NAHB Comments Highlight Need for Outreach

Overgrown Forest

The following is from a Column that I write for Timber Processing Magazine and appears in the June 2017 issue.  Special thanks to Rich Donnell and the team at Hatton-Brown Publishing for providing the platform for me to share my thoughts.

A Hatton-Brown Publication
Timber Processing June 2017

The duties imposed on Canadian softwood lumber imports to the United States has everyone talking.  That includes the National Association of Home Builders.   As I was reading and writing on this subject I came across several quotes and ideas that simply aren’t accurate.  Some statements from the NAHB stood out.

Bad Math

The first comments I will highlight are from comments made on NAHB’s own website dated April 25th, 2017.  This statement is titled “Statement from NAHB Chairman Granger MacDonald on Comments by Commerce Secretary Ross Regarding Canadian Lumber Tariffs.”

NAHB Logo

“If the 20 percent lumber duty remains in effect throughout 2017, NAHB estimates this will result in the loss of nearly $500 million in wages and salaries for U.S. workers, $350 million in taxes and other revenue for the governments in the U.S. and more than 8,200 full-time U.S. jobs. Lumber prices have already jumped 22 percent since the beginning of the year, largely in anticipation of new tariffs, adding nearly $3,600 to the price of a new single-family home.

“Clearly, protectionist measures to prop up domestic lumber producers at the expense of millions of U.S. home buyers and lumber users is not the way to resolve the U.S.-Canada trade dispute or boost the U.S. economy.”

These numbers do not pass the smell test.  Lumber has gone up about 20% since Trump was elected President.  In the world of wholesale lumber that equals about $85 per thousand board feet.  If a single-family house uses 15,000 board feet of framing lumber that increase represents $1,275 increase over the period, not $3,600.

What about the loss of jobs?  Are we to believe that due to an increase of $1,275 per new home start would have such a disastrous effect on home building?  US Census figures put the average home price in the US over $350,000 including land.  An increase of .3% will not have those effects.

Realities of International Trade

Another quote from another statement dated April 21st, 2017 from Mr. MacDonald, NAHB Chairman says:

“The fact that Canada is seeking alternative sources to the U.S. for its lumber exports should serve as a wake-up call to Washington policymakers. More than one-third of the lumber used in the U.S. last year came from exports because the U.S. does not produce enough lumber to meet the nation’s needs. Home builders need a consistent, reasonably priced supply of lumber to keep housing affordable for hard-working American families.”

Granger MacDonald seems to be referring to a statement made by West Fraser about looking to export more lumber to China.  Before I continue, I want to state that I have a great deal of respect for West Fraser.  It is one of the most forward thinking and intelligent forest industry companies in the world.  The only reason West Fraser would choose to send lumber to one market over another would be for strategic pricing purposes.  Even with the duty, West Fraser along with every other mill in Canada will continue to send lumber to the market that gives their company the best chance to succeed.  In the long term, that’s the United States.

China, Japan, Australia, and other worldwide consumers of lumber will continue to buy lumber from the US and Canada if it makes financial sense.  Until this most recent increase in lumber prices, the United States and Canadian builders enjoyed some of the lowest lumber prices in the world.  Not only that, North American wood fiber is some of the best quality and strongest lumber in the world.  Even at $435/mbf, home builders in the US are getting a fair deal when it comes to lumber. (UPDATE: As of June 8, 2017, the price of framing lumber as reported by Random Lengths has dropped to $398/mbf.)

More Bad Math

On April 25th, 2017 NAHB released another statement, this time with both bad and good information. This one was titled “Proposed Lumber Duties Will Harm Consumers, Housing Affordability.”  Here’s the bad:

These price hikes have negative repercussions for millions of Americans. It takes about 15,000 board feet to build a typical single-family home and the lumber price increase in the first quarter of this year has added almost $3,600 to the price of a new home.

Let’s show some simple math using these numbers. If this is true, that means that lumber would have increased $240/mbf ($3,600/15mbf = $240).  If we were seeing a $240 increase on lumber I think it would be time to consider cashing in your chips and wait for the crash, and buy back at a discount.  I don’t know where they are getting their information, but it’s not accurate and it has to stop.

What about Logs?

As for the good, from the same statement referenced above:

Increase domestic production by seeking higher targets for timber sales from publicly-owned lands and opening up additional federal forest lands for logging in an environmentally sustainable manner.

