Tuesday, November 2, 2010

China lumber demand helps BC forest companies

In the past few weeks, I noticed two companies in BC were helped in their quarterly earnings reports by increasing sales of lumber to China. While still a low overall percentage of their sales (10-15%), Chinese demand for Canadian lumber is picking up, and may be the difference for Canadian forest companies given the lower US demand and strong Canadian dollar. In fact, if Chinese demand continues to grow and the US demand comes back, you have to wonder what that would do to our forest industry.

A recent article by Allen Dowd on sales to China highlights some of these points.

China has become a bright spot on the balance sheets of companies still waiting for a recovery of the U.S. housing sector, its mainstay market for decades.

A report this month by British Columbia, Canada's largest lumber exporting province, estimated its producers had sold C $342 million ($335.3 million) in lumber to China in the first eight months of the year, up 71 percent from a year ago.

A stark example of China's new role can be seen in Canfor's decision in May to restart its Quesnel, British Columbia, sawmill. The mill had been idled because of slack U.S. demand, and its production now goes exclusively to China.

Bell added that he hopes the province will be shipping as much wood to Asia as it does to the United States when the U.S.-Canada softwood trade agreement comes up for renegotiation in 2013. "That would make for quite a different discussion," he said.