Home builders seek to construct a deal for Russian lumber;

10/10/2006 8:01:06 AM
Home builders seek to construct a deal for Russian lumber;
Chicago Tribune
Bloomberg News
Published October 10, 2006

MOSCOW -- U.S. home builders, concerned that an agreement between the U.S. and Canada to manage the lumber trade might lead to shortages and price increases, began meetings Monday in Russia intended to secure new import sources.
Russia, which has more than one-fifth of the world's forested land, might join with a group of European countries to increase exports to the U.S. in the face of likely declines in lumber trade from Canada, said Jerry Howard, chief executive of the National Association of Homebuilders.

The ability of Canadian companies to export lumber "is going to be severely curtailed," Howard said. Canada provides about one-third of the lumber used in U.S. housing construction each year. Imports from Europe grew to about 5 percent of consumption last year. In addition to more imports, the association of more than 235,000 builders and remodelers said it is researching ways to use other construction materials, such as cement, and petitioning to open up more U.S. forest land for logging.

"As this agreement became more and more a reality, our members told us to be active in terms of what we could do," Howard said. The group's concerns stem from a similar trade agreement worked out by the U.S. and Canada in the 1990s. After that agreement to limit trade was put in place in 1996, lumber prices surged to more than $450 per 1,000 board feet, near a record high. Under the terms of that accord, Canada could ship 14.7 billion board feet to the U.S. duty free each year. Amounts greater than that were subject to increasing tariff rates.

After years of litigation following the expiration of that agreement in 2001, the U.S. and Canada negotiated a new accord this year to limit trade. That agreement goes into effect Thursday and will allow Canadian companies to recover about $4.3 billion in duties that the U.S. began collecting in 2002. It also will mean a new export-tax regime on Canadian lumber sent to the U.S.

In the wake of that agreement, lumber prices have fallen to their lowest level in more than three years on speculation Canadian suppliers are boosting shipments before the export tax goes into effect. Howard said that recent drop in prices illustrates the need for home builders to prepare for a potential spike in prices in the future. Increasing imports from Russia and countries such as Sweden is one way to do that, he said.

Russia has more forests than any other country, with forested land covering more than 2.5 billion acres, according to the U.S. Forest Service. Russia already exports lumber to Japan, China and Europe. Russia's forests provide 5 percent of the country's export earnings and 2 million jobs, the U.S. Forest Service said.

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