Canfor and West Fraser reported second quarter losses within a day of each other this week, an Alberta sawmill was condemned, and one producer disclosed the first hard numbers on how the new Section 338 tariffs will hit Canadian wood panels
VANCOUVER, July 31, 2026
Two of Canada’s three largest lumber producers reported second quarter losses within twenty four hours of each other this week, a 120 million board foot Alberta sawmill was condemned, and West Fraser Timber became the first major Canadian wood products company to quantify its exposure to the Section 338 tariffs that take effect on August 19.
Canfor Corporation told analysts on Thursday that it lost $18.5 million, or 16 cents per diluted share, in the three months ended June 30, narrowing sharply from a loss of $202.8 million, or $1.71 per share, a year earlier. Sales rose to $1.53 billion from $1.38 billion. The shares gained roughly 3 per cent on the day.
West Fraser, reporting a day earlier on July 29, went the other way. Its second quarter loss widened to US$61 million, or 78 cents per share, from US$24 million, or 38 cents, in the same quarter of 2025, on sales of US$1.43 billion against US$1.53 billion. The shares fell more than 6 per cent on Thursday.
The Canfor call was dominated by a decision the company had announced two days earlier. The Fox Creek sawmill in Alberta, with 120 million board feet of annual capacity and more than 74 employees in a town of roughly 2,400 people, will wind down by late summer.
“These are incredibly difficult decisions that impact our employees, their families, and our local communities,” Canfor president and chief executive Susan Yurkovich said on the call, as reported by The Canadian Press. She was more blunt about the cumulative effect of the company’s restructuring: “We’ve made changes across our platform that are gut-wrenching, but we are putting our business on a more sustainable footing.”
Three pressures, converging
Canfor attributed the Fox Creek closure to a combination of prolonged weak markets, persistent high American softwood duties and tariffs, and exhausted fibre supply.
The fibre problem is specific to the region and largely irreversible. Alberta’s mountain pine beetle strategy has ended, having reduced beetle populations by 98 per cent province wide, and the salvage timber that sustained mills through the infestation years is gone. Wildfire damaged timber that provided a further bridge has also been depleted. What remains is a sustainable annual allowable cut that cannot support the mill’s installed capacity.
“This decision reflects the challenges facing our operation and does not diminish the dedication and contribution of our Fox Creek team,” Yurkovich said in the company’s closure statement.
Canfor expects roughly $30 million in third quarter restructuring costs tied to the closure of its Northwood pulp mill in Prince George, British Columbia, and an asset writedown and impairment of approximately $35 million on Fox Creek.
The company’s difficulties are not unique, and the corporate response to eighteen months of American trade measures is now visible in the location of head office functions as well as in mill capacity. Interfor Corporation notified staff in a memo dated July 9, reported publicly late on July 28 and picked up broadly on July 29 and 30, that its Peachtree, Georgia office will become the primary hub for corporate and functional support. British Columbia, where Interfor was founded, now accounts for just 17 per cent of the company’s 4.4 billion board feet of annual capacity.
Jeff Bromley, wood council chair at the United Steelworkers, was measured but unhappy. “I understand that they’ve built and purchased a number of operations in the States over the last 20 years,” he told the Vancouver Sun. “But at the end of the day, it’s still a kick in the gut.”
Harry Nelson, a professor of environmental resource policy at the University of British Columbia, described the move as “an individual company decision that makes sense from the company perspective,” while adding that “it’s a shame.”
The first Section 338 numbers from a Canadian producer
West Fraser’s quarterly filing contained the disclosure most likely to be read closely in Ottawa and by customs brokers on both sides of the border.
The company estimated that on a year to date basis, had the Section 338 tariffs been in place, they would have applied to roughly 3 per cent of its plywood shipments and 20 per cent of its laminated veneer lumber shipments to American customers. Its medium density fibreboard is not directly subject to the new tariffs.
“We continue to monitor developments relating to the scope and implementation of these tariffs and any potential impacts on our business,” the company said in a statement carried by The Canadian Press.
That disclosure is the first concrete quantification any major Canadian wood products producer has offered, and it is instructive for two reasons.
First, it confirms that engineered wood products are inside the annexes even though solid softwood lumber is not. The Section 338 proclamations signed on July 20 carve out any article already subject to a Section 232 measure, and softwood timber and lumber have carried a 10 per cent Section 232 duty since October 14, 2025. Plywood and laminated veneer lumber sit in a grey zone where coverage depends on the specific eight digit subheading rather than on the product family.
Second, the differential between 3 per cent for plywood and 20 per cent for laminated veneer lumber shows how granular the annexes are. A producer cannot assess exposure at the product line level. It has to be done subheading by subheading.
