WASHINGTON – Excessive amounts of western Canadian timber pouring into the United States have put Maine lumber mills at risk of shutting down.
The delay of planned Canadian export taxes on softwood lumber, coupled with a beetle infestation in British Columbia that is forcing mills there to harvest trees quickly before they die, has taken a toll on lumber mills in the Northeast.
“We have to make decisions on whether we’re going to continue to run or shut down,” said Ron Beaulieu, mill manager for Fraser Timber Ltd. in Ashland. “We’re doing everything we can to keep it going, but I’m not 100 percent sure if we can.”
Already, Fraser Timber Ltd. has scheduled a two-week shutdown beginning Oct. 13 of its lumber mills in New Brunswick. According to a Web page for Fraser Papers, the parent company of Fraser Timber Ltd., the mills in Ashland and in Plaster Rock and Juniper, New Brunswick, employ about 300 people combined.
New Canadian export taxes, which were supposed to start Oct. 1, are part of a settlement reached between the United States and Canada over the long-running softwood lumber trade dispute. But recently the two countries agreed to delay the settlement – a delay that has placed thousands of Maine jobs at risk.
“I don’t think the workers here realize how bad the lumber market is right now,” said Michael Levesque, who is based at the Ashland mill and is Fraser Timber’s general manager of sales for the United States and Canada. “I’ve been here since 1982, and it’s probably the worst we’ve seen it.”
The agreement, reached Sept. 12, calls for replacing U.S. import duties totaling 10.8 percent with a Canadian export tax of about 15 percent. The delayed export tax followed requests from Canadian lumber producers seeking more time to meet the agreement’s requirement that private lawsuits filed against the United States be dropped.
“Each day that the terms of this landmark agreement are delayed is an additional day the Maine lumber industry will be subjected to the unfairly subsidized softwood lumber crossing from Canada into the United States,” U.S. Sen. Olympia J. Snowe, R-Maine, said in a statement.
The softwood lumber dispute is actually part of a series of disputes that have stretched over 20 years between the United States and Canada. The heart of the dispute is the claim that Canada is unfairly subsidizing its lumber production.
The way the price of timber is set in the two countries is quite dissimilar, according to Brooke Grantham, spokesman for Foreign Affairs and International Trade Canada. In the United States, when timber is harvested on private land, the price is negotiated between the timber cutter and landowner. In Canada, timber is cut on provincial-owned land, and a stumpage fee is set by the government.
Because the provincial fees tend to be significantly lower than the prices that come out of the United States, the U.S. government contends that the low fees constitute a subsidy to Canadian producers.
The U.S. Coalition for Fair Lumber Imports, an organization that represents a number of sawmills around the country, says Canadian lumber exporters are exploiting the implementation delay by unloading unusually large amounts of timber on the U.S. market, drastically lowering prices.
“The settlement agreement should ultimately level the competitive playing field,” said Steve Swanson, chairman of the U.S. coalition. “It is ironic that, in the short term, some are using it as an excuse to undermine the market and shut down U.S. mills.”
Snowe added: “This unnecessary delay, which is accompanied by a suspicious increase in the supply of Canadian softwood lumber and a precipitous drop in price, more than violates the intent of this hard-won agreement; it puts the jobs of thousands of Mainers in imminent danger.”
But the export tax delay is not the only reason western Canadian companies have been pushing timber into the United States. British Columbia is plagued by a pine wood beetle infestation that is killing the trees. The trees can be harvested for only a short period of time after they have perished. Consequently, timber mills have been exporting as much and as quickly as they can.
“The big factor that we don’t hear a lot about over here is that there’s a lot of bug-kill wood in British Columbia,” said Beaulieu of Fraser Timber’s Ashland sawmill. “In order to not lose that, they have accelerated the harvesting, and that is bringing a lot of lumber into the U.S., and it impacts the prices. It probably has a greater impact than the trade agreement.”
The surge in lumber coming in from British Columbia, coupled with the weakened domestic housing market, has made timber prices plummet.
“Our customers on the retail side aren’t even buying wood,” Levesque said. “They don’t even care about the price and how low it is. They can’t take any more.”
He added: “British Columbia needs to stop production. We haven’t heard of them cutting back at all, so until the Canadian government comes up with some sort of production cutback or shutdown or something, it’s going to hurt all the other little areas.”
Anthony Hourihan, regional manager for sawmill and woodland in Maine at Irving Woodlands, also in Ashland, feels the pinch as well, and cites western Canadian timber producers, especially in beetle-infested British Columbia, as the biggest challenge the lumber industry faces today.
“We’re starting to see a fair number of shutdowns,” he said. Irving shut down its Ashland mill a month ago for a couple of weeks, and worries that it will have to again.
“We’re hearing that some of the other local mills will be taking downtime in the next few weeks. We are already planning downtime for our mills in New Brunswick,” Hourihan said.
The softwood lumber agreement between the U.S. and Canada is expected to be implemented no later than Nov. 1. In the meantime, with timber pouring in from western Canada, mill managers are bracing themselves for shutdowns.
“The sooner they sign that agreement, the better,” Levesque said. “This will kill our market for three months after the tax even goes into place. And we’re heading into the winter months, which slow up a little bit. It’s not one of the better timings for markets.”