NAWLA

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Jon Anderson, PublisherRandom Lengths
Publications, Inc.

• NAWLA

Spring Meeting Colorado Springs
June 10, 2002
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• U.S. - Canada Lumber Trade
• CVD / ADD
• Who Wins? Who Loses?

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Duties AppliedMay 22, 2002

• 1 - Countervailing Duty - 18.8
• 2 - Anti-Dumping - 8.4
• Except Six Large Producers w/ Individual Levels
• (West Fraser-2.2, Canfor-6.0, Slocan-7.7,
• Tembec-10.2, Abitibi Consolidated -12.4,
• Weyerhaeuser-12.4)

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Negotiated Settlement ?

• Canada split - East vs. West - No agreement on
  basic issue of whether to negotiate (other issues
  within)
• Bush Administration has remained supportive of
  Coalition
• No formal talks at this time

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Canadian Lobbying Efforts In the U.S. Have Failed

• Joint efforts with dealers and homebuilders
• Politicians in Wash DC favor Coalition
• Joint ad campaign in the works

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CVD / ADD can change upon reviews

• Five year sunset provisions

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CVD / ADD Appeals

• WTO and NAFTA
• (Byrd Amendment)
• Years, not Months
• (Ex Pre-drilled stud ruling)

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WTO Appeals

• Preliminary decision on the legality of the
  U.S.s subsidy claims could come as early as July
  2002

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CVD / ADD Appeals

• Key Question Will the U.S. adhere to the final
  WTO and NAFTA rulings?
• U.S. did not follow WTO pre-drilled stud
  ruiling

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Western U.S. Lumber OutputCoast and Inland on
different paths
(billions of board feet)
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Southern U.S. Lumber Output 1993-2001
(billions of board feet)
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Non-Canadian U.S. Lumber Imports
(millions of board feet)
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Canadian Exports to the U.S.
(billions of board feet)
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Canadian Output 1993-2001
(billions of board feet)
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Canadas Share ofU.S. Lumber Market
(1975-2001)
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Canadian Shipments to the U.SThere was a wall
of wood in April 2001
(monthly billions of board feet)
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Random Lengths Framing Lumber Composite
PriceSince the end of the Softwood Lumber
Agreement
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Random Lengths Framing Lumber Composite Price
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Who Wins ? Who Loses ?How Will The Market
Adjust ?
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Winners

• U.S. Lumber Producers (Coalition)
• U.S. Timberland Owners (Coalition)
• Producers in The Maritimes - (No
  CVD - Pay ADD)
• Some Border producers -
  (No CVD - Pay ADD)

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Winners

• Lumber Buyers/Consumers in Canada
• Canadian Producers with lower ADDs (WF in
  particular - dif -6)
• Canadian Remanners of non-dutiable products
  (Growth during SLA)
• Suppliers of Offshore Lumber (1st
  Q total a record w/o duties)

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Winners

• U.S. Reloads
• Substitute Products (esp. if/when prices are
  higher esp. of higher value products
• Cheaters

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Losers

• Canadian Lumber Producers, esp. those with higher
  ADDs (AC, W 4 dif)
• Wholesaler/Distributors of Canadian lumber to
  U.S. (esp. Canadian DCs)
• Canadian Remanners of dutiable lumber products

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Losers

• Canadian Suppliers of higher value dutiable
  lumber (Ex Cedar, Clears)
• Canadian Reloads
• U.S. Remanners, esp. those who have relied on
  S-P-F

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Losers

• U.S. Dealers, Homebuilders, Consumers (But how
  much do they lose?)

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Market Adjustments

• Overall Canadian Production should decline, esp.
  in B.C.
• Maritime and Border Output should increase
• Prices will increase (How much? Who gains most -
  Mills or Timber Owners?)

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Market Adjustments

• U.S. Production should increase
• Coast should gain more than Inland South holds
  or gains market share Byrd Amend. incentive to
  produce
• Imports from offshore sources should increase -
  more impact on market

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Market Adjustments

• Distribution of Canadian lumber will be altered
  (reloads)
• Accelerated consolidation in Canada (primary
  producers) and U.S. and (distribution/secondary
  levels)

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Market Adjustments

• EXPECT THE UNEXPECTED

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QUESTIONS?
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THANKS!
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CHANGE!Effects on the Markets

• Less liquidity in market
• More volatility in pricesday-to-day
• WHY?
• Aversion to risk
• Reduced speculation
• Consolidation
• Programs and JIT

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Canadian Dollar Weakens1996-2001
(Canadian per U.S. )
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North American Softwood Lumber Demand

• 2000 1
• 2001 8 (projection)
• 2002 7 (projection)
• RISI projects 55.8 billion feetin 2002
• Source Resource Information Systems, Inc.

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Solution More Consolidation Curtailments /
Shutdowns
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CVD / A-D Questions ?

• Can a deal be negotiated ?
• Can provinces come together and stay together ?
• Termination to deal ?
• Ongoing discussions / talks during an SLA II ?

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CVD IVPreliminary Decision

• 19.31 CVD in effect as of 8/17/01
• CVD retroactive to 5/19/01
• Bonds/cash deposits required until 12/15/01
  preliminary duty terminates
• No CVD liability during window
• Final determination in March

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Anti-DumpingPreliminary Decision

• 12.6 preliminary duty covers all of Canada,
  including Maritimes
• Six large Canadian companies have individual A-D
  duties
• Not retroactive
• No interim termination prior to final

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U.S. - Canada Lumber Trade Negotiated
Settlement ?

• Talks yield little
• Interim Agreement?
• Were where we were last March.