Canada’s lumber industry will experience strong recovery and transformation

By: | at 08:00 PM | Channel(s): International Trade  

By Leo Quigley, AJOTCanadian lumber producers were advised to concentrate on new global markets and to rely less on the U.S. housing industry in the future. In a speech to forest industry executives attending the PricewaterhouseCoopers Global Forest and Paper Industry Conference in Vancouver May 11, Avrim Lazar, CEO of the Forest Products Association of Canada told delegates Canada’s beleaguered forest industry is about to experience a strong recovery, but must also be prepared to undergo a major transformation.
While prices and U.S. markets are showing signs of improvement for lumber producers north of the border Lazar told producers in the audience to work at developing Asian markets and said British Columbia is well positioned to take advantage of this growth.
He said the lumber industry is already Number One in Canadian exports to China – mostly in pulp and paper – and Number Three in exports to India.
Lazar noted that B.C. is doing well in terms of productivity. “In some ways, B.C. is in better shape [than Canadian industry as a whole], because B.C.‘s lumber industry is at the top in terms of productivity.”
The CEO of the Forest Products Association of Canada also said the lumber side of the industry, after several years of downsizing, has now outstripped productivity increases made south of the border.
During the conference Pricewaterhousecooper also released a report indicating that the global forest, paper and packing industry is starting show better than expected results for the first quarter of this year.
The conference sponsors said Return of Capital Employed (ROCE) data gathered by the firm for the top 100 companies in 2009 showed:
Global ROCE improved to an estimated 3.2% in 2009 from 2.4% in 2008
75% of companies generated ROCE of 7% or less
15% of companies generated ROCE of 10% or greater
Of the companies that generated ROCE of 10% or greater, 70% were US companies
30% of companies generated negative ROCE in 2009, which ware consistent with the percentage in 2008
Michael Armstrong a Vice President in the Consulting practice at Pricewaterhousecooper told delegates a weak economy over the last few years led to chronic under-supply in the forest and paper industry and, as a result, many companies have taken down time or gone out of business all across the supply chain.
He said that while it may be relatively easy for existing companies to turn back on idle mills, it will be more of a challenge to rebuild supply chain components of the lumber delivery system.
At Port Metro Vancouver, which has moved largely to containers for lumber shipments rather than raw logs, containerized lumber to export markets last year grew by 15% from 2,187 containers to 2,510. (Not including lumber shipments to the U.S. which move primarily overland by rail or truck and not through the port.). On the other hand, log exports dwindled from 10,952,000 tonnes to 6,696,000 tonnes.
In the Pacific Northwest, the ports of Longview and Olympia are the largest forest products shippers, mostly in the form of raw logs.
This year the Port of Longview, WA, on the Columbia River is experiencing a surge in shipping activity and particularly the log business. Ship calls have risen by more than 35% in the first quarter compared to 2009 and the port is actively looking for additional longshoremen to handlie the traffic
Most significantly log exports have shot up by up 350% during the first quarter compared to the same period last year with most of this being exported to China and Japan.
China is demanding an increasing amount of offshore wood to be used primarily in the construction of factories and other manufacturing facilities. The move to North American wood has been spurred partially by the fact that Russia has imposed a new tariff on log exports, which has caused China to buy more wood from both the United States and Canada.
Further north, the Port of Olympia, WA, which only recently returned to handling logs after the move of lumber giant <="" p="">

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