Global Benchmarking: The impact of duties on Canadian lumber exports to the US could impact export markets, including China and Australia

The following was supplied by Russ Taylor, President of Vancouver based Wood Markets International    

With the expiry of the U.S.-Canada Softwood Lumber Agreement, the outcome of what is next is going to change global trade flows in lumber. The impact of probable duties on Canadian lumber exports to the U.S. starting in May 2017 will be a game-changer for different producing areas, and especially depending on the amount the initial duties will be (at least 25%) and how much is passed on to the market. Essentially a new “floor price” will be established in the U.S. market with less total Canadian imports and increased U.S. lumber production. Higher prices have already happened: Canadian Western SPF lumber prices soared by a whopping 25% (US$78/Mbf; US$50/m3) in the three week period between January 27 and February 17, 2017. 

It is now possible to better see and understand the cost impact of export duties on Canadian lumber exports and potential lumber prices from two WOOD MARKETS benchmarking reports. The new  Biannual Global Timber / Sawmill / Lumber Regional Cost & Revenue Profiles Report provides quarterly costs, revenues and margins for 20 producing and export regions. For the major regions, the delivered lumber production and logistics costs delivered (including Canadian lumber at different duty scenarios) to three major export markets are profiled: to the U.S. South; to Sydney/Melbourne; and to Shanghai. The Regional Quarterly Profiles Report shows the point at where other supplying regions start to become more profitable to the U.S. South with export duties implemented against Canada. The Regional Quarterly Profiles Report outlines that the higher costs for Canadian mills will translate into higher lumber prices in the U.S. South to allow European exporters to fill the gap left by Canada. Of course, all U.S. mills will benefit from this windfall of Canadian duties. 

A key question to consider is: what is the market potential for Canadian lumber to China or even Australia as U.S. duty levels increase, and how effective can export markets become as an outlet for incremental Canadian volumes? Based on WOOD MARKETS’ recent field investigations in both China and Russia, including a clear view on Russian exports and costs, China could become a battleground for lumber market share, eventually at lower prices, which could also impact log prices. 

The Q1-2017 edition of the Biannual Global Timber/Sawmill/Lumber Regional Cost & Revenue Profiles (with current-quarter cost profiles of 20 countries/regions) benchmarks delivered log costs, sawmilling costs, lumber and by-product revenues, and EBITDA margins annually from 2010 and quarterly results starting in Q1-2015 to Q1-2017 for 20 producing countries (including Australia and New Zealand) and/or regions around the world for both “average” and “top-quartile” sawmills. The report also profiles delivered lumber costs to the U.S., China and Australia from key supplying regions to show which country is the low cost supplier. This report is now available by subscription every six months – as a single copy or as an annual subscription (2 reports per year). 

Click here to view the brochure.   

WOOD MARKETS is currently starting the 8th Edition of its Biennial Global Timber / Sawmill / Lumber Cost Benchmarking Report that covers 2016 annual costs and Q1/2017 costs in 29 countries and regions – this report will be available in July 2017. 

Click here to view the brochure.   

For further information, please contact International WOOD Markets Group 

(+1) 604-801-5996,   

Russell Taylor   

Barb MacDonald