British Columbia's major lumber producers continue to book substantial profits on near-record lumber prices almost a year after the U.S. Department of Commerce first hit Canadian producers with punishing duties.
The benchmark price for 1,000 board-feet of top-quality western Canadian two-by-fours hit US$540 about a month ago, according to the trade publication Madison's Lumber Reporter, compared with US$315 at the start of 2017 before U.S. interests re-ignited the ongoing trade dispute.
Bottlenecks in rail transportation plaguing all industries are one reason lumber prices have spiked so high, but solid demand has also allowed producers to simply pass the price of tariffs along to consumers in prices, said Susan Yurkovich, president of the B.C. Lumber Trade Council.
"Who knows how long these prices will hold, but for now (they are) mitigating the impact of duties for Canadian producers," said Yurkovich, who is also CEO of the Council of Forest Industries, one of the forestry sector's main industry groups.
The U.S. Department of Commerce levelled preliminary duties against Canadian lumber producers last April, on the complaint of the U.S. Lumber Coalition following expiry of the last Canada/U.S. Softwood Lumber Agreement.
Final duties were set last fall at between 20.8 per cent and 22.1 per cent, depending on which company it is, and so far, Yurkovich said it is consumers that have felt them the most.
"It just reminds everyone that the fact the U.S. industry is claiming it has been injured is just preposterous," Yurkovich said.
In the meantime, West Fraser Timber Co. Ltd., Canada's biggest lumber producer, reported a $596 million profit in 2017, up from $326 million in 2016. Canfor Corp., the country's second-biggest producer, reported $345 million in profits up from $151 million in 2016.
The U.S. case is that Canadian, particularly British Columbian, lumber producers are unfairly subsidized because the province's methods of granting access to Crown-owned timber doesn't constitute a fair market, allowing B.C. producers to undercut American mills.
Last year, however, B.C.'s lumber production shrank slightly due in large part to the record wildfires that interrupted logging and burned timber supplies.
B.C.'s total lumber exports fell nine per cent to 25.3 million cubic metres in 2017 with shipments to the U.S., the province's biggest customer, down 10 per cent to 16.1 million cubic metres.
"We've always predicted there would be a shortage of lumber in North America," said Russ Taylor, publisher of trade publication Wood Markets.
That is because B.C. has to reduce timber harvests for several decades to allow its forests to recover from the mountain pine beetle infestation, but it started happening sooner, Taylor said, because of last summer's unprecedented wildfires.
"It's a function of 'where is the U.S. going to get its wood?'" Taylor said.
And U.S. lumber producers, including mills that turn out competing southern yellow pine, have been able to push up prices for their own product in lock step with tariff-driven Canadian prices, said Keta Kosman, publisher of the trade publication Madison's Lumber Reporter.
"You could almost say sawmills in the southern U.S. must be doing handsprings," Kosman said, "because it is putting southern-pine prices up when that has nothing to do with the (tariffs)."
However, B.C.'s biggest lumber producers, such as West Fraser Canfor and Interfor, are also sharing in those benefits having bought some 40 U.S. mills between them during the term of the last Canada/U.S. trade agreement.
The biggest losers among Canadian forest-product producers, Kosman said, are the value-added manufacturers who are being charged the higher prices for lumber then have to pay tariffs on finished products that they sell into the U.S.
Yurkovich said Canada is continuing to push the dispute in litigation having filed appeals both under NAFTA and with the World Trade Organization.
For the moment, however, she added that efforts to renegotiate NAFTA have put negotiations for a new Canada/U.S. lumber deal on the back burner.
"We find it frustrating that we're still having this fight," Yurkovich said.
– Derrick Penner, Prince George Citizen