A new report released in November by Stats Can demonstrates a radical shift in Canadian exports. Until recently, export of Canadian goods into the United States rose on a year to year basis, but since 2006 American demand has been dropping. Meanwhile a new customer has emerged, with exponentially growing demand for Canadian goods, in particular forest products. In the first half of 2008 China imported almost as much lumber and pulp chips as it did for all of 2007, effectively overtaking Japan to become Canada’s third largest customer of wood products.
The euphoria of a newly elected President in the United States, widely anticipated to usher in an ‘era of change’, is wearing off as people put away thoughts of election campaigns and return to business. The economic situation in America is not good, and not expected to immediately improve. Rumblings of a potential merger between the big auto makers, if not the outright collapse of General Motors, is keeping the atmosphere of fear and uncertainty strong in the workforce. Where two short years ago Americans just wanted to spend and buy, they now fear for their very jobs. No extravagant vacations, new cars, or home buying. Rather, concerns dwell towards simply putting food on the table and gas in the car. So where else can exporters of Canadian goods look to sell their products?
Forest Products
A new report from Statistics Canada points a finger directly at China. As well, British Columbia’s Minister of Forests and Range Pat Bell will be leading a delegation of a dozen industry representatives on a trade mission to China for the week of November 12 to 18, 2008. The delegation will review progress on BC marketing and demonstration projects, strengthen relationships with construction agencies and government officials, and pursue new sales opportunities. Despite recently suffering its own economic setbacks, there is no question that China will be providing a seemingly endless emerging market for North American wood products long into the future. Working to develop trade there is certainly a better option than sitting back, waiting for the US housing market to come back.
In 2000, Canada exported almost $43 billion in forest products, accounting for 10 per cent of total exports. Forest product exports shrank to just over $33 billion in 2006, and $29 billion in 2007 which accounted for just over six per cent of total exports. It is important to point out that in 2000 almost 84 per cent of Canadian exports went to the US, while in 2007 just 77 per cent went south of the border. From 2006 to 2007 exports to America fell by 1.6 per cent while exports to all other countries rose by 16 per cent, bringing total Canadian exports up 2.1 per cent. Put in different terms, 41.9 million cubic meters of lumber were produced across Canada in 2005, compared to just under 40 million cubic meters in 2006 and barely 24 million in 2007.
While change is slow to happen this increase is significant. The US remained Canada’s largest export destination last year, followed by the UK. Exports to China were responsible for over 17 per cent of Canada’s total exports growth, a surge which elevated China to become Canada’s third largest export market, ahead of Japan. According to Statistics Canada, forestry products, notably wood pulp for paper and cardboard, comprised an important export. Overall, exports to China increased 21 per cent in 2007, surpassing the $9 billion mark and nearly doubling its value in 2003. Meanwhile, 2007 was the second straight year of export decline into the US, with the main contributors being exports of automotive products and softwood lumber, which combined accounted for losses totalling $7.3 billion.
As for this year, a press release from the BC Ministry of Forests explains that sales data from January to August 2008 show that British Columbia has already exported 689,576 cubic metres of softwood products to China, 3.5 per cent of the total BC exports to that country, and just shy of the record 727,750 cubic metres exported to China in all of 2007. “Our long-term objective and main focus is encouraging China to adopt North American wood frame construction in ways that fit the unique mix of housing styles in China,” said Forests Minister Pat Bell in the same release. “China is the second-largest wood import market in the world and represents the fastest-growing market for BC wood products.”
I am in complete agreement. While practically every country in the world is beating a path to China in search of new customers, Canada has the distinct advantage in existing relationships, established trading and strong Chinese population on the west coast which is very active in the business community.
British Columbia, through Forestry Innovation Investment and in conjunction with the Canada Wood Group has been working over the last several years, along with the Government of Canada, to diversify BC’s markets by demonstrating new uses for softwood products. The value of such efforts can not be ignored, especially considering it may be several years before dimension lumber demand in the US returns to pre-2005 levels. Even when US home building resumes, customers will first buy from American mills before looking to Canada for lumber.
