Issue link: http://palletcentral.uberflip.com/i/638772
36 PalletCentral • January-February 2016 palletcentral.com producers. Industry sources expect it to take a year or more to hammer out a new agreement. And, many are wondering how the explosion of Canadian ownership of sawmills in the U.S. will impact the next agreement. Since the 2006 SLA was signed, Canadian companies have acquired nearly 40 mills in the United States. Less Low Grade? While the stage appears to be set for increased Canadian softwood shipments to the U.S., producers in both countries are attempting to minimize production of #3 and #4 Common, which typically sell at a loss. Mills are taking steps to reduce drying defects that drop boards into lower grades and installing increasingly sophisticated trimming systems to upgrade boards whenever possible. Perhaps most importantly, many have improved grade yields by adding automated grading systems. Whereas human graders often put questionable boards into the lower grade pile or miss opportunities to remanufacture and upgrade boards, automated grading systems can do all those things, and usually faster. The result is typically reduced low-grade production and higher average value. Supply Outlook Despite producer efforts to minimize low-grade softwood production, availability in the U.S. is likely to increase this year. For now, Canadian shipments are not subject to quotas or taxes, and the U.S. softwood industry cannot bring anti-dumping claims against Canadian producers for a period of one year. Since Canadian shipments to the U.S. were already trending up prior to the SLA's expiration, they are likely to trend even higher now that it has expired. What's more, banks and currency exchange analysts expect rising U.S. interest rates to drive the U.S. dollar higher against the Canadian dollar this year, making Canadian lumber even less expensive in the United States. China's increased reliance on Russian and European softwoods is also likely to push more Canadian lumber into the United States. Canadian imports would almost certainly result in lower softwood prices for U.S. pallet manufacturers. PC MARKETS Mills are taking steps to reduce drying defects that drop boards into lower grades and installing increasingly sophisticated trimming systems to upgrade boards whenever possible. Andy Johnson is a freelance writer in Charlotte, North Carolina. He has previously written for Hardwood Review and on numerous business topics. Andy can be reached at andyjohnsonnc@gmail.com or phone: 704-564-8784.