BC Business
Because the Canadian market for its products is relatively small, the growth and sustainability of Vancouver-based Conifex Timber Inc.— a softwood forest products company that operates in the Northern Interior of British Columbia and focuses on the manufacturing of structural grade SPF [Spruce-Pine-Fir] dimension lumber and the production of clean, renewable energy—depends on its ability to penetrate export markets. Although the company has deep roots in B.C. with mills in Mackenzie and Fort St. James that turn the timber it harvests into lumber, the majority of its product is exported throughout North America and Asia.
Hans Thur, Conifex senior vice president, marketing, says that only between 12 and 15 per cent of what is produced at the two mills goes to markets in Canada. The rest is shipped to international markets: Between 25 and 30 per cent to China; nine to 12 per cent to Japan; 40 to 45 per cent to the United States; and three to five per cent goes to emerging markets, which includes Mexico.
David Watt, chief economist, HSBC Bank Canada
What makes Mexico an attractive market for B.C. companies? One factor is that Mexico is a market that we already have a free trade deal with. As trade barriers are set to decline globally, it makes sense for firms to try to take advantage of the opportunities currently available and possibly under explored.
What are some emerging sectors in Mexico that B.C. companies can benefit from? Information and communications technologies is certainly one sector as the Mexican economy evolves to being more service-oriented. Agriculture is also likely to be important as Mexico evolves. I would note that the factory sector there is developing quickly, helping support demand for business and consumer services. toward the middle class. Financial services will also be in increasing demand, as will housing and home construction.
For several years, Conifex, has considered Mexico as an emerging market—and for good reason.
According to Export Development Canada (EDC), Mexico’s growing consumer class and favourable labour demographics make it a rich source of opportunities for Canadian businesses. Moreover, Mexico is Canada’s fifth-largest export market. As of 2014, Canadian direct investment in Mexico totaled CAD$13 billion, making Canada one of the top investors in the world in Mexico.
The steady business Conifex has always had from Mexico combined with the development of new business opportunities have resulted in Mexico becoming a bigger export partner for the global forestry company.
“Expanding into Mexico is an essential part of the company’s program to diversify away from dependence on the U.S. market,” says Thur. ”Our earlier success in Japan and China encouraged us to continue to look for new international markets, such as Mexico.”
Most of Conifex’s end-user customers in Mexico use the lumber shipped to them for industrial purposes, such as making crates and pallets for the many Mexican manufacturers located in Mexico City and centres further north. In addition, there is some demand for Conifex lumber from Mexican construction companies that make wood-frame housing.
One of the advantages of Mexico over other Conifex export markets is that it is relatively close to Canada. And there are no oceans separating the two countries. “Shipping to Mexico is easier and more straightforward than shipping overseas,” Thur says. “There are no docks and containers to deal with, and documentation is more streamlined.”
To expedite shipments of its lumber, Conifex works with a distributor that has offices in Canada and Mexico. “We can load our lumber onto rail cars in Mackenzie or Fort St. James and it will be at its destination in Mexico in 15 to 20 days,” explains Thur.
Conifex’s entry into Mexico was gradual.
“We had been dabbling in the Mexican market for years and had been getting small orders,” Thur says. “But the small orders turned into a steady stream, and we managed to establish a solid relationship with our distributor and end-user customers.”
The company’s goal in Mexico is to increase its market share as Mexico continues to develop its manufacturing capacity. “We think our main market in Mexico will continue to be the industrial market, although we believe we’ll still receive some orders for lumber that will be used to make houses,” states Thur.
Breaking into a new market isn’t easy, and Thur has a few tips for Canadian companies who are looking to grow internationally.
“You need to have a product with consistent quality,” he says. “It’s also essential that you’re on time with your deliveries, make sure your documentation is accurate and up-to-date, and always deal immediately with any problems that come up.”
Conifex is confident that its shipments of lumber to our Latin neighbour to the south will continue to grow. Happy with the positive growth it is seeing in Mexico, the company is looking to further expand its global reach. In fact, Conifex is testing the waters in other international markets, including the Middle East, Philippines and Taiwan.