Double Whammy

The impact of the Chinese market on domestic lumber prices has become increasingly more dramatic in recent times. In November 2013, a month in which the Random Lengths Framing Lumber Composite Price averaged $398, forest industry analyst David Elstone warned “If the Chinese were to stop buying today, the North American market would be in massive disarray.”

Fast forward to today. Demand has stalled in China (B.C. softwood lumber exports to Mainland China were down 18.1% in June and 19.5% in July, YOY). The Composite Price sits at $303. The inconvenient timing of China’s arrested demand, with the Softwood Lumber Agreement about to expire, is a double whammy for B.C. producers.

In today’s Vancouver Sun here, most probably agree with policy analyst Naomi Christensen’s view that it is in Canada’s interests to pursue a new Softwood Lumber Agreement. The weak loonie, rising production, and flailing offshore demand however would all seem to make the upcoming trade talks/negotiations with the U.S. especially problematic. It makes one wonder how much of the rationale for Canadian sawmill acquisitions south of the border is aimed at helping hedge revenue sources – exempt from the challenges in cross-border tariff discussions – as much as it is about securing timber.

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