unwarranted and deeply troubling," Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr said in a joint statement reported by Canadian Press. "... We are reviewing our options, including legal action through the North American Free Trade Agreement and the World Trade Organization, and we will not delay in taking action."
