Tariffs may accelerate Canadian lumber industry's southward shift, hunt for new markets

By Mrinalika Roy and Seher Dareen

(Reuters) - U.S. President Donald Trump's tariff menace could motivate much Canadian lumber producers to displacement to the U.S. confederate borderline portion accelerating efforts to find caller markets, manufacture experts said.

The levies are the latest successful a astir four-decade quality betwixt the neighbors implicit softwood lumber, utilized successful construction, furnishings and insubstantial production.

Levies connected Canadian lumber could deed 40% if existent duties of 14.54%, and Trump's projected 25% tariffs are added. Trump has paused tariffs connected goods compliant with the United States-Mexico-Canada Agreement until April 2.

Washington has alleged that Canadian lumber products were subsidized and sold successful the U.S. beneath just marketplace value. Canada has successfully challenged specified duties nether the quality solution provisions of multilateral commercialized agreements.

Canada supplies astir a 4th of U.S. lumber, and implicit the past decade, respective Canadian mills person moved their operations to the U.S. South, drawn by cheaper, abundant timber and its availability connected backstage lands arsenic opposed to Crown land, which employs stringent harvesting policies.

"Disparity successful log costs and availability are the large drivers here, but Canadian concern successful the portion has surely been partially motivated to moving operations wherever they debar the interaction of duties," said Dustin Jalbert, elder economist, wood products, astatine commodity pricing bureau FastMarkets.

Canfor, for instance, has been shuttering operations successful British Columbia, citing challenges accessing economical fibre, losses, anemic markets and U.S. tariffs.

About 70% of Canfor's lumber concern is present extracurricular Canada, portion 80% of adjacent Weyerhaeuser's lumber manufacturing is present successful the U.S., they said successful their latest quarterly net calls.

Canfor, Weyerhaeuser and respective Canadian companies declined to remark for this story.

"In 2004, determination were lone 2 sawmills owned by a Canadian manufacturer. Today, we person much than 50," said Kyle Little, main operating serviceman astatine New York-based Sherwood Lumber, which supplies implicit 2,000 U.S. lumber yards and manufacturers.

"Canadian companies present nutrient much than a 3rd of the measurement of the largest producing portion successful the U.S. - the U.S. South."

The U.S. South surpassed Canada successful softwood lumber capableness successful 2022 and volition proceed to grow this decade, FastMarkets said.

British Columbia's dwindling output, which has halved since 2017, is dragging Canada's marketplace share.

"For years, producers person opted to unfastened mills successful the U.S. South owed to challenges successful Canada," and the tariffs could expedite this, said Morningstar expert Spencer Liberman.