Canadian Mills Rush Exports Ahead of New U.S. Tariffs
Alex Mead, StoneX Risk Management Consultant, explains how Canadian sawmills are reacting to looming US tariffs and a shifting demand landscape.
Key Takeaways
Canadian mills are front-loading U.S. shipments ahead of possible duties
Lumber demand is being supported only by single-family housing
Futures are pricing risk, but cash market has not caught up
Canadian Export Strategy Before Tariff Changes
Canadian sawmills are shipping as much softwood lumber to the U.S. as possible ahead of the anticipated AR6 duties, which could take effect between July 28 and August 15. “They're trying to get everything ahead into the U.S. prior to the new duties”. The goal is to avoid the cost burden and either pass along or absorb the upcoming increases.
Demand Side Challenges in the U.S.
Mead describes demand as “lacklustre” with only one out of three segments, single-family housing, providing support. Multifamily construction has also declined, leaving overall demand constrained.
Pricing Pressures and Strategic Curtailments
Producers are taking different approaches. Some are passing on the expected 20% duty in full, while others are attempting partial pass-throughs or cutting output. “They're going to reduce their production because they can't operate at a loss”. This raises the risk of a Canadian supply overhang, especially if U.S. buyers resist higher prices.
Futures vs Cash Market Discrepancies
Futures contracts have surged in anticipation of the duties, but the cash market hasn’t followed. “We only seen an 8% increase” in cash versus a 25% futures spike. Unless demand and cash pricing catch up, Mead anticipates futures prices may realign lower.
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---- Written by Frederic Guetin, StoneX TV Producer
---- Expert: Alex Mead, StoneX Risk Management consultant
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