B.C.'s Small Sawmills Brace for Bigger Hit from U.S. Lumber Duties

Menzies said the help his sector of the industry needs from the federal government is access to existing credit programs that larger companies can tap.

SEATTLE (Scrap Monster): It was a scramble for Jake Power’s specialty sawmill in Mission to ramp up shipments across the U.S. border before the big hit from a more than doubling of softwood lumber duties took hold as of midnight Monday.

 “You can only do so much of that,” said Power, CEO of his family’s firm, Power Wood. “The customers are only willing to stock up so much. I would say our June and July were maybe 10, 20 per cent more than we would have expected without this.”

Last Friday, the U.S. Department of Commerce confirmed it would implement the first part of a dramatic increase in punitive duties on Canadian lumber producers, pushing anti-dumping duties to an average 20 per cent from eight per cent.

Those rates vary depending on what company is involved, with West Fraser Timber paying the lowest anti-dumping rate of just under 10 per cent and Canfor Corp. paying the highest at 35 per cent.

The insult added to injury for independent mills such as Power Wood that don’t hold rights to harvest any of the timber that the U.S. argues is being subsidized by the province’s stumpage system.

So they wind up paying duties on the price of their finished products, not just the lumber that went into them, which Power said has added up.

Businesses “need capital and all the capital right now is being sucked into this challenge,” Power said. “Then you get the knock-on effect of no one wanting to (invest) new money into an uncertain industry.”

Power is hopeful he won’t have to lay off workers among his workforce of around 60 people, but he expects to survive a slowdown while everyone waits out the impact of higher duties, which he expects will rise to 35 per cent when U.S. Commerce finalizes countervailing duty rates, the second part of its penalty equation.

Andy Reilly’s Yarrow Wood Inc. specialty mill in Chilliwack is crossing his fingers about being able to raise prices to help cover costs.

 “We’re lucky that we don’t have a bank loan and we don’t rely on the bank for a huge line of credit,” Reilly said. However, companies that do have debt payments “probably will have to work for free and ingest some of those duty increases.”

Brian Menzies, executive-director of the Independent Wood Processors Association of B.C., said many of the independent mills among its 60 members don’t have deep pockets to absorb increased duties and could use help.

“I’ve been in the forest sector, working on and off, for 30 years. I’ve never seen people that own these businesses so worried,” Menzies said. “Of course they’re worrying about laying off people, because as soon as you lose people, you can’t get them back.”

Menzies added family owned businesses have financial considerations that bigger companies don’t have, such as using their own homes as collateral to post bonds for duties. “So you can see how scary this is.”

Menzies said the help his sector of the industry needs from the federal government is access to existing credit programs that larger companies can tap.

Reilly, who is also president of the Independent Wood Processors Association, said he was in Ottawa last week as part of a national delegation to press their point and the feds were receptive to their request.

 “That would be something that would be very welcome for a lot of our companies,” Reilly said.

The best resolution, however, would be a negotiated resolution to the whole dispute, Reilly added. So his group was encouraged by the message from Minister for Canada-U.S. Trade Dominic LeBlanc and Natural Resources Minister Tim Hodgson that they were giving lumber the same priority as steel or aluminum in trade negotiations.

 “If you’re asking would you rather have a bad deal or no deal, the worst-case scenario right now for value-added companies is a 34-1/2 per cent duty on your finished wood products going across the border,” Reilly said. “I’m pretty sure that anything they could come up with would be considerably better.”

 Courtesy: www.vancouversun.com

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