Lumber History Repeats Itself, and It's Gotten Ugly

History, it seems, is simply repeating itself. Random Lengths points out, “The three-week surge in lumber prices just ahead of anticipated duties on Canadian exports to the states looks similar to the one that occurred in 2001 just before the U.S. imposed countervailing and anti-dumping duties on Canada.”

Here’s what is contributing to the surge: A coalition of predominantly southern yellow pine (SYP) producers petitioned the U.S. Department of Commerce (DOC) last November (see Table 1), asking for an investigation into Canadian softwood lumber shipments with an eye toward levying tariffs on those shipments. According to the DOC’s timeline (see Table 2), we may know their preliminary determination on countervailing and anti-dumping duties (CVD and AD duties) in the next few weeks.

It is very likely the DOC will determine harm has been done to U.S. lumber producers through the importation of lumber from Canada (see Table 3). It’s “very likely” because the Trade Preferences Extension Act of 2015 now makes it even easier for U.S. industries to bring an action against a foreign country and win. Several changes to trade law within the bill allow the DOC and the U.S. International Trade Commission (ITC) to more easily impose CVD and AD duties, to assess higher duty rates and to examine fewer foreign companies to establish harm.

A preliminary determination in favor of U.S. petitioners is also “very likely” because the currency exchange rate between the U.S. and Canada favors the strong U.S. dollar. Since the exchange rate is influenced by a wide array of external factors, those petitioning for CVD and AD duties have an incentive to push for a determination now while the exchange rate helps make the case for a decision in their favor.

Lumber experts who have spoken with SBCA staff over the past few weeks have indicated the market assumes the total assessed duties will likely be in the range of 30 percent (see Table 3). If the DOC and ITC determine harm is being done to the U.S. companies who petitioned the investigation, the duties can be assessed on lumber imported from Canada retroactively up to 90 days from the preliminary determination date. This means lumber coming across the border today may be subject to CVD and AD duties.

If and when the CVD and AD duties are determined, the U.S. can begin collecting them from exporters in the form of cash deposits.  For those who are interested, the U.S. Lumber Coalition provides a thorough summary of the CVD and AD duties determination process the last time this occurred from 2001-2006.

If and when CVD and AD duties are imposed, there will suddenly be a two-tiered lumber market in North America. Lumber purchased in Canada will be duty-free, while Canadian lumber purchased in the U.S. will be approximately 30 percent higher due to the CVD and AD duties. Higher prices and a restriction of supply from Canada will immediately increase demand for U.S. sources of lumber, and that will drive up the cost of U.S. lumber accordingly.

For CMs, higher lumber costs are very likely to stick around for the foreseeable future. Both the U.S. and Canada appear motivated to seek a new negotiated softwood lumber agreement (SLA). Unfortunately, there isn’t consensus on when that new SLA might be reached. It could be in the next few weeks, or it might take years like it did back in 2001. While the free trade of lumber in North America over the past 16 months has been very good for lumber end users in the U.S., it seems that a managed trade deal is inevitable. U.S. petitioning companies would prefer an imposed limitation on Canadian lumber’s market share in the U.S. Under free trade, Canadian lumber imports to the U.S. reached levels last seen in 2007 at the tail end of the housing boom.

Again, lumber experts who have spoken with SBCA staff over the past few weeks indicate the petitioners would prefer to reduce Canadian market share down to between 20-26 percent, which is considerably lower than the 30-33 percent that has traditionally existed, with the goal of altering the current lumber supply-demand equation.

Additional Background:

  1. Softwood Lumber from Canada Antidumping and Countervailing Duty Investigations
  2. Important new AD/CVD changes signed into law
  3. FACTSHEET: Canada-U.S. Softwood Lumber Trade
  4. Softwood Lumber Products from Canada Preliminary Report January 2017
  5. Antidumping & Countervailing Duty Handbook
  6. Department of Commerce Investigation Schedule
  7. USITC Commissioners
  8. DEPARTMENT OF COMMERCE “SOFTWOOD LUMBER SUBSIDIES REPORT TO THE CONGRESS”

 

Table 1

Softwood lumber: U.S. producers of softwood lumber, their positions on the petition, production locations, and share of reported production 2015

Firm

Position on petition

Production location(s)

Share of production (percent)

