As China’s economy burns ever brighter, B.C. is happy to throw its lumber on the fire. Now that it’s cranking above pre-recession levels, B.C.’s forest industry has just one question: Can it last?
Today both sawmills are back in operation, as is the pulp mill, and they’re investing heavily. Only the newsprint operation is unlikely to revive, but in its place, a bio-energy facility promises to employ 50 to 60 of the 200-plus people who once worked there.
A similar story is being played out in Houston, Burns Lake, Quesnel and other resource towns across the province. And it’s all due to voracious new Chinese demand for B.C. lumber.
“China picked up the slack where the U.S. left off, and that means there are people working in our forest industry all over B.C. that would otherwise not be working today,” says Pat Bell, B.C.’s Jobs, Tourism and Innovation minister and MLA for the forestry-dependent Prince George-Mackenzie riding.
But this new upsurge in business that is bringing the industry back in places like Mackenzie raises obvious questions. How far does this new Chinese demand – and players’ hopes of broadening markets elsewhere in the region – go in terms of injecting a sustained prosperity back into an industry historically dependent on housing starts in the U.S.? What’s driving the Asian boom, and how long might it last?
China surpassed the U.S. as the B.C. forest industry’s number one customer in May 2011: companies in the sector earned a collective $122 million on products shipped to China that month, while exports to the U.S. were pegged at $119 million over the same period. While this may seem a small difference, it signals a tectonic market shift, for the time being at least. Only five years ago, the U.S. absorbed about 70 per cent of the industry’s output, compared to China’s five per cent.
When the U.S. housing crisis hit, however, construction of new housing units there nosedived from about two million a year to less than 800,000. Overnight the provincial business was devastated, with sweeping mill closures and mass layoffs. And there’s no sign of relief in the gloomy economic outlook south of the border today.
But the new Chinese demand spike seen over the past two to three years has already produced a marked turnaround. According to the latest import statistics from China customs, Canadian lumber shipments to the country (most from B.C.) rose by an impressive 97 per cent in the first six months of this year compared to the same period in 2010, with projections calling for about 35 to 40 per cent of total B.C. wood exports continuing to go to China, compared to 37 to 40 per cent going to the Americans.
This implies new strategic possibilities for the B.C. industry: first, on a higher price for its products; second, on export market access for its wares; and third, for the prospects of longer-term prosperity. This latter point is what’s driving talk of a potential future “super-cycle” – a perfect storm that could result if the U.S. starts building houses again – driving up demand for B.C. wood, forcing down supply and pushing prices ever higher.