Softwood duty to drop

The rising price for Canadian lumber is about to deliver an added benefit.

The duty on exports into the U.S. will decline to 10 per cent from 15 per cent on June 1, after the composite price for softwood struck the $316 per thousand board feet level.

If the price rises to $335, the duty will fall to five per cent and at $355, it will be zero.

Seeing a decline in the duty has been rare since the agreement was signed, said Madison's Lumber Reporter publisher Keta Kosman.

"In summer 2006, prices were high because we hadn't crashed yet," Kosman said. "Only a couple of times since we've signed the agreement in '06 did the duty reduce or go to zero."

Kosman believes producers have learned their lesson from 2010 when the duty dropped to zero and they responded by ramping up production.

"They over-shipped so much that the prices immediately tanked," she said. "You have to keep the supply-demand balance where it is. This is a very delicate balance."

Kosman is uncertain whether lumber prices will continues to rise but doubts they will decline for the next few months. Exports into the U.S. for the first quarter of this year have surpassed those for the same period over the past four years, Kosman noted.

An upswing in construction of U.S. multiple-family housing is the prime reason for the increased demand and price of lumber, said Kosman. She also noted wildfires in some other provinces and states are adding to the trend.

Council of Forest Industries president John Allan doubted the drop will have much impact on producers' bottom lines "unless prices keep rising to where the tax falls to zero."