Forest products companies such as Tembec are standing pat in the face of a proposed tariff of 19.3 per cent levied against the Canadian softwood industry by the United States Department of Commerce.
"(The lumber dispute) is becoming almost a sport to them," says Martin Michaud, vice-president of Tembec's Northern Ontario division. "Even though they don't have a case, they keep trying and trying because their objective is really to create uncertainty in the market so prices go up."
Tembec laid off 120 workers at its six sawmills across Northern Ontario in February, cutting back from three shifts to two, in the face of an uncertain and volatile North American market. Tembec, which employs 790 at its mills, exports about 50 per cent of its product to the United States.
Whether Americans will pay more for Canadian lumber, which is regarded as the best product for homebuilding, is not known, he adds.
Michaud says the proposed tariff also opens the doors to off-shore replacement products such as plastic and steel from Europe, South America and New Zealand to increase their U.S. marketshare.
It is expected the United States Commerce Department's next step is to impose punitive duties against Canadian software producers for dumping lumber in the United States. If carried out, that will hurt Tembec's cash flow for reinvestment in its own mills.
"If a customer doesn't pay the premium, it would mean we have to increase our cash costs by 20 per cent to ship anything to the U.S.," Michaud says.
"There's just no way we can even think of that. It would paralyse us completely."
Canadian producers do have some American allies, for the first time, with consumer groups and large lumber retailers such as Home Depot much in favour of repealing any tariff or legislation that artificially raises the cost of building a home.
Demand for Tembec products from American markets remains relatively soft until the United States Commerce Department delivers its final determination in October.
