Loonie hits 14-month low as softwood lumber duties expected to impact jobs

MONTREAL – The Canadian dollar sank on the weight of preliminary U.S. duties on softwood lumber imports that is expected to lead to large job losses that could begin to take hold as early as this fall.

The loonie hit a 14-month low on Tuesday at 73.60 cents, the lowest 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.

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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.

Industry observers believe high lumber prices will provide some short-term relief until the addition of anti-dumping duties punish small and independent producers.

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.

“Last time I think the impact was 15,000 jobs, this time it’ll be even more,” Dias said.

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Bob Matters, chairman of the United Steelworkers union wood council, said the cumulative impact of duties will be particularly harsh on independent, family-owned operations in Central Canada and New Brunswick that don’t have the deep pockets of big international firms.

“I do hope and expect that the first go-around we can fight it out but I do suspect that come September if in fact the second duties are in the same range there will certainly be some dramatic impacts coming in the fall,” he said in an interview.

Matters said some smaller producers that hung on during the last five-year battle may not be prepared for another protracted fight.

“They may just do the easy thing and just shut her down.”

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While the unions anticipate job cuts, National Bank senior economist Krishen Rangasamy said the Canadian economy as a whole will only take a modest hit.

“While the import duty of as much as 24 per cent imposed by the U.S. will hit the forestry industry on the chin, the overall impact on Canada’s economy is likely to be limited,” he wrote in a research note.

Lumber accounted for only 1.2 per cent of all exports last year. Although 50,000 forest sector jobs are at risk, they account for less than 0.3 per cent of total Canadian employment.

Despite the challenges, shares of most lumber producers were up on relief the duties weren’t as steep as some estimates.

Shares of Western-based Canfor (TSX:CFP) rose 6.4 per cent in afternoon trading on the Toronto Stock Exchange, West Fraser (TSX:WFT) 9.2 per cent, Interfor (TSX:IFP) 2.9 per cent and Norbord (TSX:OSB) 2.16 per cent.

Quebec-based producer Resolute (TSX:RFP) was up 0.9 per cent while Tembec (TSX:TMB) was down one per cent.