Copyright 2001 Reuters
June 14, 2001

VANCOUVER, British Columbia, June 14 (Reuters) - Western Canadian timber producers are nervously awaiting word from U.S. officials about trade sanctions on softwood lumber shipments, with some firms scaling back production in hope of avoiding penalties.

The end of the Canada-U.S. softwood lumber accord on March 31 left Canada with free access to the U.S. market in theory, but producers say they are reluctant to let shipments increase too much for fear of triggering countervailing duties.

``I think there as been discipline in the industry,'' Canfor Corp. (Toronto:CFP.TO - news) vice-president Jim Engleson said on Thursday. Canfor has announced plans to curtail production by 100 million board feet.

This week, Canada reported exports of softwood, such as spruce and fir, have increased 14.4 percent since April 1, below the 15 percent level that would allow the United States to levy retroactive duties against Canadian lumber producers if the Commerce Department finds there is a ``critical circumstance''.

Canada supplies about 30 percent of the U.S. softwood lumber market, with British Columbia the largest exporting province. The lumber is used mainly in housing construction and is worth an estimated C$10 billion ($6.6 billion) a year.

U.S. lumber producers, who want renewed restrictions on Canadian shipments, have complained they will face as ``wall of wood'' with the end of the trade agreement that had curbed Canadian exports to the United States for five years.

Lumber inventories are building at sawmills in British Columbia where producers are holding back on shipments, while required by provincial law to keep cutting on their tenures on publicly owned forests.

West Fraser Timber Co. Ltd. (Toronto:WFT.TO - news) and International Paper Co.'s (NYSE:IP - news) Weldwood unit have both announced they will take downtime at their mills in British Columbia and Alberta, according to industry publications.

West Fraser expects to reduce production by 140 million board feet and Weldwood by up to 50 million board feet.

Engleson said the timing of Canfor's cutbacks will depend, in part, on when the United States announces its next step in an effort by U.S. producers to win duties and other penalties of up to 70 percent on Canadian shipments.

The U.S. Commerce Department had been expected to make a preliminary decision by the end of June on whether Canada unfairly subsidizes its softwood exports, but the complex nature of the issue prompted officials to postpone that until July 27. Error: Unable to read footer file.