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Issue 1 2019 - FBJNA


///LUMBER


Timber! Forest products are a valuable, yet volatile trade


Today,


By Karen E. Thuermer shipments of forest


products to and from the United States are most influenced by trade disputes with China and Canada. “Growing uncertainty


generated though protracted trade disputes is today’s concern,” states Judith Adams, vice president of marketing for Alabama State Port Authority. The Authority’s sole port, the Port of Mobile, is a major forest products port that services


product pricing. Adams continues: “Another


group experienced a 21% increase in exports to China in 2017 over 2016. But a tariff standoff between the US and China has resulted in a threat from China to issue tariffs ranging from 5 to 25% on items that include low-grade lumber and hardwoods, effective last October. Consequently, the US is shipping less lumber and hardwoods to China. “China, as a consumer of lumber, is not taking as much


thought, China merely seeks new sources of lumber and restructures supply chains, which begs the question can the US timber industry recover their market position when the dust settles?” China already is increasing


and expanding its lumber business with Russia. “Significant and ongoing


investments in a combination of modern sawmills, kilns and planers at Russian mills in Russia, Chinese mills in Russia, and Chinese mills on the Chinese side of the border have increased the value of lumber where it can be transported further in China,” states Wood Markets in an October press release. “A growing number of Chinese distributors and processing companies are tapping into the expanding supply chain from Russia to access Russian spruce and red pine lumber.” But Adams indicates


that the Port of Mobile has seen increases into other markets. “So, overall, lumber is performing,” she says. According to Wood


Export Kraſt Liner Board being handled at the Port of Mobile Pier B North. (Alabama State Port Authority photo.)


most major trade lanes. China is traditionally the


largest importer of US forest products. The commodity


lumber as usual,” observes Adams. She


protracted trade only impact volumes, but also


notes that fights not


Resources International LLC, global trade of softwood lumber from January through September 2018 was down 2.5% as compared to the same period last year. China, Japan, the UK and the MENA region reduced their imports, while the US and continental Europe have imported more lumber in 2018 than in 2017. “After US lumber imports


reached a 10-year high in 2Q/18, import volumes fell 3.5% to 9.44 million m3 in 3Q/18,”


Wood Resources states. “This is still over 10% more than in the same quarter in 2017. The trend over the past few years has been that the market share for overseas lumber supply to the US has increased at the expense of Canadian supply. The Canadian share has fallen from 95% of total imports in 2016 to 91%in 2018.” The US and Canada have


experienced five trade disputes


“Canada secured protection from American anti- dumping tariffs through the preservation of the dispute- settlement mechanism from NAFTA in the USMCA,” writes Mark Cardwell in his FBJNA feature in this issue. US disputes with Canada center around federal and


since the 1980s.


States. Bracing for a tough 2019, some British Columbia lumber producers are looking to China for trade opportunities. Meanwhile, Wood Markets/ FEA Canada, part of Forest Economic Advisors LLC, indicates that the impact of US import duties on Canadian lumber production and exports has been developed from building a cost curve of Canadian producing regions. It predicts in its Global Timber/Sawmill/Lumber Cost Benchmarking Report that the first real “supply gap” could occur as early as 2019 as a result of ongoing price volatility. It predicts further record-level lumber prices in the US market into 2020. It states: “As the import duties on Canadian lumber


are expected. This should


allow American mills to increase their market share of its home market.” The report predicted


Canadian lumber production to dip slightly in 2018 and potentially in 2019 from the impact of US import duties and tight timber supplies, and forecasts exports to China to increase slightly. “But this will depend on lumber price levels as compared to the US price, net of import duties,” it reports. Forest2Market has studied


trends in the industry, notably the residual wood fiber market between 2004 and 2017 and market forces impacting the US South and the Pacific Northwest, two regions. Among the trends impacting these regions: the structural


provincial subsidies to the Canadian lumber companies, most of which is owned by provincial authorities. Of all Canadian provinces, British Columbia exports


the most softwood lumber to the United


Fluff pulp exports being handled at the Port of Mobile Pier 2. (Alabama State Port Authority photo.)


imports will give many US mills a substantial cost advantage, a surge of capacity expansions has already started, and more


decline in printing and writing papers and other end products derived from har d w ood


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