Kevin Mason
The incoming U.S. administration has highlighted that it will impose tariffs on friends and foes alike. The application and size of any potential tariffs are unknown, leaving countries and companies guessing about how to position themselves. First-order impacts will be greatest on partners with few alternatives (i.e., Canadian lumber production). Second-order effects are always harder to forecast, but, if Asian paper imports turn away from the U.S., they are likely to flood Europe and/or traditional U.S. export markets. Retaliatory tariffs are to be expected, with the greatest risks to products dependent on export markets, including fluff, dissolving pulp and pellets.
Leaving aside the inevitable unknown unknowns, there are several known economic drivers in the year ahead. Interest rates are expected to decline in 2025, although expectations for the pace of declines keeps changing. Lower rates should increase U.S. housing activity, and even a small increase in activity should have an outsized impact on solid wood and housing markets (as labour allows). The U.S. dollar is expected to strengthen, putting downward pressure on commodities. The U.S. is expected to impose steep tariffs on imports—particularly those coming from China, but also from other countries. This will reshape trade flows over the next few years and should boost domestic manufacturing (although the last go-around showed little benefit). The Chinese real estate conundrum is too deep to be solved in 2025 and will continue to be a drag on confidence, consumption and credit within China and beyond its borders.
As most may have heard by now, Premier Eby has announced an agreement in principle between the BC NDP and Greens. …Of key significance to the forest sector, the agreement commits “to undertake a review of BC forests with First Nations, workers, unions, business and community to address concerns about sustainability, jobs, environmental protection and the future of the industry.” Such broad encompassing reviews typically take several months, if not over a year to complete and even longer before acting on recommendations. To propose such a review now is a prime example of just how forestry in British Columbia has truly become all about politics and not common sense. The two parties in their wisdom, have agreed to a review while the BC forest industry is literally in its death throes.
NEW YORK — The U.S. increasingly relies on Canadian crude oil to meet domestic demand and that relationship faces potential strain amid the threat of tariffs from President-elect Trump. More than 50% of crude oil imported to the U.S. comes from Canada, up from 33% in 2013. The increase follows a jump in production from Canada’s western provinces and growing pipeline capacity to its southern neighbor. Trump has threatened blanket tariffs of up to 25% on products from both Canada and Mexico. That has raised concerns about higher energy costs trickling through the entire U.S. economy. “All three countries remain heavily reliant on each other economically, and hefty taxes on key U.S. imports like crude oil or softwood lumber risk exacerbating U.S. consumer inflation,” said the Americas for UBS Financial Services. …Canada, with its proximity to the U.S., is also the nation’s biggest trading partner. 
The B.C. government has appointed a new chair and three new directors to the BC Hydro board of directors. …Glen Clark has been appointed the new chair of the BC Hydro board of directors. Clark will take over the post from current chair, Lori Wanamaker, whose term will end on Dec. 31, 2024. …Merran Smith is president of New Economy Canada and brings award-winning leadership uniting industry, government and civil-society partners. …Brynn Bourke is executive director of the BC Building Trades (BCBT). …Don Kayne is president and CEO of Canfor Corporation, and former CEO of Canfor Pulp Products Inc. Kayne has deep experience in international sales and marketing, human resources and executive compensation through 45 years with the forest company. 
The monitor for the San Group of companies has been granted broader powers by the Supreme Court of B.C. to manage and make decisions about the financially troubled forestry company, which has operations in Port Alberni. The San Group’s protection from creditors was extended at a court hearing in Vancouver on Thursday. The next hearing is set for Jan. 16. Expanded powers granted to Deloitte include the ability to administer the company’s restructuring and any winding down of the business, plus liquidating property and disposing of assets. The monitor is permitted to continue running the business, and said it anticipates working with current management. The various parties are expected to be back in court to ask for approval for a sale and investment solicitation process. …The court agreed the company can increase its borrowing limit to $1 million — up by $400,000 — to keep operations going.
