Donald Trump
Russia has emerged as one of the winners from the trade dispute between Canada and the US over lumber. Source: Bloombergs
The US is importing more softwood lumber from overseas after it slapped tariffs on Canadian supplies, making them more expensive.
Russian shipments are 42% higher so far in 2017, according to US government data.
To be sure, Russia accounts for a relatively small proportion of the total, while European countries such as Germany and Sweden are among the biggest suppliers to the US. But the shift in volumes illustrate how a political spat has quickly altered the flow of international trade.
“It seems to be that there’s something illogical that we’re not buying the lumber from our neighbours to the north, that we’re buying it from the Russians,” Jerry Howard, chief executive officer of the National Association of Home Builders, said. “That’s sort of the looking glass that we’ve gone through and that’s what the market is forcing us to do now.”
The dispute has increased material costs for house builders in the US by 20%, according to Howard.
Lumber futures traded in Chicago have gained 11% this year, among the best performance of all the commodities tracked by Bloomberg.
Prices fell 0.6% to US$364 per 1000 board feet at 10:33 a.m. on the Chicago Mercantile Exchange.
The trade in softwood lumber between the U.S. and Canada has been an intermittent source of friction for years, but tensions escalated in April when the Trump administration set countervailing duties of up to 24% on Canadian imports.
Additional duties of as much as 7.7% followed in June. There’s been speculation since then that both sides could resolve their differences before talks this month aimed at renegotiating the North American Free Trade Agreement. But so far, it’s remained as speculation.
House Building Monthly softwood lumber shipments from Russia totaled 4214 cubic meters in May, the most since January 2008, data from the Us Department of Agriculture show.
For the first half of the year, offshore softwood-lumber imports into the US rose 38%, while shipments from Canada declined 1%, said Bloomberg Intelligence analyst Joshua Zaret.
The additional cost of Canadian lumber is not only saddling US consumers with extra costs but threatens to price some of them out of the market, according to Howard.
For every US$1,000 price increase of a home, 150,000 people are priced out of the market, he said.
“Fewer houses are being built at the moderate price points, and they’re not being built because the cost of lumber puts them out of too much of the consumers’ buying range,” he said.
