While it seems unlikely the U.S. and Canada will ink a new softwood lumber agreement anytime soon, Canadians aren’t as concerned about duties imposed by the U.S., considering high lumber prices and the fact that prices are expected to remain at near-record levels in 2018.
According to a new report from Moody’s Investors Service, U.S. consumers will absorb most of the estimated $1.2 billion in duties collected in 2018 through higher lumber prices. Senior Vice President at Moody’s, Ed Sustar, said in reports that the cost of the duties on Canadian lumber would be outweighed by high prices, credit positive for lumber producers in the U.S. and Canada.
The report claims Resolute Forest Products, West Fraser Timber, and Rayonier A.M. Products will benefit, as only about 50% of these companies’ production is shipped to the U.S. and duties will only be levied on that lumber. Georgia-Pacific LLC and Potlatch Corporation will not pay duties, as the two companies have no mill operations in Canada.
Lumber prices have jumped approximately 25% in 2017, with prices expected to remain high because of several factors including hurricane repair and rebuilding efforts and an increase in U.S. housing starts, projected at 6%.
Forest Products Association of Canada VP of International Trade and Transportation, Joel Neuheimer, said the voracious demand from U.S. builders, along with the increased price of lumber, is helping prevent the duties from forcing companies to reduce production, lay off employees, or even close down. Neuheimer also said that, because prices could change and the lumber industry’s position is not guaranteed, those in the industry want to reach an agreement.
So far, Canadian producers have paid approximately $500 million in deposits for the duties, however, without a settlement, there will be further duties in 2018. The country is challenging the duties at the WTO and under NAFTA.
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