Tembec open to lumber export quotas in a break from Canadian industry

Tembec open to lumber export quotas in a break from Canadian industry

MONTREAL — Eastern Canadian lumber producer Tembec Inc. (TSX:TMB) says it’s open to quotas on exports to the United States, in a break from the positions of some Canadian rivals and the Quebec government.

While chief executive James Lopez agrees that Canadian lumber should be exempt from restrictions because provincial systems are now market based, he’s advocating for a compromise to secure a new agreement.

Lopez says he’s willing to accept limits on access in the belief that increasing home construction will ultimately result in higher lumber shipments.

He says Canada’s proposal for a quota in the range of 31 per cent — which is far higher than the original U.S. proposal of 22 per cent — will likely win the day.

If the number is too low, Lopez says Quebec-based Tembec may not be able to sell all of its output or sell it profitably.

In the 2006 lumber agreement, eastern Canadian producers were subject to quotas ranging between 30 and 34 per cent, plus export charges of 2.5 to five per cent, depending on the price of lumber. Western producers who have been opposed to quotas only paid export charges of 5 to 15 per cent.

Resolute Forest Products (TSX:RFP) and the Quebec government want free trade with no quotas or duties. The BC Lumber Trade Council says it prefers free trade but could accept a flexible system that adjusts to market conditions instead of a hard quota.

Lopez is bracing for the imposition of duties ranging between 25 and 30 per cent this spring until a new deal is negotiated.

He believes the U.S. Lumber Coalition wants a negotiated settlement instead of a protracted legal dispute given Canada’s track record of winning these battles.

Ultimately he says this is a political issue that U.S. President Donald Trump may want to settle quickly to burnish his credentials as a deal maker.

However, Lopez doesn’t believe softwood lumber will ultimately be part of Trump’s quest to renegotiate NAFTA, adding that process could be lengthy to conclude.

Ross Marowits, The Canadian Press

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