Audio Where the issue stands NAHB actions Advice to home builders

Barry Rutenberg: The duties that have been bonded by the Canadian companies up until that date [when the duties go into effect] will be forgiven because there was not proof of injury but only the potential for injury. The Canadian government has already filed appeals with the World Trade Organization -- the WTO -- and NAFTA, and in addition to that, we have seen recently discussions in the Canadian press that Canadian firms will be bringing suits against the U.S. government under NAFTA for damages. The Canadian government is also kind of planning to increase its public relations effort in the U.S. to try to explain its side better. There are rumors that negotiations between the U.S. and Canadian governments may restart, but so far there's no substance to that. All you're seeing right now is positioning. You're seeing a recent series of ads by Weyerhaeuser asking for a better solution, and they are particularly interested because the high price of cedar carries the same percentage duty. ( Listen. )

Bill Lurz: And they operate on both sides of the border?

BR: Yes. We have several companies who operate on both sides of the border who are neutral on the subject. Most of the push for the tariffs is coming from the companies that are operating [mostly] in the U.S.

BL: Have you been watching the lumber prices? What's happened with futures?

BR: May futures are moving up, which was a surprise because I thought that, given the fact that there would be no duties toward the end of May, we might see some duty-free shipments. A week ago Thursday [May 2], the futures price was about $280, and today it's about $305, so it's moved up $25. There's not a good clarity as to whether or not the pre-May 2 price had the duty built in or not. You hear opinions on both sides of that. Once again, we don't know which way lumber prices are moving.

BL: What's the NAHB's course of action now?

BR: Let me add one other thing to the previous question. An interesting note is because of the action on steel tariffs that the Bush administration took prior to the lumber ITC [International Trade Commission] decision, we are seeing some significant price increases in light-gauge steel, which is used for residential framing as an alternative to wood. And that's the first time that price has really moved in some time, some number of years. So it makes the situation much more interesting and much more volatile.

NAHB actions are to work as closely as we can with members of the regulatory side of the U.S. government. We are continuing discussions with the Canadians. We are working with the American Consumers for Affordable Housing. We have participated in press conferences. We are scheduling a meeting, or attempting to, with the Canadian ambassador to the U.S. We continue to be engaged in the process, representing consumers, and that's what we really do is, we represent the consumers. ( Listen. )

BL: Would the NAHB take any part in the Canadian initiative to bring a public relations effort to American consumers? I'm assuming that they would be the target of the Canadians' public relations campaign.

BR: What that campaign might be is not clear yet, and I think that we would be careful in doing that. Our membership is very broad. What we do feel confident in doing is representing the consumer, working for free trade and propagating good information. And those are the things I think that we would focus on.

BL: What would be your advice to American home builders over the next month or so?

BR: I would be working closely with my suppliers, and I might be trying to make some longer-term arrangements. The key to that is that quite often, when builders make longer-term relations, if prices go down they don't honor them. And that leaves the lumberyard having committed to a higher price and leaves a very bad taste. So, if you commit to a relationship like that, you have to be 100% sure of following through and executing it, whether it's to your advantage or not to your advantage.

BL: And in the current uncertainty that's a difficult thing to do, I would think.

BR: I know very few small builders and lumberyards that make money playing the lumber futures. It's a good way of hedging, but most of the people I speak to are not the ones making the money. Somebody else seems to be making money on it. It's difficult. I think I would be mindful of it in my pricing going forward and be careful on how you price out your custom homes. ( Listen. )

BL: What about alternative materials? Are you looking at alternative materials yourself?

BR: Yes. I'm going to be preparing a presentation for the Southeast Building Conference on alternative materials, which will be under the banner of Professional Builder magazine. We're going to be exploring and explaining it. From consumers, I'm hearing a lot more interest in ICFs, the insulated concrete forms. In my hometown now one of the major government buildings is going up with ICFs. It's interesting, and we're seeing it becoming more mainstream. Also, light-gauge steel. It's had 50% increases for the last two years in tonnage used in residential construction. There is movement now that's going on, and I think one other thing that builders have to be alert to is that in the long run the economics of lumber will even out. What I mean by that is Canadians will have to look for markets besides the U.S. that are more stable and inviting. The U.S. has started importing lumber from other countries that have not been traditional suppliers. Scandinavia and Austria are two examples. Most of the trim material that we get now is coming from the Southern Hemisphere, not the Northern Hemisphere. It's coming from Chile and New Zealand.

BL: One of the major concerns about this duty has been that the quality of the Canadian lumber is superior to that which is used in framing houses from the American side of the border. Is that correct?

BR: The SPF, the spruce/pine/fir, that we get in large part from Canada has replaced the materials that we used to get from our Northwest but since the environmental movements of the early '90s and the spotted owl decisions have been placed off-limits to timber. There is a significant, common interest between U.S. timber companies and U.S. consumers, but the characteristics of the Canadian lumber are superior for walls versus the southern yellow pine, which has a tendency to warp and twist more than the spruce will.

BL: Is the lumber that's being imported from Scandinavia and other parts of the world of similar quality to the Canadian lumber?

BR: I think so. Not enough of it has come in yet that I'm familiar with it, but I believe it to be. We have as good a lumber in the U.S. as Canada does. We're just not allowed to timber it.