We are at a significant inflection point in the supply of Canadian SPF lumber to the US because of several factors. The shipments to the US are tallied up at the end of every month, as the Canadian Government must keep a precise tally for the possibility of negotiated refunds that previously happened in the last lumber settlement. The CDN lumber shipments have been averaging about 10% less per month (-100 million board feet) in 2025 compared to 2024. This is roughly in line with the demand drop in 2025.
| 2025 | |
|---|---|
| Jan - July duty rate | 14% |
| Aug - Sept duty rate | 35% |
| Oct. - going forward | 45% |
In August and September, the effect of the significant rate increase was immediate. Shipments of CDN lumber dropped ~ 30%, the lowest since 2012. With the extra 10% added for October going forward, it is reasonable to expect that this is the new normal. Mills are being shut down in Canada, as it is economically unsustainable to continue producing at these levels, as the numbers below show.
| USA Cost | RL Print (FOB mill) | |
|---|---|---|
| 0% Duty | $425 | $425 |
| 36.5% (WFG) | $425 | $580 |
| 44.5% (IFP & All Others) | $425 | $614 |
| 57.6% (CFP) | $425 | $670 |
If shipments continue at the new pace, probably not lower, the effect on the US supply will be dramatic. The lumber industry is extremely inelastic as building sawmills is a slow and laborious process, regardless of the prevailing market conditions. Only two companies (Bid and SLR) provide the essential equipment, and lumber accounts for only 50% of the log breakdown process. The other 50% consists of chips, sawdust, and hog fuel, which all require offtake agreements with another party, such as pulp mills and paper mills. This is what the new normal in shipments will look like. As you can see, even with a flat demand market in 2026 or any increase in demand, Covid-type pricing is inevitable.
| Projected CDN Lumber Shipments to the US |
|---|
| 2024: 11.8 billion fbm |
| 2025: 10.1 billion fbm |
| 2026: 8.6 billion fbm |
