Softwood comment for Toad

[plywoody]

Toad,<br /><br />The effects of the countervailing duty against Canadian softwood lumber mills on US consumers has been complex and confusing at best.<br /><br />The duty itself varies from company to company but averages around 30%, and the US historically imports about 35% of its lumber, traditionally mostly from Canada.<br /><br />One would think that by adding a 30% tariff, it would automatically raise the prices paid by US consumers but the reality is the futures markets for lumber went down in the US. There are many and varied explainations for this, from changing sources of wood (lots of new production coming in from Brazil, Chile, Russia, etc.) to Canadian mills trying to get more efficient to lower their unit cost of production, and actually increasing their output, rather than decreasing it, and flooding the market driving prices down.<br /><br />In any event, the US driving force behind the duties have been several large timeber companies (but not all-Weyco, for example has been anti duty all along) who wanted the government to protect their markets and margins (yet another case of corporate welfare--editorial--this is the real welfare reform we need!)<br /><br />I think what it really shows is that it is difficult to directly manage economic affairs, and when one action is done on one side of the equation, the results are not always easily predictable, and don't always follow a prescribed script.<br /><br />Softwood plywood and OSB has never been part of the softwood lumber issue, and there is no duty on it either way. The recent run-up in prices (3/8" CDX sheathing is currently being sold mill to distributor in truckload quantities at almost $13 a sheet US$, and OSB is even higher than that!) is a little difficult to explain, although with continued low interest rates, housing starts are very strong, and overall production, for a variety of reasons, has not kept pace. What will happen?? no one knows, but I have been trading commodity lumber and panel products for a long time, and markets go up, and markets go down, and that is about all one can count on.

 

[Carphunter]

Re: Softwood comment for Toad

"Softwood"............now thats funny. <br /><br />Finally, we got 'ol plywoody makin jokes. Keep it up!

 

[gaugeguy]

Re: Softwood comment for Toad

Plenty of medical options nowadays to take care of that <br /><br />No "well placed arrows" are gonna fix that problem

 

[mellowyellow]

Re: Softwood comment for Toad

howdy PW, are you working with any specialty<br />plwoods? saw some awesome fake teak deck PW 4<br />marine use online.<br />hoping to re-roof the house this summer if I<br />can afford it... any deals u can give me?<br />house and barn are about 40sq! <br />prob. 1/2" t/g variety.

 

[Toad2001]

Re: Softwood comment for Toad

Thanks Plywoody. Thats interesting.

 

[plywoody]

Re: Softwood comment for Toad

I should add that there are many Canadian softwood lumber mills that are expecting a huge refund as they expect the World Trade Organization to rule the duty illegal. The money collected is being held in trust pending appeal and it amounts currently to several billions of dollars.<br />Whether that happens or not, it is hard to say.<br /><br />The main dispute is over whether the Canadian industry is subsidized or not by the government, and what precisely constitutes a subsidy.<br /><br />The real issue is in your neck of the woods, Vancouver, although Ontario and Quebec are also part of it. Both Canada and the US have vast quantities of public timberlands, but treat them differently. Canada prefers to view them as a resource for a source of jobs--and generally good paying jobs, and allocate them to various mills at a set stumpage rate--which does include the reforestation expense plus some revenue to the general fund of the government of Canada.<br /><br />The US, on the other hand, opens up the available timber to public bidding, with the timber going to the highest bidder--with certain stipulations on US Forest Service timber like ti cannot be exported in log form in certain cases.<br /><br />The US procucers claim that this is an unfair subsidy, and Canada claim that it is their soverign right to deal with their resource in the best interests of their country, and in any event while it may not be the source of revenue that the US model creates, in no way is it a subsidy, and that it provides good paying jobs in the hinterlands of Canada, of which there are many!<br /><br />Who is right?? Who knows, but my money is on the WTO ruling the tariffs are illegal, as it really appears that the US has taken an arrogant stand that suggests that their way is correct, and any deviation from that is wrong. This is of course one example of many reasons why Americans, American government, and especially this American president, and American business generally are somewhat distrusted and thought to be profoundly arrogant north of the border.<br /><br />At the risk of being a bit long winded, interestingly, we are currently importing a fair bit of US Forest Service timber, with all the proper clearances, into Ontario from Michigan, all at US market prices--Clearly, Ontario forests are not being subsidized, yet they are part of this issue.<br /><br />And the most interesting thing is a entity called the "Vancouver Log Market", which I worked in and around for many years, and which is comprised of the width and breadth of the Fraser River, and Howe Sound, and related areas. <br /><br />Companies are allocated "Tree Farm Licenses" from the BC goverment, typically somewhere in the temperate rain forest of coastal BC and Vancouver Island. These TFL's do not necessarily comprise what a particular mill uses, and in the case of one Douglas Fir plywood mill I worked with in Vancouver, their TFL was on the north end of Vancouver Island, where there isn't a single Douglas Fir tree within 200 miles.<br /><br />they then bring their harvests, graded, into this VLM, generally hire a broker (although some big companies do this themselves) establish a "market price" for the various grades of logs, and negotiate the same with other companies, and trade what they harvested for what they need. A consumated trade may involve as many as 5 or six different companies or more. It is truly a dynamic and fascinating process to watch work, and there have been several books written on this market and how it works.<br /><br />I worked in this market, and as I worked for a US company, all I had to trade was mere money. Their view was that was allright, as long as I brought enough of it!

 

[Toad2001]

Re: Softwood comment for Toad

Great write up. I find it ironic that the duty exists. As you are well aware that it is US companies who dominate the industry (at least here in BC). Perhaps we should simply figure out a way to establish a foreign tax on those companies if the US gov't doesn't want to play fairly.