Drywall costs soar as much as 80% across Western Canada

New tariffs imposed on drywall board crossing the border from the USA into Canada, west of Manitoba, have been in effect for over two months now, and a lot has happened. Reaction from the home building and renovation industry has been harsh and swift.

Here’s why. While prices have remained more or less stable in Ontario and increased slightly in the Maritimes, they have soared as much as 80% in surveyed stores in  Alberta and British Columbia.

How do we know?
Canadian Contractor began surveying on-line prices across Canada and the United States in mid-September, using the same brand, the same piece of 4×8 (1/2″) drywall product, and the same Canadian and U.S. locations each week, for 8 weeks, converting U.S. prices into Canadian dollars at market rates. A consistent source was required; that’s why we went with a particular chain of big box supply stores. Some local drywall wholesalers were either reluctant to speak to us or did not stock the identical product.

Here is chart of our price survey over 8 weeks, from mid-September to mid-November.

What this graph tells us
When the tariff went into effect, Western Canada was already paying a slightly higher price for the subject drywall than was Ontario, although significantly less than the Maritimes. Quickly prices rose in Ontario and the West to where the price was almost uniform across the country. Then prices diverged again. While Ontario actually dropped and the Maritimes remained stable, prices in the West shot upwards, ultimately becoming the highest in Canada.

To put numbers on it, the prices were as follows:
Mid-September
Ontario    $6.99
Western Canada   $7.49
Maritimes    $9.99

Mid-November
Ontario    $8.49
Western Canada    $13.49
Maritimes    $12.39

In the meantime, the price gap between U.S. and Canadian cross-nation average prices for the subject drywall was initially quite high in mid-September. However that gap has all but closed, and appears to be more sensitive to currency fluctuations and long term supply contracts than other factors.

Why did this tariff happen?
CertainTeed Gypsum Canada, owned by French building material conglomerate St. Jobain SA, filed a claim with the Canadian Border Service Agency (CBSA) this past spring, saying their three western Canadian manufacturing facilities in Western Canada had been negatively impacted by the ‘dumping’ of drywall product into Canada from the United States by five specific manufacturers.

In a press release, Matthew Walker, General Manager, CertainTeed Gypsum Canada said, “Dumping creates material injury to domestic manufacturers in the form of [market] share loss and price and margin suppression. Faced with increasing injury from dumping, we had to terminate Western Canadian employees, reduce investment in our manufacturing plants, mine operations and business, and put in jeopardy the continued viability of our plants.”

Is this regionally-specific tariff a penalty for being efficient?
Have U.S. manufacturers simply been using their North American manufacturing and distribution facilities to full advantage, based on a continent-wide marketing and distribution vision? For example, Chicago-based USG Inc., which owns the giant CSG Inc., has a drywall board manufacturing facility in Oregon, whereas their Canadian facilities are solely in Ontario and Quebec, thousands of kilometers from Canadian Western markets. By serving Western Canadian markets from nearby U.S. plants, are they simply guilty of being more efficient than CertainTeed’s beleaguered Western Canada plant? In Ontario, for example, where both CertainTeed and their U.S.-owned competitors have facilities, no complaint has been filed; price competition is the order of the day.

“Higher prices all around”, say drywall contractors and associations
One drywall contractor in Saskatoon, speaking to the media, believes the new tariffs in Western Canada, while applied only to U.S. made product, have opened the door for all Canadian manufactures to increase their prices too, causing housing and renovation costs to rise for consumers across the country.  He is not alone. Angela Zuba, CEO of the  Canadian Home Builders Association, Lethbridge Region, told Global News, “What this tariff has done, it’s enabled drywall manufacturers to be able to increase their prices. So regardless to whether or not this tariff stays, increases, or goes away, there are going to be significant increases to the prices of drywall.”

Although the new tariffs are deemed ‘preliminary’, and subject to investigations and representations by interested parties next month, the magnitude of the outcry from both consumers and the building industry forced Finance Minister Bill Morneau in October to request an immediate public interest review ahead of the final Canadian Trade Tribunal ruling scheduled for January 2017. Since that time, however, no further developments have been reported.

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