Lumber prices reach trigger for reducing taxes on Canadian softwood exports to U.S. under SLA 2006; rate on Western Canadian shipments will drop to 10% from June 1, exports from other parts of Canada will fall to 3%

Wendy Lisney

LOS ANGELES , May 18, 2012 (Industry Intelligence) – The monthly trigger price for reducing taxes on Canadian softwood exports to the U.S. has been reached under the terms of the 2006 Softwood Lumber Agreement between the two countries.

From June 1, the tax on exports from Western Canada will drop to 10% from 15%, while exports from the rest of the country will fall to 3% from 5%, ForestTalk reported on May 15, citing an analysis by Madison's Lumber Reporter. If recent lumber price increases continue, the lower tax level could continue or be reduced even further.

Industry Intelligence reported earlier this week that the Random Lengths reported price of KD Western SPF #2&Btr 2x4 random was $304 per thousand board ft. (mbf) on Friday, May 11, up US$27 (9.75%) from $277/mbf a month earlier and $76 (33.33%) above the level a year ago of $228/mbf. Lumber futures prices reached an eight-month high on May 11, with the May contract closing at $302.50/mbf, but prices have fallen back this week.

According to the report carried in ForestTalk, this is only the second time since the 2006 agreement was signed that the export tax has been reduced. The last time was in June 2010, when the trigger of US$355/mbf was reached, sending the tax to zero. This encouraged Canadian shippers to increase exports, leading prices to crash and the tax to be reintroduced.

In the first three months of this year, the U.S. imported 1.83 billion board ft. (bbf) of softwood lumber from Canada, according to U.S. Census Bureau data, compared to 1.74 bbf in 2011 and 1.81 bbf in 2010.

The primary sources of this article are ForestTalk, Canada, on May 15, 2012 and data from Industry Intelligence's Random Lengths Wood Center.

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