SPOKANE, Washington — Brazil’s Suzano is exploring an offer for Clearwater Paper, according to people with knowledge of the matter. The company is working with an adviser as it seeks to reach an agreement, said the people. A deal hasn’t been finalized and it’s possible one won’t be reached. Representatives for Suzano and Clearwater declined to comment. Spokane, Washington-based Clearwater, which manufactures pulp and paperboard products, had a market capitalization of $409 million as of Thursday’s close and its shares have fallen 31.6% this year. Clearwater’s shares jumped as much as 19% after the close of regular trading Thursday. Suzano, which is the largest supplier of hardwood market pulp in North America, has been pushing further into the US, most recently buying two paperboard mills in Arkansas and North Carolina in a deal valued at $110 million. [END]
Donald Trump talked about using tariffs as a means to increase American manufacturing. …One important economic aspect surrounding these tariffs centers on their potential impact on the housing market in 2025. …The good news for the upcoming year’s outlook on housing is that the overwhelming majority of such sourced building materials are not imported. Instead, housing market experts suggest that interest rates and bottlenecks in existing supply chains are the real threats to the market worth watching. …The biggest potential tariff expense impacting home builders would come from enacting such a cost on Canadian lumber. Market observers remain skeptical that the President-elect would really enact the tariff on close ally Canada’s raw materials. The real threat to the housing market in 2025 comes not from potential tariffs, but instead from high interest rates and lingering bottlenecks in supply chains, according to Stephen Haines of Artisan Built Communities.
Lumber prices have rebounded to around $560 per thousand board feet, up from a seven-week low of $531 on December 16th, driven by strong demand and supply constraints. U.S. existing home sales rose by 4.8% in November, the highest in eight months, reflecting growing momentum in the housing market, with more buyers entering as job growth continues, housing inventory rises, and consumers adjust to mortgage rates between 6% and 7%. Additionally, building permits surged by 6.1% in November, the highest level since February 2024, signaling strong future construction activity. On the supply side, production cuts and mill closures are restricting lumber availability as Western Forest Products reduced output by 30 million board feet, and Canfor Corp. shut two mills, cutting annual production by 670 million board feet. These supply limitations, coupled with U.S. tariffs on Canadian softwood lumber and rising import tariffs amid the China trade dispute, are pushing prices higher. [END]
Building Permits – Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,505,000. This is 6.1% above the revised October rate of 1,419,000. Single-family authorizations in November were at a rate of 972,000; this is 0.1% above the revised October figure of 971,000. Authorizations of units in buildings with five units or more were at a rate of 481,000 in November. ..Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,289,000. This is 1.8% below the revised October estimate of 1,312,000. Single-family housing starts in November were at a rate of 1,011,000; this is 6.4% above the revised October figure of 950,000. The November rate for units in buildings with five units or more was 264,000. …Privately-owned housing completions in November were at a seasonally adjusted annual rate of 1,601,000. This is 1.9% below the revised October estimate of 1,632,000. 
WASHINGTON — U.S. single-family homebuilding rebounded in November as the drag from hurricanes faded, but the threat of tariffs on imported goods and potential labor shortages from mass deportations could hamper new construction next year. Single-family housing starts, which account for the bulk of homebuilding, jumped 6.4% to a seasonally adjusted annual rate of 1.011 million units last month, the Commerce Department’s Census Bureau said. Data for October was revised to show homebuilding declining to a rate of 950,000 units from the previously reported pace of 970,000 units. …A National Association of Home Builders survey on Tuesday showed a measure of sales expectations in the next six months surging in December to the highest level since April 2022. …But economists were less enthusiastic, warning of even higher lumber prices and severe worker shortages if Trump followed through with tariffs and expulsions of undocumented immigrants, which would undermine the housing market.
