Producers brace for second round of US softwood lumber duties

Preliminary anti-dumping duties expected average around 10%, added to previous levy.

June 26, 2017   by Ross Marowits

MONTREAL — Canada’s softwood lumber industry is bracing for a second wave of US duties expected to come June 26 that could put further pressure on producers, particularly smaller ones, to cut jobs.

The US Department of Commerce announced in April preliminary countervailing duties against five companies ranging between three and 24%, with other producers facing a tariff of 19.88%.

This time, the US is expected to announce preliminary anti-dumping duties with an average rate of around 10%, which would be added on to the previous levy.

Analyst Paul Quinn of RBC Capital Markets believes the US will play hardball and impose high anti-dumping rates in order to push Canada to agree to a deal before negotiations on NAFTA begin in August.

“Anti-dumping (duties) is a way to scare the Canadians and try to force them to get something done,” he said from Vancouver.

Canada’s share of the US softwood lumber market was 27% in May, down from 31% a year earlier, according to monthly Canadian government reports. That represented a $165-million loss in exports for the month, including $105 million in BC and $18 million in Quebec.

Final duty rates have been lower than preliminary tariffs in the past. But Quinn said that could change this time because the US Lumber Coalition is pushing for a tough response to the Canadian government’s $867-million financial support for the industry, mainly through loans and loan guarantees.

Federal Natural Resources Minister Jim Carr said Ottawa was “very prudent” in developing the program and wouldn’t say if more industry funding will be coming in the wake of the second round of duties.

“We will react to market conditions in the reality of the moment,” he said. “We are committed to ensure that our forestry sector is able to adapt to changing environments.”

The ripple effects of the first round of softwood lumber duties are already being felt. Resolute Forest Products has cut shifts at seven sawmills, and there are fears other companies could follow suit.

The Conference Board of Canada has said US softwood lumber duties will cost Canadian producers $1.7 billion a year and result in the reduction of 2,200 jobs.

Resolute spokesman Seth Kursman wouldn’t say if the Montreal-based company will pursue another round of layoffs.

“It wouldn’t be fair for me to speculate and guess and in doing so create angst among our people and the communities in which we work and live,” he said.

Analyst Hamir Patel of CIBC World Markets predicts Resolute will face the highest preliminary anti-dumping duty of the four producers set to receive their own tariffs. All other companies will get a weighted average duty, similar to when the last round of softwood duties were announced.

Countervailing duties target what the US considers unfair subsidies, while anti-dumping tariffs go after the alleged selling of softwood below market value.

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