Canfor Corp., one of Canada’s top lumber producers, says fluctuating lumber prices are here to stay amid “the emotion and confusion” regarding potential duties on the country’s softwood exports to the U.S.
Lumber prices are reacting to higher demand and also some producers reducing shipments amid a looming trade dispute between Canada and the U.S., said Wayne Guthrie, a senior vice president at Canfor. Lumber shipments to China were stronger-than-anticipated at the end of 2016, he said Thursday on an earnings call.
“You add all of that up it’s created the bit of a storm we’ve seen on pricing here,” Guthrie said. “This volatile price environment is likely here to stay for a while.”
Lumber futures have climbed 14 percent this year, one of the best-performing commodities, according to data compiled by Bloomberg. Prices rose for the eighth straight session Thursday, heading for the longest rally since Nov. 4, 2005.
The price increase comes as the U.S. investigates softwood lumber imports amid allegations that Canadian timber is heavily subsidized. The U.S. is expected to announce a countervailing duty in the second quarter of 2017 and a preliminary anti-dumping tax about 60 days later, Canfor said Wednesday in a statement.
One aspect of the trade dispute is the amount of U.S. market share Canada will be allowed. Canada’s potential market share is the “key sticking point” in the trade dispute, Chief Executive Officer Don Kayne said on the same earnings call.
The Canadian share of the U.S. lumber market averaged 33 percent in 2001-06, according to the Congressional Research Service, Bloomberg Intelligence analyst Joshua Zaret said in a Jan. 9 report. Under the softwood lumber agreement that became effective in late 2006, Canada’s share averaged 28 percent.