A new Chinese sawmill Canfor (TSX:CFP) plans to invest in will make some of the same products currently cut in the company's Quesnel mill – set to close in March – and for the same market.
Canfor announced November 26 that it will form a 50-50 joint venture with a Chinese company, Tangshan Caofeidian Wood Industry Co. Ltd., to build a wood manufacturing plant at a deepwater port near Beijing.
The move makes sense for Canfor because of the company's interest in the Chinese wood market, said Russ Taylor, president of Vancouver-based Wood Markets Group. Canfor is one of the largest suppliers of wood to China.
"This is an extension of the strategy Canfor has already implemented some time ago where they have a big commitment to China," Taylor told Business in Vancouver. "They're picking up the pace and raising the bar and saying now we're going to make some investments in China."
The new mill will allow Canfor to produce metric-sized wood products for the Chinese market. Currently, much of the wood that is shipped to China comes in North American sizes and is then recut in China.
"The facility will further process B.C.-finished lumber to address the local size needs of the Chinese construction sector," wrote Christine Kennedy, Canfor's vice-president of brand and external relations, in an email.
Few B.C. mills have been refitted to cut wood in metric sizes, Taylor said, although one of those is Canfor's Quesnel sawmill. That mill was shut down in January 2010 during a severe downturn for the industry, but reopened a few months later after Canfor secured customers in China, according to Woodbusiness.ca.
Canfor announced last month it would close its Quesnel mill in March 2014, affecting 209 workers. The company said the move was in response to the mountain pine beetle infestation, which has seriously depleted the region's timber supply. On the same day, West Fraser (TSX:WFT) announced it would close its mill in Houston, B.C. ("West Fraser, Canfor to close Interior mills" – BIV issue 1253; October 29, 2013).
Canfor's plans in China do not affect B.C. workers, said forestry minister Steve Thomson.
"This plant will re-cut lumber from B.C. into custom cut sizes for the Chinese market, especially for furniture stores, windows and mouldings," Thomson said. "So this is a remanufacturing that's taking place as opposed to primary manufacturing."
Also at play is the planned location of Canfor's plant in China, near a new deepwater port in Hebei province. Construction on the Caofeidian Port Tangshan started in 2003.
The port accepts resources like coal but is also designed to be a lumber and log importing hub. It includes a fumigation facility. Taylor said that, with no fumigation, wood can only be accepted during the winter months.
"The B.C. logging sector now has the opportunity to export logs year-round to a new port," Taylor said.
This year, B.C. increased its softwood lumber exports to China by 35%, Thomson said.
"We're on track to break the previous year's exports of softwood lumber."
