Building boom spurs Canadian lumber lift

U.S. weighing an import duty as prices touch 19-month high

With Americans buying more new homes than at any time since the Great Recession, the cost of the wood used to build them is getting a lot more expensive.

Lumber prices are off to their biggest rally in more than a decade, touching a 19-month high in July as demand increased from builders. But almost a third of all wood used in U.S. homes comes from the world’s top exporter, Canada, where surging shipments have compounded a trade dispute and increased the chances of import tariffs that may top 30 per cent. That spells trouble for producers including West Fraser Timber Co. and Canfor Corp.

While the two countries have until October to iron out a new softwoodlumber trade agreement to replace one that expired last year, imports are flooding into the U.S., intensifying opposition from American producers who say their northern neighbours get unfair subsidies. Canadian exports accounted for most of the increased demand from U.S. builders this year through April, according to estimates.

“Canada is shipping so aggressively into the U.S., you’re going to stoke the fears there,” said Kevin Mason, managing director of ERA Forest Products Research, a Vancouver-based financial research company.

With demand for lumber slowing in Asia, Canada stepped up sales to its southern neighbour, by far its biggest customer. Exports surged to 7.45 billion board feet of lumber in the first half of the year, up 20 per cent from the same period a year earlier, government trade data show.

Growth has been fuelled by a rebound in the U.S. housing market. Purchases of new single-family homes rose in June to the highest level in more than eight years, to a 592,000 annualized rate, Commerce Department data show.