Apr 01, 2005. /Lesprom Network/. A sharp decline in prices from 2004 highs will result in a 50% reduction in profits for Canada's wood products industry in 2005, according to the Conference Board's Canadian Industrial Outlook: Canada's Wood Products Industry. "The robust production and rising prices that the industry enjoyed last year are already starting to dissipate, and these factors will cut profits in half in 2005," said Louis Thariault, Associate Director, Industrial Outlook. "The expected transition from countervailing duties to a negotiated export tax in the second half of this year will help to mitigate the effects of a stronger Canadian dollar. However, the industry would be further hampered by duties that stay in place beyond 2005, or by an even higher dollar." A surge in Canadian exports to the United States caused demand to outstrip supply in 2004, depleting inventories and driving prices higher. With North American housing demand easing modestly in the near term, a new balance between supply and demand will be reached, keeping prices much lower this year. As a result, exports and revenues will both decline in 2005. In the medium term, residential construction activity is expected to slow to a pace matching demographic trends, keeping growth modest in the outlying years of the forecast. Profits reached $2.1 billion in 2004, driving the profit margin to its highest point since 1999. However, lower prices will be the primary factor contributing to a decline in profits to $1.1 billion this year. If softwood lumber duties remain at current levels indefinitely, another $300 million would be shaved from industry profits in 2005. If a resolution to the softwood lumber dispute is negotiated in the second half of this year, as expected, profits will rise by 15% in 2006.