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Builders Pursue Opening Up U.S. Lumber Market
Recent visits by NAHB Senior Officers to Sweden and Russia geared toward increasing exports of duty-free softwood lumber to the U.S. makes good business sense, according to an expert forestry policy analyst.
The NAHB initiative, coming just as Canada and the U.S. enter into a new, seven-year trade pact that creates a series of complex border taxes and quotas that will artificially raise lumber prices during periods of normal or slow demand, shows that home builders are serious about opening up competition in the U.S. lumber market, said Bruce McIntyre, a partner in the Vancouver office of PricewaterhouseCoopers LLP.
“I think the NAHB mission was a good idea,” said McIntyre. “It sends a signal and reminder to Canadian producers that there are alternative sources of supply. It’s difficult to manage trade. This shows that the potential for increased lumber imports from offshore is an unintended consequence of the U.S.-Canadian agreement.”
NAHB Executive Vice President and CEO Jerry Howard in early October traveled to Stockholm and held two days of talks with Swedish trade and industry officials. The following week, Howard and NAHB Immediate Past President David Wilson ventured to Russia. The purpose of the visits was to seek to increase exports of softwood lumber and other wood products to America.
In working to ensure that the nation’s home builders have access to an adequate supply of lumber, NAHB’s top priority is to exhaust all domestic opportunities. This includes seeking higher targets for timber sales from publicly-owned lands and urging the U.S. government to open up additional forest lands for logging.
However, as a result of environmental and regulatory policies that have greatly reduced timber harvests from public lands, America today does not have the domestic capacity to meet its demand for lumber.
More than 38% of the lumber used in the U.S. in 2005 was imported. The bulk of that — roughly 33% — came from Canada.
While the association remains firmly committed to seeking ways to increase domestic resources, the NAHB Board of Directors recently approved updated policy on trade stemming from the restrictive U.S.-Canada trade agreement and the fact that America is overly reliant on Canadian lumber imports.
The board called on NAHB to work with governments and industry of other nations to facilitate increased imports and to promote the use of steel and other alternative building materials wherever practical.
Given that U.S. consumers and Canadian producers are “stuck” with the trade agreement, McIntyre said that looking to other markets could be a shrewd move for both sides.
The question for Canadian lumber firms is whether to invest in improving facilities in Canada under the context of the agreement, or to move that capital offshore to other markets such as Russia or Eastern Europe, he said. “Canadians haven’t invested to any significant degree in Russia. At a minimum, current events indicate it’s worth at least looking at the Russian market as an opportunity to set up alternative production facilities to ship lumber duty-free into other markets, including the U.S.”
By visiting Russia, McIntyre said that U.S. home builders are expressing a vote of confidence in the Russian marketplace.
“The capacity to significantly expand lumber shipments to the U.S. is not a near-term reality until there is further investment in infrastructure and equipment,” he said. “Certainly the potential is there, but it will take time to develop.”
Citing how Russia is becoming a more viable place to do business, McIntyre noted a recent announcement that International Paper has entered into a 50-50 venture with Ilim Pulp, the largest pulp and paper company in Russia.
“That deal is another vote of confidence that investment opportunities are better in Russia than in the recent past,” he said.
McIntyre also acknowledged the prospect of increasing lumber shipments from Sweden.
“Clearly, the opportunity is there. Sweden is a very sophisticated lumber producer and lumber from Western Europe is already flowing into the U.S.,” he said.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
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