Wood products woes

This week marks the fifth anniversary of Montana’s “Forest Products Week.”  In 2011, the state Legislature set aside a week, every October, to recognize the important contribution Montana’s forest products industry makes to our over-all economy and especially, to Montana’s timber-dependent rural communities.

What dampens the upcoming event-filled celebration this year, is announcement after announcement of mill layoffs due to the high cost of raw fiber, an increase in lumber imports and an uncertain future.  F.H. Stoltze Land & Lumber, RY Timber, Sun Mountain Lumber and Tricon Timber have all laid off workers since January.  All of Montana’s mill manufacturing facilities are now either running one shift or a 50-hour work week. 

One of the major drivers of economic uncertainty is the expiration of the U.S. - Canada Softwood Lumber Agreement.  The current agreement expired Oct. 12. The agreement maintained border measures against subsidized and unfairly traded lumber imports, which has existed in some form since the 1820s.  

Unlike the United States’ fair market approach to stumpage prices, Canada’s government administratively sets the stumpage price for government-owned timber, thus allowing producers higher profits during normal market cycles and an increased ability to make capital investments and build cash reserves.  

Even during Canadian down markets, government subsidies enable Canada to gain market share in the U.S. by taking advantage of the strength of the U.S. dollar.  With the current exchange rate, for every one dollar invested in Canadian lumber production, $1.23 is being returned if products are imported into the U.S. lumber market, further undercutting U.S. lumber producers.

Over the years, there have been several countervailing investigations that have led to the passage of antidumping and antisubsidy laws in order to offset the unfair trade situation on the U.S. side of the border.  With the border now wide open and without a countervailing tariff, the Canadian government and provincial timber producers do not have any incentive to come to the table and develop a new agreement. Without pressure from our state department and members of Congress, U.S. lumber producers will have no choice but to avail themselves of existing laws.  

In the meantime, what can be done?  As mentioned, one of the contributing factors in mill curtailment is the availability and cost of raw fiber.  More timber supply opens up competition and drives stumpage prices down.  The only way to close the gap between the cost of raw fiber and lumber futures is to have access to more supply.  Since we are outpacing the growth of green trees to harvest by a rate of 9 to 1, we certainly can and should sustainably increase the pace and scale of timber harvest.

Forest Products Week is an opportunity to not only highlight the importance of wood as a major component in building and energy design, but utilization of wood harvested through sustainable forestry practices promotes a healthy environment and a strong economy.

Montana’s forest products industry has a proud heritage of promoting healthy forests and healthy communities through the wise management of our forest lands.  Forest Products Week is a time to celebrate all things we use and enjoy that comes from trees and to support the people that make it all happen.

Julia Altemus is the executive vice president of the Montana Wood Products Association.