And as the price of lumber goes up, the duties actually come down. They're just going to wait it out.Īnd the other thing, too, is that the formula for lumber duties, which is calculated by the US Commerce Department every year, is one of the key inputs is the price of lumber. So they don't have- there's not a lot of pressure on them to reach a negotiated settlement, like they did back in 2006. So if there is a settlement, the money will come back to the Canadian companies.Īnd the other thing with all the very positive cash flows that they've generated over the past two years, despite the pandemic, a lot of the companies have absolutely no debt.
The other thing you got to remember, too, is that the duties aren't going into the US Treasury. They're off the peaks, of course, from last spring, but they're still very much up there earnings wise. JOHN DUNCANSON: Well, nothing right now, because the Canadian producers are making so much money. KARINA MITCHELL: Yeah, and I was going to talk to you about some of those regulatory issues and wondering what is the US doing to alleviate some of them because I understand from what you were saying, that, you know, the Canadian tariffs have been exorbitant and really sort of pressured the lumber market. So one big solution if they want to drop the cost of a new house in the United States is negotiate with the Canadians and get rid of this tax because it's just a tax on the US consumer. First week in December, they went up to 18%. And those- the duty rates went up actually in November. And the duties- the ongoing trade war between Canada and the US on lumber imports, 30% of that 19,000 additional costs to host 30% of that, I calculate to be just the Canadian lumber duties, or the duties on Canadian lumber going into the States. One thing that I always like to point out is that the Canadian lumber is a major supply for US housing. And, you know, the National Association of Home Builders published just Tuesday that just the jump we've seen in lumber prices since they bottomed out last fall has added about $19,000 to the cost of the new home. The other thing you mentioned we talked about earlier was just the- and you mentioned that the record high lumber price- or the record high housing costs. If we do get interest rates picking up a bit, which I hear everybody thinks, all that's going to do is try to squeeze more people that are on the fence into buying houses. So on the demand side for lumber, I don't see any real slowing up.
#YEP ITS WOOD MAC#
So we're still in a red hot housing market.įreddie Mac came out about a couple of weeks ago, saying that the shortage of houses in the United States is 3.8 million. Nobody's looking at the building permits, so you didn't mention it either, but they hit a 17-year high in January. I think it's- I can't think of any part in North America, or particularly in the States, where they didn't have some pretty severe winter weather. But I think that's largely probably supply chain and also weather. Just going back to your housing start figures, yes, they were down in January. We've had some good- positive news, actually. JOHN DUNCANSON: Yep, it's been very interesting. Now they're sort of creeping higher again, although slightly off some of those highs today. And now lumber prices are exacerbating the situation because they've been on a rollercoaster all pandemic long. There is so little supply, and prices are sky high. Mortgage applications are lower, all because demand is so tight. So the housing market's being pulled in all kinds of directions, right? Housing starts are down, mortgage rates are up. For more, let's bring in our next guest, John Duncanson, timber analyst at Corton Capital. KARINA MITCHELL: We're going to turn our attention now to the lumber market and its impact on sky-high housing costs, as housing starts slipped by more than 4% in January.
Corton Capital Timber Analyst John Duncanson joins Yahoo Finance Live to discuss the spike in lumber prices and how it's affecting housing markets.
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