Canadian sawmills are absorbing punishing losses as US duties transform North American lumber supply, with construction costs in the balance<\/p>\n
Canadian lumber mills are curtailing production, absorbing historic losses, and in some cases closing permanently \u2013 all while American competitors operate with a built-in margin advantage engineered by US tariff policy, according to wood market analyst Russ Taylor.<\/p>\n
Speaking with Canadian Mortgage Professional, Taylor laid out a deteriorating picture of the North American lumber market, unwelcome news for the housing sector at a moment when the supply crisis has made the cost and availability of construction materials a prominent political issue.<\/p>\n
The tariff burden on Canadian softwood lumber has grown heavier over the past year. Combined anti-dumping and countervailing duties have climbed, with an additional 10% Section 232 tariff applied in October worsening that pressure.<\/p>\n
\u201cAll this stuff is just working against exporters to the US,\u201d Taylor said. The practical effect is a marketplace that strongly favours US producers. Insulated from import costs, American mills are generating margins that Canadian suppliers cannot access.<\/p>\n
\u201cThe only region really making any money is the US because they\u2019ve got what I call a huge subsidy that they\u2019ve put on importers,\u201d Taylor said. \"So they're gaining the margins that importers aren't getting.\"<\/p>\n
Those margins have also given US producers room to manoeuvre aggressively on pricing, further cornering their Canadian competitors. \"The US mills\u2026 can afford to be a little bit reckless right now because they've got built-in margins and they know that the Canadians don't have margins \u2013 or they have break-even at best,\u201d Taylor said.<\/p>\n
Curtailments, closures, and a shrinking supply base<\/strong><\/p>\n Despite the pressure, many Canadian mills have held on far longer than Taylor anticipated. But he warned the ability to absorb losses has its limits.<\/p>\n \"I've been shocked at the losses Canadian mills have been able to afford or put up with to stay in the game,\" he said. \"[That] doesn't always mean that because you've got high duties, you can be able to pass it on to the market. Only in strong periods of demand can you do that.\"<\/p>\n Attrition is also gathering pace with demand flat. North America has shed roughly eight billion board feet of sawmill capacity over the past three years, according to Taylor, with losses concentrated in Canadian operations.<\/p>\n By contrast, only approximately three billion board feet of new US Southern mill capacity has been added, resulting in a net deficit of around five billion board feet.<\/p>\n Among the products feeling the supply squeeze is SPF \u2013 western spruce-pine-fir, a framing staple in Canadian residential construction. \"SPF is in tighter supply,\" Taylor said. \"[It has] duties and\u00a0tariffs to absorb. So that price is sort of holding right now.\"<\/p>\n Federal and provincial governments have set ambitious new housing targets over the past year, with prime minister\u00a0Mark Carney\u00a0vowing to turbocharge construction to a pace of half a million starts annually.<\/p>\n But tighter lumber supply and stubborn pricing would likely represent a big challenge to those targets, complicating the picture even further when it comes to solving the national supply crisis.<\/p>\n Trade talks offer little near-term relief<\/strong><\/p>\n Taylor is doubtful that ongoing Canada-US trade negotiations will deliver meaningful relief for the lumber sector in the near term. Both governments are working toward a July 1 framework update to\u00a0the Canada-United States-Mexico Agreement (CUSMA), and Canadian officials have reportedly sought to include softwood lumber in a broader trade package alongside steel, aluminium, and auto parts.<\/p>\n \"There is talk that the federal government of Canada will be approaching the US government about some sort of a package \u2013 trying to deal with steel, aluminum and auto parts and lumber because they're being heavily penalised right now,\" Taylor said.<\/p>\n But he sees the political odds as long. \"I think knowing how long it's taken in previous years to get agreements in place \u2013 and they're not even talking yet \u2013 I can't see that happening at all.\"<\/p>\n The main obstacle: the US industry has little incentive to give ground, according to Taylor. \"Lumber has always, for the last 45 years, been sort of hung out on its own. And quite honestly, the US industry is probably saying: \u2018We like the way the tariffs and the duties work right now. We don't want to change it because it gives us a competitive advantage,\u2019\u201d he said.<\/p>\n He also pointed to the lobbying dynamics shaping Washington's position. \"There's a strong US lobby that seems to be getting the ear of Trump through the Softwood Lumber Coalition. They've done a really good job influencing and biasing the story, unfortunately. But that's politics.\"<\/p>\n For now, it remains to be seen how the lumber market crisis will impact Canada\u2019s housing affordability and supply challenges. But Taylor warned that even when capacity does eventually return to the market, the ride could be rough. \"When demand does start to come back, we'll see a lot more price volatility as well,\u201d he said.<\/p>","protected":false},"excerpt":{"rendered":" Canadian sawmills are absorbing punishing losses as US duties transform North American lumber supply, with construction costs in the balance Canadian lumber mills are curtailing production, absorbing historic losses, and in some cases closing permanently \u2013 all while American competitors … Continue reading