250 News - Your News, Your Views, Now

October 27, 2017 8:49 pm

No Softwood Deal Yet

Tuesday, October 11, 2016 @ 6:00 AM

Prince George, B.C. – The  end of the full year  of  the stand still  in  lumber  trade between  Canada and the U.S.  ends tomorrow, and  with no sign of a new softwood lumber agreement anytime soon, experts  are predicting  the U.S.  will  launch action against Canada.

The talks  aimed at  reaching a new deal have been ongoing  with  the  most recent happening  last week in Toronto .  That round involved  a U.S. Trade representative, the Canadian lumber industry and  Canada’s  International Trade Minister.

President of the BC Lumber Trade Council, and head of the Council of Forest Industries, Susan Yurkovich    says the  discussions are “challenging”  and  has expressed  appreciation for the  leadership of Prime Minister Trudeau, Premier Christy Clark and  Forest Minister Steve Thomson “They have made achieving an agreement on softwood lumber a top priority and we know they will continue these efforts until a new agreement is reached.”

Having said that though,  Yurkovich  says the  BC Lumber Trade Council is “preparing to work alongside the Canadian government to defend the industry against any potential trade actions brought by the United States, as we have done successfully in the past.”

The Softwood Lumber agreement expired on October 12th of last year.   Since that time, the two  countries have been trying to work out a new agreement, and in the meantime,  lumber  shipments have been allowed to  carry on during a one year ‘stand still’ period  where neither side could launch action.

Nearly half of all the lumber exported to the U.S.  comes from the   B.C. Interior.   With the  Canadian dollar  being  low,  and the U.S. housing market  picking up,  the demand for  Canadian  lumber has grown.   The United States has long argued  lumber  produced  north of the 49th parallel is  subsidized by  government,  but  industry experts on  this side of the border argue  it has more to do with American producers  wanting a better share of the market.





“… experts are predicting the U.S. will launch action against Canada.” Welp, looks like we are about to go into round five of the Softwood Limber Agreement with the USA.

For the most part we won the last round… yet American protectionism rears it’s ugly head once again.

So much for “free trade” and “free markets”.

The USA is all for “free trade”, yet they have shown the world that they are unable to compete on a world scale as several other countries have managed to do.

Sawn lumber is one of those examples.

Canada is not that good at it either in many cases, but we have 10% of the US population, so our domestic market is small and does not help in providing us with economies of scale. We have had reasonable access to the US market, which has helped mostly in the case of the automotive industry as well as the lumber industry.

Then again, there are countries with smaller domestic markets than we have who are doing better than both Canada and the USA.

The USA net export of sawn lumber in 2015 was -US$2.6 billion. That is up by 157.5% from 2014. I am sure that will be a discussion point for them. They are bleeding.

Canada exported US$7 billion = 21% of total world sawn wood exports in 2015

USA is second at $3.1 billion for 9.3% of world market
Russia = $3billion
Sweden = $2.9 billion
Germany = $1.7 billion

Given all that, the USA appears to be the highest producer of timber in the world producing almost twice as much as Canada. India is second highest; China the third highest and Brazil the fourth with Canada the fifth.

gopg2015 I’m not too sure where you got those figures from but you are wrong. Canada is the largest producer/exporter in the world. Almost 3 to 1 on the next country. As for your statement “Canada is not that good at it either in many cases” is total hogwash. Canada and especially BC producers we are well ahead of the US in capacity and technology. Comparing an “average sawmill” in Canada to a US counterpart is night and day. Why do you think Canfor and West Fraser are gobbling up all the mill in the southern US as quick as they can. They are hedging against the softwood lumber agreement fallout and they are modernizing these mills to a Canadian standard. Our mills are world class and very efficient with only Scandinavian countries in the same class. If you haven’t been in a modern mill lately you really are missing out on some incredible technology

    I got those figures from this website: sawmilldatabase.com

    The data from that source is for sawn lumber only, no matter whether it is softwood or hardwood.

    It is current date for capacity of sawmills, listing the 12 largest in each country as well as the 12 largest producers based in the country.

    The data is for 2015 and sourced by the site from the export/import data for the country. Please blame the source, not the messenger.

    I am not sure what your complaint is. The figures I show are for export only. Production for domestic use is not accounted for. You wrote producer/exporter, so some sort of mix. I do not show total production of sawn lumber. I show just export. That is what the site shows. I show that it is the largest exporter in the world, 2.5 times as large as the next largest exporter, the USA.

    Where exactly are our figures (you actually do not show any) substantially different? Are they for the same year, 2015? Where do your figures come from?

    “Canada is not that good at it either in many cases” is total hogwash.”

    That statement was meant as a comment to my introductory paragraph, not to the lumber industry. It was meant in general application to other manufacturing areas.

    That being said, sawn lumber is a manufacturing process. Timber harvesting, on the other hand, is an agricultural industry. Trees are crops. We even replant tress these days and cultivate them to a limited degree. That part is not manufacturing. Cutting timber is merely harvesting the crop. Until it gets to a mill to manufacture it into a wood product or pulp & paper, it is not part of the manufacturing industry.

    Even at that level it is the lowest end of manufacturing.

    The use we make of wood in this country to make competitive exportable value added products such as furniture, flooring, cabinetry, doors, moldings, etc. is limited. Other countries are far better at it than we are. Not only that, but we have restricted ourselves to supplying the US market, with some going to Asia with virtually nothing to other parts of the world. We saw the folly of that when the US housing market crashed.

    Then we discovered China and we began selling a significant amount to that country.

