Despite the housing boom in the United States in the last few years driving up demand for British Columbia (B.C.) wood products, Asia remains a crucial market as Canada seeks to diversify its global market presence.
Several industry officials have recently highlighted the potential in expanding existing markets like China and Japan, as well as finding demand for B.C. lumber in new regions such as South Korea, Southeast Asia and India.
“We’ve spent a tonne of our time and energy looking at diversifying our market,” said Susan Yurkovich, president and CEO of the BC Council of Forest Industries (COFI). “I was in the industry in the 1990s, and we probably spent about 85 per cent of our production efforts at the company I was working at to the United States. Now, that’s down to about 50 per cent, with about 30 per cent going offshore and 20 per cent staying in Canada. It’s highly difficult to be dependent on one market.… We will continue to be a major supplier to the U.S. market, but diversification is important given the trying circumstances of dealing with the U.S. government of late.”
The latest COFI statistics put 53 per cent of B.C. wood product exports going to the United States, followed by China at 24 per cent and Japan at 9 per cent. The growth in the Chinese market– traditionally a country that is not used to wood as a building material – has been especially fast, with export volumes and value increasing 20-fold since 2003.
Even with the Chinese government transitioning the country’s economy to that of a slower-growth, higher-sustainability model, Yurkovich said the market of almost 1.4 billion people has to remain B.C. lumber’s primary focus in the overseas market.
That’s why industry groups like COFI have been working closely with federal and provincial governments under the “Canada wood” banner in targeting trade shows, linking up with Chinese government officials and launching demonstration projects to grow the market for wood products.
“Even with its slowing pace, its economy is growing at 5 per cent a year – and that’s on top of a base population that’s so large,” Yurkovich explained. “One of our CEOs said that China is the next China, just because there are so many opportunities….”
She also pointed out that with China’s burgeoning middle class, they see a big opportunity in the resorts sector there as domestic leisure travellers increase. And as they begin to construct more mid-rise buildings, China will start adapting to building with wood. The time take by the Chinese to warm up to wood has been long because they do not have a culture of building with wood but they are starting to see that take hold.
Yurkovich added that environmental concerns in China have further pushed up demand for wood construction, since the material not only is sustainable, but also captures and stores carbon.
But while China is viewed as the largest potential market for the forest products industry, the value-added sector made up of manufacturers of cabinets, millwork, timber frame and engineered wood products – still finds it difficult to penetrate the Chinese market due to the country’s lack of single-family homes and low interest in residential wood houses, as well as the market’s preference for cheaper lumber (often sourced from nearby Russia).
Officials from BC Wood representing the sector said the organisation is hence looking to traditionally stronger markets for B.C.’s value-added products, such as Japan, to drive demand as such markets are more mature and less susceptible to price changes, especially since Japanese consumers prefer more expensive, higher-end materials in a complete package for their wood homes.
“Japan, outside of the United States, is the only market that takes a full product line, and they’ve done so for more than 20 years,” said BC Wood’s Asia Pacific region director, Jim Ivanoff, who is based in Tokyo. “I think that’s a big misconception with Japan. Obviously, the overall population is shrinking, so high overall growth is not going to happen. But within that, how much market share do we have, and how much potential do we have of taking more market share, that’s the question.”
While construction of wood-frame housing has been climbing steadily for 40 years, Japan is fast facing the problem of dwindling number of carpenters, so the importance of two-by-four housing is all the more apparent.
Compared to the Chinese market, Japan builds more than 500,000 wood homes every year, 120,000 of which are framed with two-by-fours. With a strong wood architectural culture, Japanese consumers continue to demand additional products like cabinets, floors, mouldings and the like, and B.C.’s two-by-four exports now make up 12 per cent of the Japanese market for these types of projects, Ivanoff said.
The challenge there, he noted, is not cheaper wood from Russia but rather, the Japanese government’s increasing subsidisation of local, domestic value-added industries. Ivanoff said officials are keeping an eye on the situation, although the market remains very strong for B.C. products.
Another promising market, he said, is South Korea, where there is sufficient demand for the full line of B.C. products, similar to the Japanese market.
“Yes, it’s a much smaller market – about 20,000 homes a year – but that has gone from 0 to 20,000 in under 20 years, and it’s a segment that’s strong and growing because of a change in lifestyle,” Ivanoff said. “People can afford it, and there are now more people who don’t have to live in downtown Seoul and can live a little further out, and they prefer a wooden house whereas before that wasn’t really an option.”
Representatives from COFI and BC Wood both stated that there are ongoing efforts to develop the markets in places like Southeast Asia and India, but it will take time. Meanwhile, Yurkovich said, it is important for the B.C. and federal governments to support the industry, as competition from lower-cost global players like Russia and more sophisticated producers like the United States and Europe will only grow stronger.
She said that the B.C. Industry couldn’t tap into the Chinese market without government support, because things like building codes require government-to-government intervention, while companies provide commercial relationships and the know-how.
Yurkovich said :“What’s critical for us as an industry is to remain competitive…. We have been a huge contributor to B.C.’s GDP for generations … but we have to keep the industry healthy.”
