NORTH VANCOUVER, B.C. - With the Softwood Lumber Agreement in tatters and inventories shrunk, U.S. lumber futures prices are spiking, threatening the U.S. homebuilders' business momentum.
Fires spread across the province this month, and lumber wholesalers had to rely on inventory, say analysts - a supply already being tapped as a result of the trade spat over softwood lumber trade between the U.S. and Canada. The Softwood Lumber Agreement between the countries expired in 2015, and a one year grace period ended in October 2016.
The U.S. Commerce Department made a formal determination in June that Canada subsidizes softwood exports to the U.S., and announced tariffs of 17 percent or more on softwood wood imports. Lumber dealers began running down inventories to use the less expensive stock on hand. The B.C. fires then crimped additional supplies.
As wildfires continue to rage across British Columbia, several big Canadian lumber mills have been forced to temporarily close.
The U.S. construction industry, which objected to the lumber tariffs, is heavily reliant on Canada for softwood lumber's use in 2x4's, a principal ingredient in home construction. The tariffs will add $1,700 to the price of a home, according to the U.S.-based National Association of Homebuilders, which says 20 percent of builders were already experiencing lumber shortages in May.