North American lumber producers are rapidly losing their offshore markets! In 2001, combined Canadian and U.S. exports to overseas markets are estimated to be down 30% from the previous year. This trend is serious, considering the fact that North American productive capacity has increased to where it can easily oversupply the domestic market.

N. American Offshore Lumber Exports, 2001 (est. Mbf)

Canadian and U.S. producers should consider a combined overseas promotion program similar to the highly successful domestic Wood Promotion Network campaign. This would be a much more productive use of funds than the hundreds of millions currently being spent on the Canada-U.S. trade dispute.

Current Market

Prices for most species are set to rise again after a downward adjustment of $5-$10. Market fundamentals are strong, with lean consumer inventories and bright prospects for spring construction activty. Winter weather conditions in some consuming regions may slow the upturn, but weather is becoming less of a factor as the market approaches early spring inventory needs.

Market Drivers
Dispute Negotiations Stalled

Negotiations to settle the lumber dispute between Canada and the U.S. are going nowhere! The U.S. Coalition's response to Canadian proposals has left little basis for fruitful discussion. After more than six months, deep fundamental divisions still exist in the positions of the two parties (see Trade Talk). Meanwhile, CVD/ADD amounts built up on exports to the U.S. since May 10/01, made under bonds, are reaching significant levels: by our calculations, the Canadian lumber industry collectively owed about US$800 million by December 31/01, and this will swell to over US$1 billion by May 6/02, when the ITC makes its final determination.

The Recession That Wasn't!

The North American wood products industry has been operating under the assumption that the U.S. economy was in recession in 2001. Department of Commerce statistics just released, however, indicate that there never was a real recession (two consecutive quarters of negative growth). Although Q3/01 was negative, Q4/01 had minimal but positive growth of 0.2%. Moveover, Q1/02 may mark the beginning of the recovery from last year's slowdown: unemployment dropped sharply in January/02 to 5.6% from 5.9% the previous month.

Austrialia Recovers