Thank you, Madam Chair.
Good afternoon. My name is Sylvain Labbé. I'm the president and CEO of the Quebec Wood Export Bureau, an association of manufacturers that focuses solely on export development in the softwood and hardwood lumber sectors, as well as in three other industry sectors.
I'll talk to you today about two issues that affect lumber. First, I'll explain the current impact on our markets as a result of the war and sanctions, and the impact on the American market. I'll then provide some ways to resolve this matter.
You have all read the papers. Russia is at war with Ukraine, and Belarus is lumped in with Russia. Last year, Russia and Belarus accounted for one third of global softwood lumber exports, with 50% destined for China and about a third for Europe. All this ended when the sanctions began. For China, nothing has changed. However, the impact by market groups, such as Europe and Asia, was analyzed to some extent.
Europe will no longer receive the approximately eight million cubic metres that it used to obtain from Russia. It will send back what it normally exports to the United States, or about four million cubic metres. There will still be a European deficit, since demand will be greater than supply.
In terms of China, it's unclear where its partnership with Russia stands. The geopolitical situation is very unclear. That said, the Chinese will probably buy the rest of the Russian wood. We don't know how much they will pay, but it will certainly be much less than the market value. There will be an adjustment period before that happens. This will greatly reduce our competitive ability to sell our wood in China. We'll bring the wood back to Canada, where there will be a deficit. We'll lose the wood from Europe, which will no longer sell wood in North America.
Ultimately, we'll end up with a reduced supply of about 1.25 million cubic metres in North America compared to today. This will put upward pressure on prices over the next year or in the years to come. This price increase will be even greater than the current one. This comes on top of rising oil and home prices. The cost of living will change drastically.
The other issue is whether Russia will return to the market in the future. The Russians nationalized the factories owned by foreigners. I think that it will take a few decades before someone reinvests in sawmilling factories in Russia.
We're experiencing a crisis, and two things are important to people: food and housing. Food isn't an issue. Housing, however, is a major problem in Canada and the United States right now. There's a lack of housing everywhere, especially social housing.
My first recommendation is to meet with our American friends and tell them to immediately remove the softwood lumber tax. This is a great time to do so, given the crisis involving commodity and lumber prices, which will continue to rise in the coming months, and the housing crisis. When the house is on fire, it's time to remove the tax on water and firefighters, because it doesn't help anyone. This is a great time to negotiate something, given that there will be an obvious shortage of wood in the coming years.
In addition, since we've been living with this issue for 40 years, we must diversify our markets to ensure that we don't solely depend on the American market. That's my second recommendation. It ties in with what Ms. Yurkovich said earlier. To do this, we have two options. Either we sell our commodity product, the two‑by‑four boards, outside the United States, or we process that product to create value, whether this involves structural products or industrialized home building products.
Over the short term, obviously exporting to China or elsewhere will be somewhat difficult. However, we must keep our options open. This crisis could be completely different in two years. If Putin were to leave, everything would start again and Belarus would need to be rebuilt. The situation could change completely. The price of oil could exceed $150 a barrel and lead to a recession that would completely change the situation, as well.
We can't depend entirely on the American market. We must keep our options open.
In addition, we need to maintain our current investments in our secondary processing products, made from our two‑by‑fours, which we'll certainly sell in the United States, in the short term, or perhaps elsewhere. When we process our wood, we increase its value by four or five times, which creates wealth in Canada.
Of course, we must also change our construction practices, because our system is a bit archaic. Building with—