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Editorial – April 2013 – Looking Further Afield

When the bottom fell out of the U.S. housing market a few years ago, the Chinese market “saved the bacon,” as one analyst put it, of many Canadian sawmills and forest product companies. Since then, exports to China and the Asian market have increased significantly from the nearly non-existent levels of 2004.

With U.S. housing starts returning to normal levels, the next few years could see a drop in exports across the Pacific as Canadian lumber production will be needed south of the border. While a return to normalcy is seen as a good thing, lessons were certainly learned from the effects of the economic downturn. Namely, it’s never good to put all your eggs into one basket.

Recent events certainly show that the Canadian forest industry has taken that message to heart, as steps are being taken to broaden the market for our products beyond the U.S. and Asia.

India may not be the next China, but that doesn’t mean it can’t be an important market, as was shown by a recent trade mission looking to connect the B.C. forest industry with potential customers in a growing market of 1.2 billion people.

Between 2011 and 2021, India’s wood fibre deficit is forecast to more than double, according to industry analysts.

“Due to regulations in India, companies are not permitted to own land in any significant amount, and therefore can’t develop their own company plantations. With limited opportunity for domestic growth, India’s need for imported wood fibre is expected to be sustained for several decades,” says Robert Flynn, director of International Timber at RISI.

“However,” he adds, “we do not expect India’s growth trajectory to follow the same explosive patterns as China.”

A delegation that included the Coast Forest Products Association and others from the B.C. forest industry recently returned from a trip hosted by Forestry Innovation Investment (FII), in association with Natural Resources Canada.

The delegation of 18 representatives met with the Delhi Timber Merchants Association, toured the Nagloi Timber Market as well as local manufacturing companies. They also participated in a business roundtable with the Confederation of Construction Products and Services, a group made up of architects, builders, designers and government officials. In addition, the group participated in the Delhi Wood 2013 trade show, which included over 450 exhibitors and over 23,000 visitors. Finally, the Canadian High Commission hosted the delegates at an event that gave them the opportunity to meet directly with high-level industry officials and government diplomats. According to the Coast Forest Products Association, more than $5 million worth of new sales was generated as a result of the trade mission.

The event was applauded by the industry. “Because India is a complex market located on the other side of the globe, delegations such as these are vital because they facilitate huge opportunities for market expansion for our forest products,” stated Rick Jeffery, president and CEO of Coast Forest Products Association.

The B.C. government certainly sees parallels between China and India.

“While India is currently one of B.C.’s smaller markets for wood products, we’re confident that with the establishment of an office there we can experience the type of success we had in China, which grew in market share from 6% to over 32% of B.C. forest product exports in a few short years,” says Forests, Lands and Natural Resource Operations Minister Steve Thomson.

Not that China is going anywhere. In fact, according to some, such as Canada’s ambassador to China, money from the Asian country is likely to keep pouring into Canadian resource projects, including forestry projects.

“What I expect is maybe they will start to get interested in the forestry sector,” Guy Saint-Jacques told an audience at the University of Alberta recently. “There’s already investment in pulp manufacturing. I think they are starting to look at potential minority participation in a number of companies.”

That’s good news, because as we’ve already learned, it’s wise to have a diversified customer base for your products.

John Tenpenny, Editor
jtenpenny@annexweb.com

April 5, 2013  By  John Tenpenny