Four years ago, the U.S. Department of Commerce approved a 23% Countervailing Duty on Chinese imported plywood. The 10% Tariff in April 2017 was a similar aim, intending to protect domestic plywood manufacturers from having to compete with government-subsidized imports.
Domestic Plywood Prices Will Probably Rise, Too
The unfortunate response in 2013 may well recur this year: domestic plywood manufacturers raised their own prices in response to the price hike. While the tariff was intended to benefit those organizations anyway, it seems greed fueled their opportunistic choices. While price wars are nothing new, this kind of government intrusion for the protection of domestic companies ends up hurting the customer in the end.
Not All Rising Prices Are Bad
Before you get on your soap box, complaining of all the increased prices in the lumber market, remember this: often higher prices are needed in order to keep a wood product available. Remember Spanish Cedar? If mills can’t make money on any given species, they won’t waste time harvesting it. The price hikes for domestic plywood are a different story, though.
How Domestic Plywood Manufacturers (Don’t) Benefit
Keep in mind that a Countervailing Duty is essentially enacted as a courtesy toward a U.S. industry that’s unable to compete with subsidized imported goods; but it’s not initiated by the U.S. government. Instead, it’s in response to a petition from the industry, itself. If domestic plywood manufacturers assert an unfair price comparison and request government intervention, only to respond by raising their own prices, don’t you think the government will get a little bit suspicious?
Even though domestic plywood manufacturers claimed that increased costs of raw materials was to blame in 2013, we don’t expect them to be able to get away with that same excuse again. Even if they did, they hurt themselves in the end, failing to benefit as much as they could have from the intended price gap; maybe they made more money on each sale they did make, but they likely didn’t make as many added sales as they would have, had they declined from raising their prices to be positioned closer to the imports.
Consider This Counterpoint
Now maybe domestic plywood manufacturers were simply responding to a typical supply-and-demand situation: as demand for domestic plywood increased, their supply remained the same, so raising prices was legitimate. One thing is certain: if we see the same pricing situation repeat itself this year, we should also expect shortages of domestic plywood. Price increases will continue.
What can you do to avoid your own plywood shortage for the jobs you have lined up? Be prepared. Purchase as much of an inventory as you possibly can. Even if you’re only ordering 10 to 20 extra sheets with each order, you and your customers will benefit from your preparedness.