Trade wars hammer lumber market
Staff -- Purchasing, 2/16/2006
LUMBER PRICES
It was frustrating reading the article "U. S. to cut Canadian lumber duties" (November 28 issue of Purchasing's PriceAlert newsletter). I guess the main inaccuracy was the final sentence stating the author's opinion of the cause of this "brouhaha" as being ownership of timberland between the U.S. (mostly private) and Canada (mostly public). Actually, it's worth noting that the U.S. Forest Service, the B.L.M, and many state land departments sell no small amount of public timber in the U.S. each year. The main difference is they sell to the highest bidder! There is no allocation depending on need. Only by selling at auction do these sales generate revenue for the operation of all facets of our public forests, and help determine actual marketability of that timber. In Canada, publicly owned timber is allocated by the provincial governments, and is priced every quarter based on sales the previous quarter. The price is set so the manufacturers can make a reasonable profit based on the previous quarter's sales prices. In a rising market this is lots of fun. In a falling market, historically much shorter in duration, it's rough. However, for every quarter of pricing in a falling market there are usually about six quarters of pricing in a stable or rising market. That must be nice for those mills, to have their government help them to make money. This on top of the fact that Canada has just announced a $1.25 billion (U.S.) aid and support package for the Canadian timber industry to help them market products, become more efficient, and to provide low interest loans, loan guarantees and insurance. This isn't subsidizing? And finally, the Canadian mills don't jump through nearly the environmental hoops imposed on U.S. mills. Buyers of lumber who don't like the prices might consider that the higher prices that domestic lumber often demands is somewhat of an "environmental tax," and that requiring these stringent regulations and then going to buy the product from a nearby third-world country is somewhat hypocritical.David Slaughter, Priest River, Idaho
(Editor's note: The lumber products trade battle between the U.S. and Canadian neighbors built up steam after the expiration of the Softwood Lumber Agreement in March 2001. Under that agreement, Canada had been allowed to ship a certain amount of softwood lumber used by house builders to the U.S. without duties, with tariffs set for shipments beyond that level according to the Associated Press. In return, the U.S. agreed not to launch any trade action, including the imposition of protective duties. When the agreement ran out, the U.S., under pressure from domestic producers, moved quickly to impose extra duties on Canadian imports.)
ONLINE TOOLSRegarding "Buyers become more selective in online tools" (Purchasing; Sept. 15, 2005), your article accurately identifies the issues that we are confronting every day in working with our clients. We find that many procurement professionals are time-bankrupt and are finding it difficult to cost-justify, implement and use many of the available e-sourcing tools that are available. Recently we began using an online RFP tool…and decreased the time for a sourcing project from 25-33%.
Steven Belli, Willow Grove, Pa.
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