German softwood imports up 10X in wake of US duties on Canadian industry

Prices are rising, making imports from sources in Europe and more attractive.

OTTAWA — US imports of softwood from Germany have grown tenfold in the first half of the year as punishing duties pushed imports of Canadian softwood down.

RBC Capital Markets analyst Paul Quinn estimates Canadian lumber producers have plunked down $500 million so far in countervailing and antidumping duties since the spring.

The US alleges Canada unfairly subsidizes its softwood industry and has slapped on import taxes averaging 26.75% as punishment.

Canada disputes the US assessment but cannot officially challenge the US tariffs until after final decisions are made about the level of duties to be imposed some time this fall.

Canada and the US are trying to negotiate a new softwood trade deal to replace one that expired in 2015, but thus far have been unable to come up with a plan acceptable to the US Lumber Coalition.

In the meantime, Canadian companies are paying duties and prices are rising, making imports from places like Germany suddenly more attractive.

“When Canadian lumber is more reasonably priced it’s not that viable of an option,” said Jerry Howard, CEO of the National Home Builders Association in the US. “The Germans this time were poised to take advantage of it and I think that they have.”

In the first six months of this year, German softwood imports into the US soared more than 900% over the same period last year.

Germany’s share of imports rose from 0.35% in the first six months of 2016, to 3.6% this year.

Overall, US imports of softwood were up three per cent over the first six months of the year.

However Canadian shipments were down 1%.

As a result, Canada’s share of U.S. softwood imports fell to 92% from 96%.

Richard Walker, a spokesman for the Forest Products Association of Canada, said Canada’s softwood exports were growing before the duties were imposed at the end of April. In May and June they fell.

“It’s the American consumer who has been paying the price to date as lumber prices have gone up in anticipation of the duties,” said Walker.

Germany wasn’t the only beneficiary. Austrian softwood imports were up 178%, Romania was up 141%, Russia 42% and Sweden 41%.

Howard estimates the softwood dispute has pushed prices for homebuilders up 20%, which means new homes are costing US consumers more and more Americans will be priced out of the market.

“If our own forestry practices in the United States were more modernized and more state of the art we could probably produce almost enough lumber to satisfy our needs, but right now we have to supplement our own domestic harvests somewhere,” he said.

Quinn used the average duties imposed and multiplied it by the amount of wood exported to estimate as of now, Canadian producers have paid close to $500 million in duties as of August.

The second quarter reports for six of the country’s biggest softwood producers show the impact of the duties up to the end of June. Canfor deposited the most at $34.8 million, followed by West Fraser which paid $34 million. Resolute has deposited $4 million, Interfor $7.3 million, Western Forest Products $9.2 million and Conifex $4.6 million.

Most companies are being asked to pay the duties retroactively for 90 days. Interfor’s quarterly report suggests that could amount to another $11.4 million for it alone.

The duties deposited are held in trust by the US until all Canada’s appeals are completed. If Canada and the US reach a settlement agreement, that agreement will likely dictate where those duties end up.

The last time there was a softwood trade dispute, the US collected $5.2 billion in duties over five years and the settlement in 2006 included a clause that the US would repay $4.5 billion of it.

News from © Canadian Press Enterprises Inc. 2016

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