The southern US is poised to surpass Canada’s long-standing dominance of the North American timber industry as decades of trade restrictions cripple its northern neighbour.
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Published Nov 04, 2024 • 3 minutes of reading
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(Bloomberg) — The southern U.S. is poised to surpass Canada’s long-standing dominance of the North American timber industry as decades of trade restrictions hurt its northern neighbor.
The US region is set to eclipse Canada for softwood lumber capacity for the first time since at least 1970, according to commodity pricing agency Fastmarkets. It’s a remarkable turnabout that signals Canada’s resource sector has been decimated by years of U.S. duties and other challenges including wildfires, land-use regulation and insect infestations.
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The US raised import duties on Canadian softwood lumber by nearly 81% in August, the latest move in a simmering forty-year dispute between trading partners. Analysts expect the levy – currently at 14.54% – to double next year according to the Commerce Department’s annual review.
These measures show how trade policy can reshape industries, creating new winners and losers in the process. Import restrictions have been a hot topic during the US election, with Republican candidate Donald Trump calling for sweeping tariffs on foreign goods entering the US.
The US has long accused Canada’s C$10 billion ($7.2 billion) industry of dumping low-value timber into the country and says the fees the Canadian government pays to harvest the timber constitute a subsidy. The dispute has affected BC, where forest products account for a quarter of the value of all commodities exported by 2022.
Further levies could be “quite damaging to the sector,” said Kurt Niquidet, chief economist of the BC Forestry Industry Council. “You’re going to see curtailments spread not just to BC, but across Canada.”
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As Canadian sawmills get squeezed by high costs and low revenue – especially in the rich western province of British Columbia, the US South is enjoying the gains in the industry. The U.S. Timber Coalition sees the task as a powerful boost to American investment and capacity.
North America lost 4% of its sawmill capacity through closures this year alone — and more than 40% was in BC, according to Dustin Jalbert, senior economist at Fastmarkets.
Forestry company Canfor Corp. said in September will close two BC sawmills at the end of the year and take a C $ 100 million writedown, citing the duty as well as the lack of wood supplies. West Fraser Timber Co., the world’s largest lumber producer, and smaller rivals Interfor Corp. and Western Forest Products Inc. have also been suspended or shuttered factories in western Canada.
Interfor and Western Forest Products declined to comment, while West Fraser and Canfor did not respond to requests for comment.
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The US South has been able to cover some of BC’s losses, thanks to private forests more quickly-many of which have areas in “the largest timber basket on the continent,” said Brooks Mendell, president of Forisk Consulting in Georgia. But he said the U.S. lumber supply is growing considering “Canada is not zero, because Canada is still an important player.”
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Unless the US becomes self-sufficient, it will still have to import wood. America can be left paying a premium to do it from the permanently reduced Canadian sector or from the forests as far away as Scandinavia.
“The U.S. can only produce so much additional timber before it reaches its maximum timber harvest,” said Russ Taylor, a BC-based forestry consultant who has worked and covered the industry for 45 years.
There are glimmers of a turnaround in lumber demand that could stop Canada’s slide. US single-family home construction is on the rise and the National Association of Home Builders sees that trend continuing through 2026. Fastmarkets expects lumber production capacity in North America to reduce demand this year for the first time since the pandemic-induced renovation boom.
“Next year, if we have a good demand recovery – you know, get up, supply down – it doesn’t take business economics to tell you what that probably means for prices,” Jalbert Fastmarket said.
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