The forestry sector will be significantly impacted by the trade war

Thunder Bay - Although the Canada-U.S. trade war has been delayed by 30 days, tariff concerns still loom over the forestry industry.

"People are very worried. The 30-day reprieve is welcome, but in reality, it means nothing until the issue is resolved," said Ian Dunn, CEO of the Ontario Forestry Association.

Dunn said 97% ($7.7 billion) of Ontario's wood products are traded with the U.S., and a 25% tariff would have a $2 billion impact.

"Look at what happened during the pandemic, when there was a supply shortage in the U.S. market because mills had fewer employees and there was less lumber supply on the market," Dunn said.

"The U.S. has huge demand for home renovations and new single-family homes. The price of lumber rose to around $1,600 per 1,000 board feet, compared to the usual $500 to $600 per 1,000 board feet. So this went beyond what the lumber market has ever seen.

"If a 25% tariff is imposed, with an additional tariff on the lumber border, we could see more lumber flooding into the domestic market."

He said the industry is "no stranger to trade disputes."

He said softwood lumber trade has been an ongoing point of contention between Canada and the U.S.

Dunn said lumber shipped to the U.S. already faces a 14.5% tariff, and if another 25% is added, the cost of U.S.-imported lumber would rise to 39.5%.

"If tariffs are imposed, it will ultimately mean increased costs for U.S. consumers. Our companies will mainly pay the tariffs at the border, but it's expected that customers will have to bear part of the tariffs," Dunn said.

"So I think the Trump administration understands this and will continue to use this threat as an opportunity to achieve its political and national security goals."

Dunn said that as the trade war continues, importers in both countries will look for cheaper markets.

"There will be a tipping point. What we've seen over the years is that overseas imports of lumber have quadrupled. So the U.S. is no longer sourcing lumber from its closest neighbor and trading partner, but from Brazil, Germany, and Sweden. Over the past 8 years, that number has quadrupled," Dunn said.

He also expects the pulp and paper mill industry and the sawmill industry to decline.

"Tariffs and duties have already had an impact on the region. Sawmills in the area have reduced shifts. There have been layoffs. In other parts of the province, sawmills have closed. The very important anchor mills in Terrace Bay and Espanola are also in a state of shutdown," Dunn said.

"I think in many ways, the damage has already been done. If you're a multinational company looking to invest, you would now feel a lot of uncertainty in the market. You would lose confidence in the Canada-U.S. relationship," he added.

"I think of small family business members across the province, small operators, and I'm sure they have lost a lot of confidence. This will have an impact across the province."

Dunn said Northwestern Ontario is fortunate to have two flagship mills, Thunder Bay Pulp and Paper and Dryden Fiber; however, in the northeast, "we don't have much pulp and paper capacity."

"That capacity has been consolidated and rationalized and moved to other jurisdictions," Dunn said.

Dunn said venturing into new overseas markets is also a challenge.

He said Ontario is "essentially a landlocked country." Some companies do ship lumber overseas, but at a higher cost.

"It's costly to do so because you have to process the product more, and the supply chain isn't well developed," Dunn said.

He noted there are opportunities to sustain the forestry industry, including updating Ontario's building code to allow mass timber buildings up to 18 storeys.

"Right now it's a small niche, but it will grow over time," Dunn said.

The lumber industry has already begun entering new markets within Canada through investments in the bioeconomy.

"There are truly exciting opportunities in the energy sector. For example, for biomass fuels and syngas. There's a project underway around the Nipigon forest near the Thunder Bay area, as well as renewable diesel and sustainable aviation fuel. There are various alternative products that can help the province achieve a certain level of energy security," Dunn said.

"We're seeing some truly amazing investments in the automotive sector, the Greater Toronto Area, southern Ontario, and the battery industry in southwestern Ontario, and we want to attract billions of dollars into the bioeconomy, the forest bioeconomy of northern Ontario and northwestern Ontario," he added.

Source: https://www.nwonewswatch.com/local-news/forestry-sector-will-see-a-major-impact-from-a-trade-war-10182172