Lumber Industry Perspective 4th Quarter 2016
Petition filed against Canadian Mills
By Jesse Marzouk
The fourth quarter was highlighted by a trade case filed by the U.S. Lumber Coalition, petitioning the U.S. Department of Commerce and the U.S. International Trade Commission to restore the conditions of fair trade of softwood lumber between the U.S. and Canada. The petition alleges that Canadian provincial governments, which own the majority of Canada’s timberlands, provided timber to Canadian mills at prices far below market value. Additionally, the petition asserts that Canadian lumber is being sold for less than fair market value in the U.S. In its strongest argument, the Coalition points to the Canadian mills’ increased market share in the U.S. softwood lumber market after the expiration of the Softwood Lumber Agreement in October 2015. Canadian imports increased from 29.5% of U.S. consumption to 33.1% in the third and fourth quarters of 2015, and to 34.1% for yeartodate October 2016. The petition is supported by producers representing nearly 70% of all softwood lumber produced in the U.S. (excluding mills owned by Canadian companies).
The U.S. Department of Commerce is expected to reach a preliminary decision around the beginning of May 2017. If enacted, duties could range from 20% to 30%. In certain instances, duties can be retroactively applied up to 90 days; however, certain conditions need to be met, including a recent significant increase in shipments, although the level of increase is undetermined.
Lumber prices stayed in a tight range in the fourth quarter of 2016 after rising in the first three quarters of the year. The Random Lengths Framing Lumber Composite Price, which includes prices from a variety of softwood framing species, ended at $359 per thousand board feet (MBF) after starting the quarter at $356 per MBF.
Jesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumberrelated companies involved in manufacturing and distribution. Jesse received his MBA in finance from Kellogg School of Management at Northwestern University, and has a degree in finance and accounting from Indiana University.