Chinese market huge boost
The forest industry was struggling in the 1990s, facing the fall-out of an economic slump in the United States as well as difficulties with the small print in agreements on softwood lumber a decade ago, but now it is vibrant, revitalized thanks in great part to the trade now enjoyed with China, says a senior Canfor executive.
The economic value of that trade has increased from about $60 million per year a decade ago to over $1 billion.
Wayne Guthrie, senior vice-president, sales and marketing for Canfor, said establishing a reliable trade partnership with China was difficult at first but is stable now.
“We believe firmly this market isn’t going away,” Guthrie said. “It’s not going away. China is here to stay.”
Guthrie said that B.C. exported lumber for about 160 years, and for 155 of those years the province relied on one market, the U.S., which set the prices on lumber.
“We put all the eggs in one basket,” he said.
Breaking into the market in China took a lot of collaboration.
Guthrie said Canfor competes fiercely with its colleagues, but when the province worked to open a market in China, they worked with other like companies.
“We literally went in arm in arm,” he said. “The key gain is to build a new market for B.C.”
At the time China had no building codes and didn’t use sized lumber. They introduced the metric two-by-four which is becoming a staple in the Chinese marketplace. Canfor created the Canfor Wood College, allowing working professionals to upgrade their skills building wood-framed structures. In 2008 the Canada Wood Group, an industry marketing association, took the college over.
Helping promote wood building, the Chinese central government issued a report stating it supports wood building as a way to mitigate climate change.
“There is a slow but sure movement from concrete and steel to wood,” Guthrie said. “In the 1990s and 2000s we were too beholden to the U.S. market. Chinese demand took off in volume about the same time as the U.S. market was devastated. China was a saviour at that time.”
He said there are signs that the U.S. market is now improving combined with a probability of lumber shortages. However, due to Hurricane Hugo, one of the growing timber supply areas is in the southeast U.S. It’s been 25 years since the devastation of Hugo, when entire plantations were destroyed, and the southern pine that covered the land is now mature and ready for production.
Servicing the needs of the U.S. market will leave Canada with some U.S. business combined with a desire to maintain Chinese influence.
To illustrate his point, Guthrie quoted Wayne Gretzky: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”
He said China has the second biggest economy in the world and it has a tremendous amount of infrastructure that needs to be built. Lumber is being used more and more for that infrastructure. About half of the 450 million cubic metres needed will have to be imported.
B.C.’s abilities match China’s needs, Guthrie said.
First he pointed out the cost of getting lumber to, for example, Chicago and the cost of getting it to Shanghai. The province is equipped with a great infrastructure, whether it’s harvesting or gathering wood, plus the province now has Prince Rupert, a deep-water port that’s ice free.
The port is also closer to China than any other in North America, shaving about three days travelling time on shipments.
When trade initiated, a lot of what China was buying in lumber was used to construct forms for concrete. That is still a significant part of the market, however more and more is being purchased for building purposes. He added as the middle class in China grows, so will the market on value-added wood products, like furniture.
Guthrie said they intend to continue to grow this market.
“We are stealing Russia’s market share in the sale of fibre,” Guthrie said, because B.C. can offer a product that is legally harvested and sustainable.
“They are looking at B.C. as a great place to market with in the long run,” he said.