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Local lumber producers are pulling away from the U.S. market, but not entirely.
There will always be a market for Canadian lumber in the United States, but that doesn’t mean local producers aren’t taking at least few of their eggs out of the star-spangled basket.
A softwood lumber trade dispute between Canada and the United States has flared up this year, and the US has slapped a 20 per cent duty on most Canadian companies sending wood across the border.
Nick Arkle is the co-CEO of West Kelowna’s Gorman Bros. Lumber Ltd. He says the dispute has pushed lumber prices in the U.S. “as high as they’ve ever been,” as producers pass most of the financial pain onto consumers.
But even though shipping lumber south has become more of a hassle, Arkle says Canadian companies will keep doing it, at least in some capacity.
The American market, he said, is “huge,” and tends to pay quite well for “high-value” products, like those produced in British Columbia.
“Our high-value lumber will always have a home in the US,” he says. “You never want to walk away from that.”
Turning Japanese
However, while companies like Gorman aren’t leaving the U.S. altogether, they have cast their eyes to other markets.
Those wandering eyes were on display last week, when British Columbia sent its largest-ever forest sector delegation to Japan and China, to nose around for new trade opportunities.
Arkle, who was one of more than 30 forest company executives on the trip, points out that China and Japan are the largest markets for Canadian lumber outside of the U.S.
He said Japan seems increasingly hungry for B.C. lumber, as it seeks out more good wood to help (literally) build up its tourism industry.
Arkle said the volatility in the U.S. “makes you aware of that fact that we have to keep looking for new markets,” and that Gorman is shifting more and more of its trade to places like Japan.
As softwood lumber trade disputes have unfolded over the years, Gorman has reduced exports to the U.S. from 80-85 per cent 15 years ago to only about 33 per cent today.
Meanwhile, about a third of its trade it now done offshore, with Japan representing a big chunk of that.
‘Commodity prices are commodity prices’
Even though Gorman has moved away from the American lumber market, the company still keeps a very close eye on it.
Arkle says lumber producers actually feel good about extra-high prices in the U.S., because they signal the eventual market downturn–even if that’s not going to happen in the near future.
“There’s lots of optimism now. There’s a recognition that commodity prices are commodity prices, and they’re going to come down. But I certainly didn’t get a sense that people feel that’s going to happen imminently,” he said.
Arkle explains that, with the price of lumber soaring, new producers are beginning to pop up. Companies in the southern United States are starting to flood the market, and even European producers are getting in on the action, because high prices mean they can finally afford to ship across the ocean.
That, Arkle says, is all good news.
“When the markets are good the floodgates are open, and they flood the market and the prices go down again,” he said.
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