Cana­dian pro­duc­ers ‘stunned’ by U.S. panel’s soft­wood rul­ing

B.C. lum­ber or­ga­ni­za­tion vows to ap­peal claims sub­si­diza­tion bat­tered in­dus­try

Calgary Herald - - FP CALGARY - GE­OF­FREY MOR­GAN

Lum­ber pro­duc­ers in Bri­tish Columbia say they will ap­peal a rul­ing Thurs­day by the U.S. In­ter­na­tional Trade Com­mis­sion that im­ports of sub­si­dized Cana­dian soft­wood have hurt U.S. com­pa­nies.

“I’m quite stunned that there’s a de­ci­sion that says the in­dus­try is in­jured be­cause the in­dus­try in the U.S. is ex­pe­ri­enc­ing and en­joy­ing record lev­els of op­er­at­ing prof­itabil­ity — more than they ever have in the 35 years we’ve been hav­ing this dis­pute,” Su­san Yurkovich, pres­i­dent of B.C. Lum­ber Trade Coun­cil, said shortly af­ter the rul­ing was made pub­lic.

Yurkovich said she was dis­ap­pointed by the ITC’s rul­ing, in which a four-per­son panel sided unan­i­mously with a coali­tion of U.S. forestry com­pa­nies that an anti-dump­ing duty should be im­posed on Cana­dian soft­wood lum­ber im­ports.

Through­out this long-stand­ing dis­pute, U.S. com­pa­nies have ar­gued their Cana­dian com­peti­tors have an un­fair cost ad­van­tage be­cause they cut trees on pub­lic rather than pri­vate land. In re­sponse, Cana­dian firms have ar­gued any ad­van­tage is mis­con­strued be­cause they pay a fee for each tree stump to the gov­ern­ment.

As a re­sult of the rul­ing, most Cana­dian forestry com­pa­nies will pay a com­bined 20.83 per cent duty and anti-dump­ing tar­iff to sell their prod­ucts into the U.S.

Yurkovich said her group, which rep­re­sents ma­jor forestry com­pa­nies such as Van­cou­ver-based West Fraser Tim­ber Co. Ltd. and Can­for Cop., is al­ready work­ing to ap­peal the de­ci­sion to the World Trade Or­ga­ni­za­tion and un­der the North Amer­i­can Free Trade Agree­ment, which is cur­rently be­ing rene­go­ti­ated.

“I went to the hear­ing and lis­tened to the U.S. in­dus­try talk about how they were in­jured. Then, in our pre­sen­ta­tion, the case we pre­sented for Canada, we had their same com­pa­nies crow­ing on their an­a­lyst calls that the fu­ture looked very bright and de­mand was fan­tas­tic and prof­itabil­ity hadn’t been so good since 2004,” Yurkovich said.

“So I don’t know how you can square those things.”

The du­ties on Cana­dian wood will re­main in place while the ap­peal process is un­der­way and even if the WTO sides with Cana­dian com­pa­nies, there is no pos­si­bil­ity of fi­nan­cial re­im­burse­ment for Cana­dian pro­duc­ers through that process, said Kevin Ma­son, man­ag­ing di­rec­tor of ERA For­est Prod­ucts Re­search. He ex­pects “at least a year be­fore we get any move­ment on any front” with re­spect to ap­peal­ing Thurs­day’s de­ci­sion.

Shares in West Fraser and Can­for both jumped al­most two per cent to close at $76.82 and $25.01, re­spec­tively, in Toronto — a sign, an­a­lysts say, the duty will largely be passed onto U.S. con­sumers rather than the com­pa­nies’ share­hold­ers.

A re­port from Moody’s In­vestor Ser­vice last week es­ti­mated the du­ties would cost Cana­dian com­pa­nies $1.2 bil­lion next year, but U.S. home­builders will drive in­creased de­mand amid an ex­pected six-per-cent in­crease in hous­ing starts thanks to re­build­ing ef­forts fol­low­ing hur­ri­canes in Texas, Florida and Puerto Rico.

“This is credit pos­i­tive for our rated Cana­dian and U.S. lum­ber pro­duc­ers, as high prices will out­weigh the cost of the duty,” Moody’s se­nior vice-pres­i­dent Ed Sus­tar said in its re­lease be­fore the ITC rul­ing.

He added that U.S. lum­ber com­pa­nies like Spokane, Wash.-based Pot­latch Corp. and At­lanta’s Ge­or­gia-Pa­cific LLC would see the most up­side from the du­ties. Pot­latch shares were up roughly one per cent to close at US$51.25 on the NAS­DAQ.

Prices for West­ern Spruce/Pine/ Fir (SPF) prod­ucts have re­cently hit his­toric highs, ERA’s Ma­son said.

Data from Bloomberg show lum­ber traded at US$425.70 per thou­sand board feet on Thurs­day, which is off the high of US$460 per mbf set in Oc­to­ber, but still far above his­tor­i­cal av­er­ages.

Ma­son said he ex­pects West­ern SPF prices to aver­age close to US$400 per mbf this year and de­cline slightly to aver­age US$390 per mbf next year.

“Right now prices are high enough, and we think they’ll con­tinue to be high enough, that we think the ma­jor­ity of Cana­dian pro­duc­ers are go­ing to keep go­ing,” Ma­son said. “We’re go­ing to have record-break­ing fourthquar­ter (earn­ings) num­bers com­ing out.”

BMO Cap­i­tal Mar­kets an­a­lyst Mark Wilde re­cently boosted es­ti­mates for West Fraser, Can­for and In­ter­for Corp. due to the high prices the in­dus­try has en­joyed in re­cent months, not­ing that “al­most ev­ery­thing went right” in the quar­ter.

He noted that West­ern SPF prices are up be­cause sum­mer for­est fires across Bri­tish Columbia lim­ited the sup­ply of wood while de­mand is ex­pected to con­tinue to rise as ma­jor U.S. pop­u­la­tion cen­tres like Hous­ton re­build af­ter dev­as­tat­ing hur­ri­canes.

Still, Wilde cau­tioned in­vestors that he re­tains a “mar­ket per­form” rat­ing on the stocks be­cause “chas­ing com­mod­ity stocks in ‘peaky’ mar­kets is sel­dom a good in­vest­ment strat­egy.”


The B.C. Lum­ber Trade Coun­cil is work­ing to ap­peal a U.S. panel’s rul­ing that Canada’s sub­si­dized soft­wood is harm­ing the U.S. in­dus­try. Su­san Yurkovich, pres­i­dent of B.C. Lum­ber Trade Coun­cil, noted the U.S. in­dus­try is en­joy­ing “record lev­els” of...


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