Coal Caught in U.S.-Canada Lumber Trade War Sends Stocks Sliding

U.S. coal has become entangled in a trade war between the U.S. and Canada over lumber.

British Columbia Premier Christy Clark urged Canadian Prime Minister Justin Trudeau in an open letter Wednesday to ban U.S. coal shipments from the country’s westernmost province in retaliation for the Trump administration’s new tariffs on softwood lumber. The move sent Canadian export terminal operator Westshore Terminals Investment Corp. and U.S. miner Cloud Peak Energy Inc. plunging on Wednesday.

“I told British Columbians that I would use every tool at our disposal to ensure we get a fair deal on softwood lumber,” Clark said in the letter. “Friends and trading partners cooperate,” she said, and “clearly, the United States is taking a different approach.”

The call for a coal ban underscores the tensions flaring between the two governments over everything from lumber, to the North American Free Trade Agreement, to the dairy industry. It also comes at a time when Canadian terminals have grown in importance for U.S. miners looking to get their coal to Asian markets. Export projects on the U.S. West Coast have been stalled by environmentalists, limiting their options. President Donald Trump has repeatedly vowed to help revive the U.S. coal industry.

Clark said that, if Canada’s federal government doesn’t act on the request, she’ll take her own steps to discourage the trade. Some 6.2 million metric tons of U.S. thermal coal passed through Vancouver’s sea port last year, she said. Such a ban could hurt Cloud Peak and Lighthouse Resources Inc., which have both shipped coal through Westshore’s terminal south of Vancouver. 

“Asking for the ban on U.S. coal exports through B.C. ports is probably more for show than for action,” said Ilan B. Vertinsky, an international business studies professor at the University of British Columbia in Vancouver. “It is also clear that the federal government is unlikely to comply.”

Carefully, Seriously

Cameron Ahmad, a spokesman for Trudeau, said by phone that his office considers any request from a premier “carefully and seriously.” The White House didn’t immediately respond to a request for comment.

For more on why the U.S. and Canada are fighting about lumber, read this QuickTake Q&A.

Cloud Peak slid 6.6 percent to close Wednesday at $3.66, the lowest since September. The company “values our Canadian trading partners and hopes this matter is resolved to benefit all interests,” spokesman Rick Curtsinger said. Westshore fell 12 percent in Toronto, the biggest loss since December 2O15, to C$23.03.

Cloud Peak rivals Peabody Energy Corp. and Arch Coal Inc., which also mine coal in the Powder River Basin of Wyoming and Montana, won’t be as affected because they don’t ship much out of Canada, Jeremy Sussman, an analyst at Clarksons Platou Securities Inc., said by phone.

“For us to get excited about Cloud Peak’s shares, we’d need to get excited about the export market and this would make it impossible to do that,” he said.

‘Misguided’ Proposal

RBC Capital Markets equity analyst Walter Spracklin cut his rating on Westshore to the equivalent of hold from buy. Nick Desmarais, a Westshore spokesman, said by phone that Clark’s proposal is “misguided” and that she “doesn’t have the power” to carry it out.

U.S. producers have also used Ridley Terminals Inc. at Prince Rupert port in northern British Columbia.

On Monday, the U.S. Commerce Department announced countervailing duties of up to 24 percent on softwood lumber from Canada. The move intensified an already simmering dispute after Trump attacked the Canadian dairy industry last week and reiterated his misgivings about the benefits of the North American Free Trade Agreement.

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