The chapter level movement bears this out. Data from the Global Trade Alert tariff estimation engine put the average applied American tariff rate on Chapter 44 goods, wood and articles of wood, at 4.76 per cent on July 31 and 10.85 per cent on August 20. The average across all Canadian goods moves from 5.35 per cent to 7.16 per cent on the same measure, though a Global Trade Alert blog post has put the post-implementation figure at 6.27 per cent.
For the wood sector this compounds an already layered burden. The Section 232 wood programme applies 10 per cent to softwood timber and lumber, 25 per cent to upholstered wooden products and 25 per cent to kitchen cabinets and vanities. The cabinet rate is scheduled to double to 50 per cent on January 1, 2027, and the upholstered rate to rise to 30 per cent, increases that were deferred by a year in a December 31, 2025 proclamation citing productive negotiations.
Marty Warren, the United Steelworkers Canadian national director, singled out the forestry component of the July 20 package. “The USW is particularly concerned with the Trump administration’s targeting of Canadian forest and wood products in this latest round of tariffs,” he said. “Canadian forestry workers and producers are already under immense pressure because of illegal U.S. section 232 tariffs and unreasonable anti-dumping duties.”
The duty rate that has not moved
Sitting beneath the Section 232 and Section 338 layers is the antidumping and countervailing duty regime that has governed Canadian softwood lumber exports for nine years, and it is at an inflection point.
The cash deposit rate currently in effect is 35.16 per cent combined, comprising an antidumping rate of 20.56 per cent and a countervailing duty rate of 14.63 per cent. Those stack on the 10 per cent Section 232 duty. The BC Lumber Trade Council calculates the current effective burden at approximately 34.83 per cent.
On April 13, 2026 the Department of Commerce announced preliminary results in the seventh administrative review, covering calendar year 2024, that would cut the combined rate substantially: antidumping at 10.66 per cent, down from 20.53 per cent, and countervailing duty marginally lower at 14.17 per cent, for a combined 24.83 per cent.
Rates do not change until the final determination. Global Affairs Canada’s softwood lumber page places the AR7 final results deadline no later than August 12, 2026, six days before the Section 338 tariffs take effect. An eighth review covering calendar 2025 was initiated on March 9, 2026, with Resolute and West Fraser selected as mandatory respondents on April 8 and May 21, and final results anticipated by January 31, 2027.
If the preliminary AR7 rate holds, Canadian producers would see roughly ten percentage points come off their combined duty burden in the same month that a new tariff layer lands on their panel products. Whether the net effect is relief or additional cost depends entirely on product mix.
Kurt Niquidet, president of the BC Lumber Trade Council, rejected the premise of the duties when the preliminary results were published. “The preliminary AR7 results confirm that Canadian lumber producers continue to face unjustified and punitive trade measures that hurt workers, communities, and families on both sides of the border,” he said. “These duties are taxes on a critical building material that increase the cost of housing for Americans while undermining the competitiveness of one of British Columbia’s most important export sectors.”
He tied the argument to American housing costs. “Americans are already facing elevated housing costs and a shortage of homes. These duties continue to make it more expensive to build homes at a time when both countries should be working together to improve housing affordability.” His conclusion was a call for a negotiated settlement: “Canada and the United States need to make softwood lumber a priority in broader bilateral discussions and pursue a new agreement that provides certainty, supports investment, and benefits consumers in both countries.”
British Columbia supplies roughly one third of Canada’s softwood lumber and more than 40 per cent of its American exports.
Ottawa’s cheque book
The federal response to the forest sector’s difficulties has been financial rather than commercial, and the pace of disbursement has picked up sharply in the past week.
The Large Enterprise Tariff Loan facility, a $10 billion programme administered by the Canada Enterprise Emergency Funding Corporation on behalf of Canada Development Investment Corporation, made two forestry advances in as many days. Millar Western Forest Products, which operates in Slave Lake and Whitecourt, Alberta and Quesnel, British Columbia, received $100 million on July 27. The company employs more than 420 full time workers and roughly 300 contractors, and sells 93 per cent of its output into Asia, primarily China. The funds are earmarked for near term needs including rebuilding log inventory. Arbec Bois d’oeuvre Inc. of Saint-Léonard, Quebec, with eight plants and approximately 800 employees, received $60 million on July 28.
Both advances were framed as forestry support driven by American duties and weak Asian pulp markets rather than as a response to Section 338.
The facility’s terms have loosened considerably since it opened in April 2025. The widely cited $60 million minimum loan size is obsolete; the current factsheet states that there is no minimum loan amount. The revenue threshold has fallen to roughly $150 million in annual Canadian revenue from approximately $300 million, and the liquidity window has tightened to 24 months from 36. Terms run up to ten years at an interest floor of the Canada ten year bond yield plus 25 basis points, with restrictions on dividends, buybacks and executive compensation, a mandatory 24 month employment plan, a Buy Canadian commitment, and warrants of up to a 20 per cent voting interest for public borrowers.
