The bottom line at lumber producers these days is it costs more to ship their products into the United States. Vanderwell Contractors, the Slave Lake area mill is one of those, and the recent decision by the U.S. Commerce Department hits home.
“It’s a 20.83 per cent duty,” says Con Dermott of Vanderwell’s.
That’s actually a bit of relief from the 26-odd per cent that the U.S. had slapped on temporarily, following the expiration of the last softwood lumber agreement between the two nations. But still not good news.
“It’s going to affect the housing building industry,” Dermott says. “It’s driving prices up.”
It’s going to affect the bottom line at this end as well, obviously. For the time being, Dermott says, production at the mill continues as normal. But what happens in the future, if this isn’t resolved, is uncertain.
“We hope it doesn’t have an impact on employees,” he says. “But we don’t know what the long-term impact will be.”
Otherwise, the market for lumber is quite good at the moment, although it is well known for its fluctuations. Higher duties/tariffs on exports across the border don’t help. One unintended consequence might be that European producers get better (cheaper) access to the U.S. market. While the Canadian softwood lumber industry works its way through the appeals process, cheaper Swedish and Russian lumber could take over its market share in the States. Developing new markets is always a good idea, Dermott says, but, “that takes a long time.”
Appeals to the World Trade Organization on the U.S. ruling also don’t happen quickly, “and are very costly,” Dermott says. “But that’s the action we (not Vanderwell’s alone) will have to take. We totally disagree (with the U.S. ruling), but you never know.”
One way or another, Dermott says, “we’ll fight through it.”
The duties do not apply to other products from Slave Lake area forest products mills. At least not directly – anything that increases the cost of building a house is likely to also affect the demand for panelboard that is used in sheathing the houses.
West Fraser is affected, though, via its lumber mill in High Prairie. In fact West Fraser is one of the producers singled out by the U.S. Department of Commerce ruling for special treatment, along with Canfor and Tolko. According to some reports, West Fraser will be assessed combined duties of 24 per cent, compared to the average of 21 per cent. Reasons for the special treatment were not immediately apparent. The rates do not apply to the plywood veneer or pulp produced at West Fraser’s Slave Lake mills.
West Fraser declined a chance to explain the situation to The Leader, referring us instead to Paul Whittaker of the Alberta Forest Products Association. Asked why West Fraser had been singled out, Whittaker chuckled and said, “It’s the mysterious process the U.S. Department of Commerce takes when they investigate the companies. They have the ability to go through the books, so they came up with their numbers. The game is fixed.”
Asked to comment on possible local impact from the recent developments, Whittaker said even a company that doesn’t sell much in the U.S. can end up being affected. Why? Because one that does sell lots in the U.S. might look to sell more in Canada if the cost of doing business down south becomes prohibitive, thus upsetting the balance of other markets and driving prices down. Good for the consumer, maybe, but not for the bottom line of Canadian producers and not, ultimately, for their employees.
For the moment, though, the U.S. housing market is surging, so exports should be viable. Whittaker says that could change in a hurry if any of the key factors should go south. Those include the exchange rate of the Canadian to the U.S. dollar, as well as the demand for lumber south of the border.
“An ugly combination for us is low prices and high tariffs,” Whittaker says.
The last time the U.S. imposed softwood lumber tariffs, the Canadian appeals to international trade tribunals were successful. But the process took four or five years. This time, Whittaker says, with the tone of the current U.S. administration, “it could even be longer.”