Canadian Softwood Lumber Producers In the Crosshairs

Things don’t seem to be getting any better for Canada’s softwood lumber producers, as the U.S. Department of Commerce has just slapped an additional anti-dumping tariff on a number of large Canadian softwood lumber producers, including Canfor Corporation (TSX:CFP). In fact, among its peers, Canfor stands to pay the highest additional tariff at 7.72%, with other producers paying as little as 4.59% on top of the average countervailing duty of 19.88%.

The result is one which will see Canadian exports to the U.S. cost as much as 31% more than their American counterparts, something which has industry experts and Canadian business leaders growing increasingly anxious.

With a Canadian softwood lumber industry that has seen its market share in its largest market decrease from 31% last year to just 27% this year, many analysts are expecting continued drops as large Canadian producers shift from Canadian production toward buying American mills and producing more product south of the border.

While the Canadian political establishment has largely taken a fighting stance on this issue, it remains to be seen how these duties will affect the underlying fundamentals of large players such as Canfor in the quarters and years to come. A shift toward buying U.S. plants or shifting a customer base eastward instead of southward is something a number of firms have tried, however these solutions generally lead to fewer Canadian jobs as the U.S. market remains the key driver of the Canadian softwood lumber industry, and will remain so for the foreseeable future.

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