Five borrowers have been named to date, accounting for roughly $825 million of the $10 billion facility: Algoma Steel at $400 million, Arctic Canadian Diamond Company at up to $175 million across two tranches, C.A.T. North America at up to $90 million, Millar Western at $100 million and Arbec at $60 million. The corporation’s published approved loans table has not been updated since April and lists only the first two.
A $500 million share of the facility was earmarked for softwood lumber on November 26, 2025.
The broader forestry package has grown in stages. An August 5, 2025 announcement provided up to $700 million in loan guarantees delivered through the Business Development Bank of Canada, $500 million for product and market diversification, $50 million for upskilling and income support covering more than 6,000 softwood workers, and federal procurement changes requiring Canadian lumber sourcing. On November 26, 2025 a further $500 million was added to the guarantee programme, bringing the total to $1.2 billion, alongside a commitment to cut interprovincial rail freight rates for Canadian steel and lumber by 50 per cent from spring 2026 and a roughly $700 million Build Canada Homes allocation projected to generate $70 million to $140 million of new demand for Canadian wood products. A Forest Sector Action Plan was launched in June 2026.
The sector the money is meant to support employs nearly 200,000 Canadians directly, including more than 11,000 Indigenous people, and contributes more than $20 billion to gross domestic product. In 2024, 66 per cent of Canadian softwood lumber production was exported, and roughly 90 per cent of that went to the United States.
That last figure is the structural problem no loan facility resolves.
Diversification, announced twice in one day
Ottawa’s answer to the concentration problem was on display on Thursday, when two separate announcements pushed the same theme.
International Trade Minister Maninder Sidhu launched Canada’s first Strategic Exports Office, housed within Global Affairs Canada and originally flagged in Budget 2025, with a mandate covering the removal of trade irritants, market access barriers and infrastructure gaps, the identification of export opportunities and the coordination of senior official advocacy. Priority sectors are aerospace, defence, infrastructure and energy.
“We are launching Canada’s first-ever strategic exports office, working side by side to help our best companies win the biggest contracts in the toughest markets around the world,” Sidhu said, as reported by Global News. He described the office as “your government-level dealmaker,” adding that “it brings strategic advocacy, government financing, and diplomatic support together in one place.”
Asked why existing export finance was insufficient, Sidhu described losing contracts at the final stage. Canadian firms “would get to the finish line, another state leader would swoop in, a trade minister would swoop in and make a call and billions of dollars of deals would be lost.”
His argument for diversification was expressed in pricing terms that will resonate with any lumber executive. “If you have one customer buying your product, they will set the price. But if we’re able to open up the market and have more customers, that gives our industry a competitive advantage.”
A Strategic Exports Advisory Council was launched alongside the office, with members including the chief executives of OpenText, Bombardier and the Canadian Chamber of Commerce. Sidhu said the government supported more than $28 billion in international wins for Canadian businesses last year. Global Affairs Canada spokesperson Samantha Lafleur put first quarter 2026 non-American exports of goods and services at $96.2 billion, and the spring economic update reported that non-American goods and services exports rose $33 billion in 2025 over 2024. Ottawa has signed more than 20 strategic trade and defence agreements in the past year, including a free trade agreement with Ecuador and concluded negotiations with the United Arab Emirates, both announced on July 24.
Conservative international trade critic Stephanie Kusie was unimpressed. “Now their answer is another government office with no clear targets, timeline or measurable results,” she said. “Canadian exporters need action from their government, not another bureaucratic announcement or advisory council.”
Hours later, touring the Deltaport facility in Delta, British Columbia, Prime Minister Mark Carney said Ottawa is looking to invest roughly $10 billion or more in the Vancouver Fraser Port Authority’s three berth Roberts Bank Terminal 2 project. The government projects a 50 per cent increase in container capacity, growth in non-American exports of more than 50 per cent, over 17,000 construction jobs and a further 17,000 permanent operating positions, and roughly $100 billion in new annual trade capacity.
Carney said the Port of Vancouver’s existing capacity “is bigger than the capacity of the next five biggest ports in Canada combined,” but that “within the next decade, it’s not going to be enough” given the government’s diversification targets. The project was referred to Canada’s Major Projects Office for possible fast tracking by Transport Minister Steven MacKinnon two weeks earlier.
On the same day, Evan Solomon, the minister responsible for the Federal Economic Development Agency for Southern Ontario, announced nearly $2.5 million through the Regional Tariff Response Initiative to the Toronto Business Development Centre to launch a programme called GoEU, matched by $2.5 million from the Government of Ontario. The $5 million programme will support up to 70 Ontario companies with export readiness assessments, advisory services and in-market European expertise.
