A report last week from Canadian Business under the headline A happy, duty-free New Year for the lumber industry featured a number of interesting observations from UBC forestry professor David Cohen. It’s well-known the elimination of the export tax in January and February presents a bonus for sawmills: “That 5% goes straight to the bottom line.” What seemed newsworthy however, was learning that “Chinese imports dropped 12% (in 2012), but B.C. wasn’t down.” At the same time, with U.S. housing starts on the rebound, we’re told that “some companies could abandon China as the U.S. comes back.” Perhaps that possibility explains evidence of a shifting preference toward long-term supply agreements in China over “simply snapping up bargains.”

In a chat with Mark Kennedy today, Executive Director, Forest Products Equity Research at CIBC World Markets, it was interesting to contemplate how projected growth in U.S. demand for lumber might factor into future negotiations surrounding the Softwood Lumber Agreement.

“With the strong support of industry and provinces, Canada and the United States agreed, in January 2012, to extend the Softwood Lumber Agreement from its original seven years to October, 2015. Canada has agreed to consult with the United States before that expiry date with respect to whether a further extension would be appropriate.”
– from the Foreign Affairs and International Trade Canada website here