Successfully cracking the Chinese timber export market was what helped British Columbian forestry companies limp through the housing market crash in the United States and the subsequent global recession.
Now experts say the meteoric growth in exports to China during those years is over – but that the market will continue to be a mainstay for Canadian timber.
“There’s been concern as the U.S. housing market comes back and prices rise, that means the end of the Chinese market,” said Bob Flynn, director of international timber at Boston-based research firm RISI. “But it won’t because for the Canadian lumber producers, China has become an integral part of their market.”
Flynn will speak at a panel on China this week at the North American Forest Products Conference being held in San Diego, California, alongside Canfor (TSX:CFP) CEO Don Kayne.
In 2005, China imported 283,000 cubic metres of wood from Canada; by 2011, that number had jumped to 6.8 million. However, in 2012 it dropped to 6.4 million cubic metres, and 2013 is shaping up to look the same.
From 1997 to 2012, China’s timber deficit – the amount of wood the country needed minus the amount it could supply domestically – increased 16% annually, a higher rate than the rise in China’s gross domestic product. Flynn said that kind of growth just couldn’t continue.
The Chinese are now working to increase their domestic supply of wood, mainly through hardwood plantations. The amount of wood that can be supplied from B.C. is close to being maxed out.
But even as U.S. housing ramps back up, Flynn sees nothing but potential for Canadian producers looking to export to China.
“They can sell large amounts of low-grade lumber there,” Flynn said, “and that’s become quite important as they increase sales of higher-grade lumber to the U.S. They’re still going to need a market for that lower-grade material.”
The payoff is coming as a result of a consistent 15-year marketing and relationship-building effort by the Canadian industry.
By comparison, said Flynn, U.S. producers have not focused consistently on the Chinese market and instead have depended on their own domestic market.
“China will continue to be a strong and growing market,” said Paul Newman, executive director for market access and trade for the Council of Forest Industries (COFI), a B.C. trade association.
That’s because China’s projected annual timber deficit is “enormous.” China’s need for imported wood is projected to reach 150 million cubic metres by 2015 and 200 million by 2020.
By comparison, Canada’s annual allowable harvest was 206 million cubic metres in 2006.
Low-grade wood used in concrete forms has dominated exports, but Newman said that’s now changing to include wood for furniture-making and building.
According to Flynn, Canada will continue to be the most stable source of imported timber for China. Russia continues to struggle with significant infrastructure challenges. Other sources of timber, such as Europe and New Zealand, can’t offer the volume that Canada does.