The trade diversion evidence
Whether diversification is working is best answered not by announcements but by company disclosure, and this week produced the cleanest single example on record.
Algoma Steel reported second quarter results on July 29 showing a net loss of $96 million and adjusted earnings before interest, taxes, depreciation and amortisation of $13.8 million, in line with guidance, on a second consecutive quarter of record plate sales at roughly 125,000 tons, up from 116,000 in the first quarter, with average net sales realisation per ton up 20 per cent from a year earlier.
The policy relevant figure is elsewhere in the release. Direct Section 232 tariff costs fell to $18.7 million from $64.1 million a year earlier. The rate did not change; it remains at 50 per cent. What changed is volume. American shipments fell to 23 per cent of Algoma’s total steel shipments from 54 per cent in the prior year quarter.
“While the 50% U.S. Section 232 tariffs continue to effectively foreclose our traditional access to the U.S. market, our pivot to a Canada-centric, plate-first strategy is working,” chief executive Rajat Marwah said. Commissioning has begun on the company’s second electric arc furnace unit, with first steel expected in the third quarter, which Marwah described as entering the final phase of the most significant transformation in Algoma’s history.
Algoma reports that the duties have permanently disrupted its cross border business model. It is Canada’s only producer of discrete plate, and it received the inaugural Large Enterprise Tariff Loan advance of $400 million in September 2025.
The macro data show the same pattern in aggregate. Merchandise trade figures for May, released July 7, recorded record exports of $77.1 billion with unwrought aluminum exports up 50.7 per cent to $1.2 billion, the highest since May 2022, destined for the Netherlands, Italy and Greece. Canadian steel product exports fell 30 per cent in 2025, according to RBC Economics, which also calculated that the American share of Canadian merchandise exports fell from 75.9 per cent in 2024 to 71.6 per cent in 2025.
Catherine Cobden, whose last day as president and chief executive of the Canadian Steel Producers Association is today, put the scale of the contraction plainly in June. “Canadian steel has been the largest steel supplier to the United States prior to the trade war and our shipments have now plummeted by 60% in 2025,” she said, describing the 50 per cent Section 232 rate as “a severe and unsustainable trade action.”
What exporters and importers should take from this week
For Canadian wood products exporters, the immediate task is subheading level classification against the Section 338 annexes. West Fraser’s disclosure demonstrates that exposure within a single product family can range from 3 per cent to 20 per cent of shipments. The annexes are the authoritative source, and they are reproduced in the Federal Register as scanned images without a text layer, which rules out automated screening. No Customs and Border Protection guidance message and no Federal Register implementing notice had issued as of July 31.
Because the Section 232 carve out is absolute, producers should confirm which of their products already fall under the wood, metals or copper programmes. In the current architecture, existing Section 232 exposure functions as a shield against the new 50 per cent layer. That is a counterintuitive result and one that rewards careful line by line review.
Softwood lumber shippers should be positioning for the AR7 final results, due no later than August 12. If the preliminary combined rate of 24.83 per cent is confirmed, importers of record in the United States will see cash deposit requirements fall by roughly ten percentage points, with implications for working capital, letters of credit and any duty sharing arrangements written against the current 35.16 per cent rate. Contracts that pass duty through at prevailing rates should be reviewed for how a mid-quarter rate change is handled.
Canadian producers weighing capacity decisions face a harder calculus. The Fox Creek closure was driven as much by fibre exhaustion as by trade policy, and no tariff outcome restores an annual allowable cut. Where fibre is available, the Large Enterprise Tariff Loan facility now has no minimum loan size and a revenue threshold of roughly $150 million, which brings a considerably wider set of mid-sized producers into scope than when the programme launched. The Business Development Bank guarantee programme stands at $1.2 billion.
For distributors and buyers on the Canadian side, the diversification push creates genuine opportunity but on a longer horizon than the August 19 deadline. The Regional Tariff Response Initiative now stands at $1.5 billion, with $150 million carved out for steel producers and individual awards up to $10 million. Close to 1,500 applications had been received as of late November 2025 across steel and aluminum, lumber, manufacturing, automotive and seafood. A companion $1 billion Business Development Bank financing programme opened on May 3 for manufacturers and exporters of products containing steel, aluminum or copper.
The employment programmes are where take up is best documented. Temporary Employment Insurance work sharing measures, extended to March 31, 2027, with maximum agreement duration raised to 76 weeks, had produced more than 1,500 approved agreements covering over 50,000 workers and preventing nearly 20,000 layoffs as of February 28, 2026.
Dennis Darby, president and chief executive of Canadian Manufacturers and Exporters, has expressed the structural constraint that frames every diversification announcement. “We are still fairly tied at the hip to the U.S.,” he said on July 22. “Geography matters and history matters in manufactured goods.”
For a sawmill in Fox Creek, geography settled the question some time ago.