How Will Import Duties Affect the Logging Industry?
Back in November 2017, the U.S. Department of Commerce ruled they would levy total countervailing duties (CVD) and anti-dumping duties (ADD) at 20.83% on lumber imports from Canada. Before the new import duties could take effect, Canadian lumber exporters swiftly increased their prices to compensate and mitigate their losses. Now that a few months have passed, what effects has the industry experienced? Let's take a look at these effects along with some industry predictions for the upcoming few years as we close out the decade.
Higher Prices for All
In 2017 the logging industry as a whole recorded higher lumber prices for many reasons. Experts predict that these high prices will continue through this year and the next, and some are worried that this could lead to a supply gap among exporters and importers.
Increased prices affect the entire product chain, and they are ultimately passed onto the consumer. Experts don't expect these prices to ease anytime soon, and they predict that already record-high lumber prices could continue to expand into the next couple of years.
Fortunately, the U.S. housing is entering a slower period which cuts demand for lumber significantly, but this trend can't continue forever. With many industry analysts expecting a supply gap by the end of the decade if U.S. companies aren't careful. Many importers are relying on European lumber exporters to help stave off any softwood shortage in the next few years.
Equipment Sales Remain Strong
Although there is concern over the prices of raw lumber, U.S. logging equipment sales remain strong. Industry research firm EDA recently posted financial data for the most popular equipment types sold in the U.S.
EQUIPMENT TYPE BUYERS UNITS
- LOG LOADER 41,547 89,621
- SKIDDER 46,872 89,598
- GRAPPLE SKIDDER 24,636 60,225
- CHIPPER 36,962 58,767
- FELLER BUNCHER 18,252 43,563
- CRAWLR DOZER LOG 20,806 38,263
- STUMP CUTTER 23,829 33,041
- SAWMILL 19,883 25,644
- WHEEL LDR (LOG) 11,647 23,443
- EXCAVATOR (LOG) 10,087 23,435
They also disclosed financial data from their database detailing the top lenders and buyers in the logging equipment finance industry:
February 2018's Top Five Equipment Lenders
- JOHN DEERE INDL CREDIT 78
- CATERPILLAR FIN SVC CORP 46
- DE LAGE LANDEN FIN SVC 25
- WELLS FARGO VENDOR FIN SVC LLC 18
- STEARNS BANK 15
Even with concerns over a lumber supply gap, equipment sales are still going steady to start off 2018. Where the market will go throughout the year remains to be seen, but analysts are cautiously optimistic, at least on the equipment side of things.
John Deere continues to lead in equipment financing, as they sold significantly more than the other equipment financiers in the category. They sold equipment to companies across the U.S. using them for various purposes. Felling remains the most popular equipment type, although building equipment is also popular amongst buyers.
What to Expect Next
While equipment sales remain steady, don't expect the prices of lumber to decrease anytime soon, unless the import duties are relieved. If U.S. companies can successfully depend on European imports and U.S. production expansions they might be able to avoid a full-blown supply crisis.