This could open the door for discussion that would allow the NAHB and the Forest Industry to jointly enter into discussions with the Trump Administration and Congress on doing a better job managing our forest resources.  The United States has some of the best forest practices in the world.  We should be focused on making the most of our resources while balancing the needs of society and the environment.

In another quote from Bloomberg in a piece from Joe Light titled “Homebuilders Could Be Losers in Early Test of Trump Trade Policy,” there were numerous parts of this piece that didn’t come together for me, much of which we already covered.  The most troubling part was at the tail end.

“Fearing further supply disruptions, the homebuilders’ association has searched for lumber in other countries.

Chile looked like one promising source and the homebuilders sent a delegation there in September to meet with producers. But weeks of fires this year ravaged Chile’s forests, making it unlikely the country will be a large supplier anytime soon.”

Time to come together

The US lumber producers really need to work with groups like NAHB to educate them on the issues.  If their interest is more stable pricing, then we should develop a coalition to make more wood or logs available to US producers.

It’s time to reach out and build collaborative strength with groups like the NAHB.  The builders certainly have a stake in this value chain.  It’s up to us to inform them of our issues and interests.  This whole issue is about fair trade.  We all have more in common than what may put us at odds.  Identifying our collective interests is the best way to find solutions everyone can prosper from.

11 thoughts on “NAHB Comments Highlight Need for Outreach”

  1. I appreciate you correcting the basic math errors. More importantly I appreciate you prodding the wood producers and NAHB to opening a dialogue so both parties are informed about the issues at stake for all involved. Well done Russ.

    1. Dave, it just struck me as I was reading comments from all angles that very few people understand the depths of this issue, although many sought to weigh in. As producers of lumber, companies support the efforts of the NAHB and its members to build more homes for Americans. No one I know of is trying to remove Canadian lumber from the equation. The goal with any duty in a free market is to level the playing field so it’s fair. If we don’t deal with the actual facts we will never get there. This is a common practice across many industries to make different rules from one side of the border to the other based on pricing and currency. The more we all know, the better the outcome can be for all.
      Thanks,
      Russ

      1. Good work, Russ! Thank you. FYI, I wrote about the tariff in the June edition or The Forestry Source, the monthly newspaper of the Society of American Foresters. The article features comments from Jeff Redd, of Random Lengths; Gordy Sanders, of Pyramid Mtn. Lumber in Montana; and Lloyd Irland, a consulting forester from Maine who has studied the softwood lumber trade.

        http://tinyurl.com/y8oetjkd

  2. Bringing reality to the forefront and excellent article. In fact I enjoy all your articles. After spending 54 years in the industry it’s fresh in to see someone from the industry write and explain issues so well. Please continue .

  3. Russ,

    Thanks for calling it what it is. Unfortunately when something like this happens (the tariff), frivolity is hurled like so much confetti.
    In my opinion, the Canadians are the only entity with a legitimate grievance. That’s because their so-called “subsidy” only exists in relative terms of how each country manages its natural – and human resources. Just think, if our federal and state governments actually placed the same values that Canada does on its sustainable resources and rural economies, this dust – up would never have happened. The result would be industries that exist in a competitive environment (you’re welcome NAHB) that’s not distorted by the current enviro-gradient between them.
    Not to say Canada is without blame (see “blocking” and unchecked tonnage on WA highways), but the truth is that they’re being punished for having a common-sense approach to forest policy.

    EJ

    1. Eric,
      You’re absolutely right on Canada being punished for doing many things right. At least much better than US federal land managers. I’ve written about that very subject in past blog posts. Canada values its people and resources. Many parts of the US do not. Hopefully we can shed a light on that and create positive change.

      Thanks,
      Russ

    2. Eric

      very true

      Its a breath of fresh air every time I go up to Canada to “manage” the company’s relationships and log purchasing endeavors in BC.

      The Forest Products Industry is well respected in our neighbor’s country , contrasting with the ongoing outpouring of mis-information and misguided legal blockades we , as an industry , have to endure in this fine country.

      From over-reaching regulations on Private Forestland to excessive Riparian set asides within Timber Sales (DNR) to non-existent Timber Sales Programs (USFS) its no wonder the costs of Logs here in WA State continue to rise. The NAHB is barking up the wrong tree, no pun intended.

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