    We are not in a strong situation when it comes to bargaining a new NAFTA agreement. We have a high capacity to produce very economical softwood lumber to the US because of the capacity of our mills relative to most other countries, including the US. We are facing a 50-year downturn in the AAC in BC, but the rest of the country still has healthy timber. The worst part is, that other than China, which may be an iffy future prospect, we really have not opened ourselves up to marketing our product to the rest of the world on a large scale. So, if the US continues to need less of our lumber and has begun to improve their capacity to produce lumber and produce it more economically, they will have less demand for our products, so they control the negotiations without even being “protective”.

    The Softwood agreement stands on its own, the same as the auto pact. It does not fall under NAFTA in the strictest sense. However, if requested by one of the two parties a NAFTA bi-national panel can be formed to render a decision. The final challenge can be made to the WTO.

    We have been there and done that in the past.

    The source for the 2015 figures for sawn wood exports reported in my fist post: worldstopexports.com/sawn-wood-exports-country

    Some data on capacity of lumber mills in the world. Source: sawmilldatabase.com/productiontoplist.php

    Highest production of sawn wood in the world – by mills m3/yr
    1 Klausner Holz Thüringen
    1,200,000 germany
    2 Wismar Sawmill
    1,200,000 germany
    3 Plateau sawmill
    1,054,000 canada
    4 Houston sawmill
    1,020,000 canada
    5 Quensel West Fraser
    940,000 canada
    6 Binderholz sägewerk
    825,000 germany
    7 Mackenzie sawmill
    800,000 canada
    8 Landsberg Am Lech
    800,000 germany
    9 Offner Wolfberg
    800,000 germany
    10 Dunkley sawmill
    800,000 canada
    11 Baur Holz
    750,000 germany
    12 Longview Softwood
    720,000 usa

    Highest production of sawn wood in the world by company m3/yr
    1 West Fraser Timber Co Ltd
    8,460,000 canada
    2 Canfor
    6,900,000 canada
    3 Weyerhaeuser
    6,449,000 usa
    4 Stora Enso
    4,646,000 finland
    5 Georgia Pacific
    4,300,000 usa
    6 Resolute Forest Products
    3,760,000 canada
    7 Interfor
    3,550,000 canada
    8 Sierra Pacific Industries
    3,200,000 usa
    9 Hampton Affiliates
    3,100,000 usa
    10 Arauco
    2,800,000 chile
    11 Tolko Industries Ltd
    2,500,000 canada
    12 Schweighofer
    2,400,000 austria

    Average capacity of 12 highest capacity mills in the following countries
    Germany = 752,917 m3/yr
    Canada = 720,333 m3/yr
    USA = 521,667 m3/yr
    Russia = 271,250 m3/yr

    Average total capacity of 12 highest capacity companies in the Softwood lumber agreement countries.

    Canada = 34,195,000 m3/yr
    USA = 25,809,000 m3/yr

    These figures speak to the ability to manufacture sawn timber using large modern mills which then typically speaks about mass production of standard sized products with the latest automation, quality control and lowest manpower with relatively highly qualified workers.

    In other words, greater efficiency and cost effectiveness.

      that should read “total capacity”, not “average total capacity” for the Canada-USA comparison.

Have to agree with Ryder. Canfor, West Fraser, and Interfor, have purchased roughly 30 plus mills in the South Eastern USA. These mills are being modernized as we speak, and I might add that the modernization is being done (for the most part) by Canadian companies.

If the Americans slap duties on BC lumber to the USA in the absence of a softwood lumber agreement, we will see more mill closures.

So hang on to your hat.

Perhaps its time for the Federal Government to call in Susan Yurkovich’s old boss David Emerson, and see if he can get us a softwood lumber agreement. He was the driving force behind the last agreement.

I suspect he has forgotten more than Trudeau, Christy Clark, and Steve Thompson put together, when it comes to Softwood Lumber agreements.

The US will argue that Canadian mills (and BC mills in particular) are subsidized in order to create jobs for communities that otherwise may not have those jobs.

Their argument is that that the Crown sells the logs to the mills at a subsidized rate. We say that is not the case. They say, if it was not the case, why don’t you allow Americans to bid on raw logs? We say it’s because we want the jobs in Canada–not the States. They say if we allowed raw log exports, American companies would bid the price up a bit more from where they are presently at and the current reduction in price is a subsidy. We say ‘hogwash’.

We talk about wanting free trade, but until we are willing to open up the possibility of some raw log sales to American companies south of the border, we aren’t really talking the talk. If Canadian mills are more efficient (and they are), then we have nothing to lose–so I say allow American companies to bid on some raw logs–even 5-10% would be enough. They can’t outbid efficient mills in Canada so we’ve got nothing to lose. In return, let’s settle this once and for all and include softwood lumber in NAFTA and the Transpacific Partnership.

Then we have the harvesting side of the forest industry. These are figures of the roundwood (timber) harvesting in 2005 as a percentage of the world harvest.

World total = 3,591,409,280 m3
1. USA = 444,003,000 m3 = 12.36% of world harvest
2. India = 330,210,200 = 9.19%
3. China = 294,401,900 = 8.20%
4. Brazil = 244,962,142 = 6.82%
5. Russian Federation = 207,000,000 = 5.76%
6. Canada = 195,907,000 = 5.45%
7. Indonesia = 103,423,886 = 2.88%

Those 7 countries harvested 50.67% of the world harvest in 2005. Some may see some surprising data there if they have been thinking only of North American softwood products.

Source = chartsbin.com/view/35643
Ten year old data with some reliability risks, however, provides reasonable order of magnitude and relative size of production.

Given that the USA harvests that much timber, why are they not more competitive? We have to keep in mind, of course, that Canada produces mainly softwood for some very specific uses such as dimension softwood lumber for the typical US/Canada low rise housing construction as well as pulp and paper products.

The US has a much more diversified selection of wood for specialty and higher end production of finishing products and furniture. If one were to look at softwood harvesting only, the numbers would be quite different.

Comments for this article are closed.