For the first time since 1970, the American South will surpass Canada and become the dominant producer of North American lumber. It comes as decades of Canadian dominance have come to a halt with trade restrictions, wildfires, insect infestation, and land-use regulations have started to bite hard into a British Columbian economy that until recently has relied on lumber for 25% of its exported commodities.
That is according to Fastmarkets, which revealed that the latest round of softwood lumber duties has battered Canadian producers – raised 81% in August and could jump again according to new data obtained by the United States Commerce Department’s annual review.
The latest round of data comes after Wood Central reported on Republican candidate Donald Trump’s plans to stimulate manufacturing by imposing a 10% baseline tariff and a 60% tariff on Chinese goods.
The four-decade-long softwood lumber dispute is one of the world’s most protracted and enduring trade disputes. The United States accuses Canada’s CA $10 billion (or US $7.2 billion) industry of dumping low-priced timber into the country, arguing that the government fees that Canadian loggers pay to harvest timber amount to a subsidy.
Further levies could be “quite devastating for the sector,” according to Kurt Niquidet, chief economist for the BC Council of Forest Industries, who spoke to Bloomberg overnight. “You would see widespread curtailments throughout not just BC, but across Canada.”
As Canadian sawmills are squeezed by high costs and lower revenue—most notably in the forest-rich western province of British Columbia—the US South is enjoying gains in the industry. The US Lumber Coalition has credited the duties with a robust boost to American investment and capacity.
According to Dustin Jalbert, senior economist at Fastmarkets, North America lost 4% of sawmill capacity through closures this year alone—and more than 40% of that was in BC. Meanwhile, forestry firm Canfor Corp. said it would close two BC sawmills by year-end and take a C$100 million write-down, citing duties and a lack of wood supplies.
West Fraser Timber Co., the world’s largest lumber manufacturer, and smaller rivals Interfor Corp. and Western Forest Products Inc. have also suspended or shuttered western Canadian mills.
Demand Turnaround
The US South has offset some of BC’s losses, thanks to faster-growing private forests that have made the region the “largest wood basket on the continent,” said Brooks Mendell, president of Forisk Consulting in Georgia. But he said an ample US lumber supply assumes that “Canada doesn’t go to zero because Canada is still an important player.”
Unless the US becomes self-sufficient, it’ll still need to import wood. Americans could be left paying a premium from a permanently diminished Canadian sector or more distant forests like in Scandinavia.
“The US can only produce so much more incremental lumber before they reach a maximum timber harvest,” said Russ Taylor, a BC-based forestry consultant who has worked in and covered the industry for 45 years.
There are glimmers of a turnaround in lumber demand that could halt Canada’s slide. US single-family home construction is rising, and the National Association of Home Builders sees the trend extending through 2026. Fastmarkets expects North America’s lumber production capacity to fall short of demand this year for the first time since a pandemic-fueled renovation boom.
“Next year, if we have a good demand recovery — you know, demand up, supply down — it doesn’t take a business economist to tell you what that probably means for prices,” Mr Jalbert said.
Why a 3.4% Price Range is Key to the Canada-USA Lumber Dispute
Last month, Wood Central revealed that price was the main driver of the decades-long North American softwood dispute. Two economists revealed a 3.4% band in the sweet spot for substitutability between the United States and Canada.
That is according to Yifei Zhang and Barry Goodwin, both from North Carolina State University, who used threshold modelling to assess differentials between Spruce-Pine-Fir (SPF) and Southern Yellow Pine (SYP).
The study – published in the Forest Policy and Economics – found that consumers and builders are more likely to consider product substitutes when the price difference between Canadian SPF and US SYP is within the 3.4% sweet spot:
“Within this narrow price range, buyers may switch between SPF and SYP based on minor price fluctuations,” they said. However, when price disparities exceed this threshold, “the likelihood of substitution diminishes, and the two products operate independently in the market.”
“If Canadian lumber is only a substitute for US lumber within the narrow price range,” the economists said, “then duties and trade restrictions might have varying impacts depending on market prices.” At the same time, the US argument that Canadian imports compete with and harm domestic products “may hold more weight when prices are aligned.”
The Canada–US softwood dispute is one of the nation’s most significant and enduring trade disputes. First arising in 1982, it remains unresolved more than 40 years later. Under the US Tariff Act, the US Department of Commerce determines whether goods are being sold at less than fair value or benefiting from subsidies provided by foreign governments.
- To learn more about the Canada-US softwood dispute, click here for Wood Central’s special feature.
