Loonie takes a hit from softwood lumber duties
MONTREAL -- U.S. duties on softwood lumber imports helped drive the Canadian dollar to its weakest level in more than a year on Tuesday, with the U.S. move expected to inflict job losses on rural communities in coming months.
The loonie ended the trading session at 73.72 cents US - its lowest closing level since February 2016.
"It's an absolute disaster for Canada," said Unifor president Jerry Dias, a union which represents 24,000 forestry workers at 134 companies.
The U.S. Commerce Department levied countervailing duties ranging between 3.02 and 24.12 per cent on five large Canadian producers and 19.88 per cent for all other firms effective May 1. The duties will be retroactive 90 days for J.D. Irving and producers other than Canfor, West Fraser, Resolute Forest Products and Tolko.
Anti-dumping duties to be announced June 23 could raise the total to as much as 30 to 35 per cent.
Dias anticipates that 25,000 jobs will eventually be hit, including 10,000 direct jobs and 15,000 indirect ones tied to the sector.
He said the federal and provincial governments need to act to shore up companies and avoid a repeat of the early 2000s, when it took more than a year for Ottawa to react with an aid package.
Bob Matters, chairman of the United Steelworkers union wood council, said the cumulative impact of duties will be particularly harsh on small family-owned operations in Central Canada and New Brunswick that don't have the deep pockets of big international firms.
"I do suspect that come September, if in fact the second duties are in the same range, there will certainly be some dramatic impacts," he said in an interview.
Matters said some smaller producers that hung on during the last five-year battle may not be prepared to absorb another protracted fight. He urged the Canadian government impose a 20-per-cent tariff on logs exported to the U.S.
While the tariffs will hit forestry, National Bank senior economist Krishen Rangasamy said the impact on the broader Canadian economy will be limited.
Lumber accounted for only 1.2 per cent of all exports and less than 0.3 per cent of all Canadian jobs last year.
Despite the challenges, shares of several lumber producers hit 52-week highs on relief the duties weren't as steep as some feared.
Shares of Western-based Canfor (TSX:CFP) closed up 7.9 per cent on the Toronto Stock Exchange, West Fraser (TSX:WFT) 8.8 per cent, Interfor (TSX:IFP) 4.3 per cent and Norbord (TSX:OSB) 3.2 per cent.
Quebec-based producer Resolute (TSX:RFP) was up 2.7 per cent and Tembec (TSX:TMB) 0.33 per cent.
Paul Quinn of RBC Capital Markets said he was surprised by the rally but anticipates a correction with lumber prices likely to fall.
"You're going to have shifts that are going to come off, you're going to have mills that close and you're going to have unemployment as a result," he said from Vancouver.
Eastern Canadian lumber producer EACOM says it has been preparing for duties by lowering costs in the hope it can withstand the pressure of retroactive duties.
"We're really committed to maintaining our operations but it's difficult to say at this point what the impacts will be down the line, even this year or next," said spokeswoman Christine Leduc.
Although Resolute was given a lower duty that gives it a competitive advantage over other Ontario and Quebec producers, spokesman Seth Kursman says it's too soon to speculate about layoffs or closures.
"There are a number of chapters yet to unfold."