Bennett

***

Princeton, ID Clarkston, WA

***

Biewer

***

McBain, MI; Lake City, MI; Prentice, WI; Spencer, WI

***

Canfor

***

Camden, SC; Darlington, SC; Urbana, AR; Conway, SC; Fulton, AL; Graham, NC

***

CD Lumber

***

Riddle, OR

***

Charles Ingram

***

Effingham

***

Claude Howard

***

Statesboro, GA

***

Collum

Petitioner

Allendale, SC

***

Columbia Vista

***

Vancouver, WA; Vancouver, WA

***

Deltic

***

Waldo, AR; Ola, AR

***

Elliot

***

Estill, SC

***

F H Stoltze

***

Columbia Falls,  MT

***

Gilman

***

Blackshear, GA; Dudley, GA; Fitzgerald, GA; Jacksonville, FL; Lake Butler, FL; Perry, FL

***

Grayson

***

Houston, AL; Marianna, FL

***

Great Western

***

Everson, WA

***

Hankins

Petitioner

Grenada, MS

***

Harrigan

***

Monroeville, AL

***

Hood Industries

***

Waynesboro, MS; Metcalfe, GA; Bogalusa, LA; Silver Creek, MS

***

Idaho Forest

***

Chilco; Moyie; Lewiston; Laclede; Grangeville

***

Interfor

***

Baxley, GA; Eatonton, GA; Georgetown, SC; Gilchrist, OR; Longview, WA; Meldrim, GA

***

Irving

***

Plantation, ME; Dixfield, ME

***

Jordan

***

Mount Gilead, NC; Barnsville, GA

***

King Forest

***

Wentworth, NH

***

Klausner

***

Live Oak, FL; Enfield, NC

***

Langdale

***

Valdosta, GA

***

Maibec

***

Masardis, ME

***

Pleasant River

***

Dover-Foxcroft, Maine; Jackman, Maine

***

Potlatch

Petitioner

Bemidji, MN; Gwinn, MI; St. Maries, ID; Warren, AR

***

Precision

***

Wentworth, NH

***

Pyramid Mountain

***

Seeley Lake, MT

***

Rex Lumber

Petitioner

Graceville, Florida; Bristol, Florida; Brookhaven, Mississippi

***

Robbins

***

Searsmont, Maine

***

Rosboro

***

Springfield, OR

***

RY Timber

***

Townsend, MT; Livingston, MT

***

Schmidbauer

***

Eureka, CA

***

SDS

***

Bingen, WA

***

Seneca

Petitioner

Eugene, Or; Noti, Or.

***

Shuqualak

***

Shuqualak, MA

***

Sierra Forest

***

Terra Bella, CA

***

Sierra Pacific

Petitioner

Aberdeen, WA; Centralia, WA; Mt. Vernon, WA; Anderson, CA; Arcata, CA; Burney, CA

***

South Coast

***

Brookings, Oregon

***

Southport

***

North Bend, OR

***

Starfire

***

Cottage Grove, OR

***

Stimson

Petitioner

Forest Grove, Oregon; Tillamook, Oregon; Priest River, Idaho; Plummer, Idaho; St.
Maries, Idaho; Clatskanie, Oregon

***

Stratton

***

Stratton, ME

***

Sun Mountain

***

Deer Lodge, MT

***

Swanson

Petitioner

Glendale, OR; Roseburg, OR

***

TR Miller

***

Brewton, Alabama

***

Trinity

***

Weaverville, CA

***

Union

***

Ripley, MS

***

West Fraser

***

Riegelwood, NC; Augusta, GA; Henderson, TX; Huttig, AR; Joyce, LA; Leola, AR

***

Westervelt

***

Moundville, AL

***

Weyerhaeuser

Petitioner

Millport, AL; Dierks, AR; Dodson, LA; Holden, LA; Bruce, MS; McComb, MS; Philadelphia, MS; Kalispell, MT; Greenville, NC; New Bern, NC; Plymouth, NC; Idabel, OK; Cottage Grove, OR; Santiam, OR; Longview, WA; Raymond, WA 98577

***

 

 

Table 2

EVENT

AD INVESTIGATION

CVD INVESTIGATION

Petitions Filed

November 25, 2016

November 25, 2016

DOC Initiation Date

December 15, 2016

December 15, 2016

ITC Preliminary Determinations*

January 9, 2017

January 9, 2017

DOC Preliminary Determinations

May 4, 2017

February 21, 2017†

DOC Final Determinations

July 18, 2017

May 4, 2017

ITC Final Determinations**

September 1, 2017

June 19, 2017†

Issuance of Orders***

September 8, 2017

June 26, 2017†

 

 

Table 3

Country ALLEGED DUMPING MARGIN
CANADA 20.12 to 53.08 Percent
Country ESTIMATED SUBSIDY RATE
CANADA Above de minimus (de minimus = less than one percent for developed countries, less than two percent for developing countries