BOSTON — Placing tariffs on Canadian products entering the U.S. would be “devastating” to the New England economy, Gov. Maura Healey said during an interview with the Herald this month. …Massachusetts relies heavily on Canadian lumber for building homes, and another Trump pledge to enact an additional 10% tariff on Chinese products would stymie local efforts to spur the energy and advanced manufacturing industries, Healey said. “Where does our lumber come from? A lot of it from Canada. So this really hurts. And it’s not just Canada. Look at China. We’re trying to lean hard into technology, applied AI in the state,” Healey said. “There are a lot of component parts that, sure, we want one day to be made here in America but right now they’re made overseas. So tariffs would really hurt our state.” “It would be devastating for the New England economy if President Trump imposes tariffs,” the governor added.
The federal government has pushed its target to achieve a net-zero electricity grid back 15 years to 2050 as part of new clean electricity regulations announced Tuesday — though officials maintain that target date was always the goal. Canada had previously signalled an aim to fully decarbonize electricity grids by 2035. But some provinces, namely Alberta and Saskatchewan, said that was simply not doable. Alberta Premier Danielle Smith swiftly responded to Ottawa’s plan by saying her province would immediately mount a legal challenge because the regulations wade into provincial jurisdiction. …The country’s electricity grid is already substantially green, with 85% of Canada’s power supply coming from non-emitting sources. But four provinces — Alberta, Saskatchewan, Nova Scotia and New Brunswick — still rely on coal and natural gas. Committing to a net-zero electricity grid is an easy move for the other six provinces, which are already more than 90 per cent of the way there.
New actions are being implemented to help more people find affordable homes in the communities where they live and work. …Starting Jan. 1, 2025, the B.C. home-flipping tax will be in place to discourage investors from buying housing to turn a quick profit. People who sell their home within two years of buying will be subject to the tax, unless they qualify for an exemption, such as divorce, job loss or change in household membership. It is expected approximately 4,000 properties will be subject to the tax in 2025. All revenue from the tax will go directly into strengthening housing programs and building new affordable homes in B.C. …Other measures to help make homeownership more accessible and improve the supply of housing, which came into effect April 1, 2024, are new thresholds for the first-time homebuyers’ program and the newly built home exemption.
BOSTON — Procter & Gamble has agreed to provide additional information regarding its practices related to sourcing wood pulp from the boreal forests of Canada. The updates will reiterate the company’s aim to eliminate sourcing from intact forest landscapes and to protect primary forests. …The agreement came after discussions earlier this year with investment firms Green Century Capital Management, AXA Investment Managers, BNP Paribas Asset Management, and Robeco. In exchange, these investors agreed to withdraw a shareholder proposal asking the company to enhance its disclosures in relation to its existing efforts to mitigate risks to biodiversity and forest resilience. “These disclosures will help investors better understand how P&G is managing the risks associated with sourcing from such an ecologically important area,” said Leslie Samuelrich, President of Green Century Funds. …In addition, P&G will renew its investment in the development of alternative fibers.
For the first time since the pandemic, Canada had a year-over-year decline in its greenhouse gas emissions — though it is still a long way off its 2030 target. A preliminary 
Businesses serving the global voluntary carbon market are reducing head counts, revising services and following buyer demand as they fight for survival in a market that has yet to rebound from a steep contraction that took hold in 2023. …Criticism of carbon projects like Kariba REDD+ and others have tanked most credit prices. The average value for newly issued credits from REDD+ projects—which conserve standing forests—fell from a high of $16.27/metric ton in early 2022 to a low of $8.06/mt in June. …A survey in May found the voluntary carbon market (VCM) contracted from $1.9 billion in 2022 to $723 million in 2023. …Buyer interest has shifted. The first is a move away from projects that reduce emissions to those that actively remove them from the atmosphere, such as projects that regrow forests on degraded land. …Buyers have also turned their attention to carbon reduction efforts supported by national or international frameworks. [to access the full story a WSJ subscription is required]
