Analysis
Riitta Hänninen
Senior Scientist
Natural Resources Institute Finland (Luke):
“The customs duties of the United States are creating waves in the market for sawn timber.
The United States is a central market for the Canadian forest industry and the main export market for the country’s softwood sawn timber. This export market is now facing challenges with the United States’ decision to impose import duties on Canadian sawn timber at the beginning of May.
The duties may be higher than 20 per cent. They will be collected retroactively, in addition to investigations into whether some companies have been selling sawn timber below market prices in the United States. A preliminary decision on the matter, one which may well lead to additional duties, is expected in June.
One factor behind the dispute is explained by the Canadian government’s large holdings in Canadian forests, which some presume to have an effect on the price formation of raw wood in the wood market.
The sawn timber dispute between the countries has been going on for decades, resulting in several fixed-term agreements between the countries.
Following the agreement which expired in 2015, the situation has remained open. Canada’s exports to the United States have grown during the past few years, only to be accelerated in terms of sawn timber late last year and early this year as people sought to prepare for the possible duties in advance.
Demand for sawn timber in the United States has increased over the past two years due to growth in the construction sector. According to FAO’s statistics, roughly a third of the sawn timber consumed in the United States must be imported from elsewhere.
European exporters – particularly Germany, Austria and Sweden – have increased their supply in the United States in the first half of the year, spurred on by a competitive advantage resulting from exchange rates.
Europe’s share of the United States’ importation of sawn timber as a whole is nevertheless very small. It will indeed remain to be seen whether the export outlooks of European producers will improve due to the duties imposed on Canadian products.
If exportation from Canada to the United States will become more difficult, the supply of Canadian sawn timber in Asia is likely to grow, particularly in Japan, China and India. This would intensify competition in China and Japan, where Finnish sawmills, too, are exporting large volumes of sawn timber. This also applies to Finland’s main competitors in this sector, Sweden and Russia.”
