WFT and trade. What happens if margins go north from 15%?SLA... so, how does the question play out?
Safe money is Canada gets hosed. It's been an irritant for 100 years now.
But, player 3 has entered the game, so to speak. I'm sure you all know this.
https://nahbnow.com/2016/03/nahb-forms-coalition-dedicated-to-free-lumber-trade/
The NAHB is huge. Now they will actively lobby on our behalf. We know the new POTUS likes to 'make a deal'. I suspect he may strong arm one. He'll be compelled by pride to cut the Gordian knot.
Trump will refuse to have an extra $1000 per home in added costs. That's not OK. He likes USA jobs. So, can he really smash the Canadians? I am thinking more and more the answer is 'no'.
Maybe the US sector gets a stimulus package, and a currency-based hit that floats based on CADUSD. E.g. Canadian producers pay them 15% of the difference for divergent dollars, or ((1/.74)*.15) or about a 5% tariff now. Not enough to upset the apple cart. And a dumping provision lifted from the last SLA where a duty creeps as lumber drops. China (AKA 'Jyyna!') is a currency manipulator. So are we; but much more modestly. This would solve the issue in a good way for both. He may also reduce it proportionally to the amount of Canadian wood that goes to Asia.
He may also hammer BC. BC lodgepole used to be, ahm, unfairly priced when I was there. 25 cents a cubic meter? Yikes. That will get shut down. So, the Canadian entity may be separated by Trump. Whereas the East and the Coast are non-entities that the Americans are not worried about.
Another out of the box solution for NAHB lobby to be creative (I assume there is no Canadian lobby as we don’t care to decamp in DC and throw mud. No idea why. We need to line some senate pockets. I digress.) Consider playing ‘Fortress North America’. Wave the red flag in front of the bull. AKA 'duck the Europeans they are freeloaders on defence!' AKA 'duck the South Americans they are drug lords!'. What I am saying is we should put big tariffs on them. Leave Canada alone. How the heck to the Chileans have a 1.x% market share in USA lumber? Give them a monster tariff. I just hope Justin can increase defence spending to 2% to get in the good books. Why should the Scandinavians be allowed to pick up Canadas market share? It’s like oil; Trump is fine with our oil but not fine with oil from the ME. Keep that product away from NA.
In sum, I see some creative ways this could be solved. I am not expecting it because there is too much downside risk, but there is strong upside if we get a deal. And we'd have the NAHB to thank to a large degree because they will create red herrings as needed (xenophobia, etc.) to ensure the major supplier of cheap 2x4s doesn't get cut out of the market in any meaningful way.
And as soon as this happens, should it, I’ve got a dilemma on my hands because I’d need to get into CFP and WFT in a big way. I have zero exposure now. Moreover, you may see WFT divest their baggage (pulp, MDF, plywood) FAST. They’d then go on a new buying spree and get up to 8 billion fbm from 6 billion. Or maybe Canfor beats them to it. Who knows. WFT averages a 15% EBITDA margin on lumber; what if that could become 30% thanks to a clever trade deal? Wow, that is some serious cash.