B.C. Forests Minister Pat Bell is counting on the China lumber market to improve conditions for the forest sector in British Columbia in 2010, not the traditional, much larger U.S. market.
While the volume of lumber being shipped into China more than doubled last year, and continues to see interest early in the year, analysts continue to forecast a slow turnaround for the U.S. housing sector, some analysts recently releasing more-pessimistic forecasts.
"I've never factored into my formula a swift recovery in the U.S. market," Bell said Monday.
He stressed he continued to be optimistic about China, where he believes that the growing market for B.C. lumber could have a meaningful impact on prices and the viability of provincial operations.
Bell pointed to lumber pricing that continues on a slow upward trend.
Randomlengths pegged its composite lumber price index last week at $274 US, up from $262 US the week before and $197 a year ago.
Madison's Canadian Lumber Reporter showed a similar trend, pegging increases in a range of lumber products. Its price for its benchmark random-length spruce-pine-fir two-by-four was $250 at the end of last week, up from $235 last week and $140 a year ago.
Lumber volume shipments to China from B.C. are on track to rise above 1.6 billion board feet in 2009, a jump from 720 million board feet in 2008 and about 300 million board feet in 2007.
For the first time ever, lumber shipments to China have exceeded those to Japan, traditionally B.C.'s No. 2 export market after the U.S.
However, most of the lumber shipped to China is low grade. As a result, the value of lumber shipped to Japan still exceeds that to China. In 2008, B.C. shipped $177 million of softwood lumber to China, well below the $719-million shipped to Japan. (The value of shipments to Japan peaked in 2000 at $1.68 billion, according to B.C. Statistics).
Although China does not have a wood-building culture, British Columbia has been working to introduce wood-building codes, and show that wood construction can be affordable and provide better safety in earthquake-active areas.
Bell said B.C. producers have indicated to him that shipments continue at a rapid pace into China this month. "I heard from one particular producer that they shipped more in the first week of January than they did in the entire month of January last year," he said.
In the U.S., the housing market forecast is much cooler.
Analysts had been forecasting a slow turnaround beginning in 2010.
Reid Carter, managing partner with Brookfield Timberlands Management LP, estimates that the total surplus inventory of housing stock in the U.S. is about three million units. That's almost two years of normal-level new home construction, noted Carter in a third-quarter research report. "Despite new homeowner tax incentives, factors including persistent high levels of unemployment and consumers focused on reducing debt and increasing savings, are expected to make recovery of the housing market, a slow process," said Carter.
Recently, RBC Dominion Securities significantly reduced its 2010 U.S. housing start estimate to 725,000 from 850,000.
Either way, it's well back from the peak of more than two million starts in the U.S. in 2005.
"We expect the first half of the year to be better than the second half for building material companies," said RBC Dominion Securities analyst Paul Quinn in a growth and yield report. "While we continue to believe the U.S. housing market will improve, we now think that the pace of this improvement will be much slower than we had previously forecast."
The U.S. housing collapse has had a significant impact on lumber operations in northern B.C., where thousands of forestry workers have lost their jobs.
Some companies have, however, begun to restart some shuttered operations.
Conifex, a privately-owned new comer, restarted a Fort St. James sawmill recently, and Canfor Corp. restarted a sawmill on one shift in Mackenzie last summer.
