Columnists, Darren Satsky, Lumber Market Report, V3I3

Markets Remain Volatile

In terms of the overall U.S. economy, real gross domestic product increased at an annual rate of 0.7 percent in the first quarter of 2017, according to the Department of Commerce. This is subject to revision, but it’s below the previous increase in the fourth quarter 2016 of 2.1 percent.

The slower rate of growth reflects a slower amount of personal expenditures, which is measured by the prices of final goods and services purchased.

On the brighter side, consumer sentiment remains high, according to a University of Michigan survey. The index reflects sentiment about current economic conditions, and first quarters are typically sluggish compared to the rest of the year.


With the sluggish economy, lumber prices have been up.

WSPF 2 by 4 #2 and better prices increased approximately 6 percent over the previous four weeks. ESPF 2 by 4 #2 and better prices increased approximately 11 percent over same time period. SYP 2 by 4 #2 prices increased about 7 percent on average.

KD Western SPF studs increased approximately 15 percent, and Eastern SPF studs went up about 13 percent. Treated SYP 2 by 4 prices are up 4 percent on average. And 7/16-inch OSB increased about 7 percent.


The Canadian lumber dispute continues. On April 24, U.S. Commerce Secretary Wilbur Ross said his agency will impose new anti-subsidy tariffs averaging 20 percent on Canadian softwood lumber imports, a move that escalates a long-running trade dispute between the two countries.

A Commerce Department fact sheet shows that West Fraser Mills will pay the highest duties at 24.12 percent, followed by Canfor Corp at 20.26 percent. Resolute FP Canada Ltd. will pay a 12.82 percent duty, while Tolko Industries will pay a 19.50 percent duty. J.D. Irving Ltd. will pay 3.02 percent. All other Canadian producers face a 19.88 percent duty, according to the document.

The preliminary determination directs U.S. Customs and Border Protection to require cash deposits for the duties on all new imports as well as softwood products imported over the past 90 days for the affected exporters. To remain in effect, however, the duties need to be finalized by Commerce and then confirmed by the U.S. International Trade Commission after an investigation that includes testimony from both sides.


For the time being, the Canadian mills have priced countervailing and expected anti-dumping duties retroactively into the market. Any news of a negotiated settlement or a revised final determination will impact the market, but until then, the market will attempt to discover prices on its own supply and demand terms. So, it looks as if more uncertainty and more volatility.

What should you do? Try to keep an additional inventory, an insurance cushion, possibly 50 percent more to offset future higher prices. This is not always possible; although, in this case the CVD was widely anticipated. Once announced, the market was little changed due to the fact that higher prices already were incorporated into the market. It’s always difficult to time the market, so the best advice is to plan ahead, but always adjust to current or new circumstances.

I think it was 2001 when the previous CVD and ADD were announced. It eventually led to the Softwood Lumber Agreement of 2006. That agreement lasted until 2015.

Probably the biggest net effect of restrictions on imported building materials is increased price volatility. Ultimately, a major reason to hold more inventories is to offset some of the effects of this increased volatility.


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