A West Fraser lumber mill.
West Fraser Timber Co. Ltd. WFG-T produced more softwood last year in the U.S. South than it did in Canada as the Vancouver-based company kept its position as North America’s top lumber producer.
It marks the first time that West Fraser’s annual lumber production in the United States has surpassed its output in Canada.
West Fraser, which acquired the Angelina sawmill in Lufkin, Tex., in late 2021, now has 22 lumber mills spread across eight states in the U.S. South.
Last year, the company produced 3.02 billion board feet of softwood lumber in the U.S. to rank as the second-largest producer south of the border, moving ahead of Sierra Pacific Industries Inc. of Anderson, Calif., according to new data compiled by Forest Economic Advisors, a consulting firm.
Weyerhaeuser Co. of Federal Way, Wash., had 3.75 billion board feet of output last year to stay as the top softwood producer across the U.S.
By operating directly in the U.S., West Fraser and other major Canadian producers have found a detour around U.S. lumber tariffs, which are imposed on softwood shipments originating from Canada and sold to American buyers.
Since 2014, lumber capacity has surged in the U.S. South while production tumbled in B.C. amid timber supply constraints in the province, said wood business consultant Russ Taylor.
West Fraser’s U.S. lumber production rose 13 per cent last year, while its Canadian output fell 17 per cent.
Still, West Fraser remains the largest lumber producer in Canada, at 2.64 billion board feet of output last year, followed by Vancouver-based Canfor Corp.’s CFP-T 2.32 billion board feet, Forest Economic Advisors said in its latest Wood Markets Monthly newsletter to clients.
West Fraser currently operates six sawmills in British Columbia and another six in Alberta.
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Montreal-based Resolute Forest Products Inc. RFP-T placed third in the 2022 rankings of lumber producers in Canada, followed by Interfor Corp. IFP-T of Burnaby, B.C. in fourth spot; Vernon, B.C.-based Tolko Industries Ltd. in fifth; and Saint John-based J.D. Irving Ltd. in sixth.
Interfor, which completed its acquisition of Eacom Timber Corp. in early 2022 to bolster its Canadian production, moved up into fourth spot after placing ninth in the 2021 rankings.
Instead of staying on their home turf, major Canadian producers have been deploying a strategy of geographical diversification by buying existing U.S. sawmills and building new ones.
Interfor saw 64 per cent of its total lumber production come from the U.S. last year. In 2021, Interfor acquired four U.S. sawmills – in Mississippi, Alabama and Louisiana in the U.S. South, and in Oregon in the Pacific Northwest.
Interfor ranked as the fifth-largest producer in the U.S. last year, with 2.42 billion board feet of softwood, compared with 1.37 billion board feet in Canada. Canfor had 1.62 billion board feet to rank as the seven-largest producer in the U.S.
Benchmark lumber prices have fallen about 70 per cent since early 2022. As the economy gradually reopened amid the COVID-19 pandemic, consumers began reallocating their home renovation budgets to travel, restaurants and sporting events. Higher interest rates have also crimped housing demand for wood.
In the B.C. Interior, sawmills producing Western spruce, pine and fir have been operating at below break-even levels since last fall.
But most of the industry’s lower-cost plants in the U.S. South, which produce southern yellow pine, are still profitable.
The U.S. South accounted for just 11 per cent of West Fraser’s total lumber production two decades ago, when B.C. was the most important at 77 per cent and Alberta at 12 per cent.
Last year, a combination of factors led to the U.S. South accounting for 53 per cent of West Fraser’s total lumber production, with Alberta at 25 per cent and B.C. at 22 per cent. Weaker lumber prices and transportation challenges in the second half of 2022 contributed to downtime at high-cost sawmills, notably operations in B.C., West Fraser said.
As well, 2022 was the first full year of production at the company’s new Angelina sawmill in Texas.
Forest Economic Advisors said companies with Canadian head offices accounted for 22 per cent of lumber capacity across the U.S. last year, with Canadian-based producers controlling 35 per cent of the sawmill capacity in the U.S. South.
Besides West Fraser, Interfor and Canfor, other producers with Canadian head offices that have U.S. operations include Resolute, Tolko, Irving, Western Forest Products Inc. and Teal-Jones Group.
The long-running softwood trade dispute revolves around U.S. restrictions on Canadian shipments of softwood to American buyers. In the latest round of the trade fight, which dates back to the early 1980s, the U.S. Department of Commerce started imposing tariffs in 2017 on shipments of Canadian lumber.
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Production from U.S. sawmills, including those owned by Canadian-based companies, is exempt from the lumber tariffs. But Canada’s softwood producers have paid more than $8-billion in U.S. lumber duties for production originating from Canadian sawmills from 2017 to 2022.
Global Affairs Canada said international panels have consistently ruled in favour of Canada as a fair trading partner in selling softwood. The U.S. lumber lobby counters that provincial governments subsidize softwood and also claim that Canadian producers dump product into the U.S.
“Since the filing of the trade cases in 2016, U.S. sawmill investment and capacity expansion has been robust,” Zoltan van Heyningen, executive director of the U.S. Lumber Coalition, said in a statement.
Brent Jang