Go to the Globe and Mail homepage

Jump to main navigationJump to main content

A Canfor instructor in China teaches workers to work with wood. (./.Canfor handout)
A Canfor instructor in China teaches workers to work with wood. (./.Canfor handout)

Lumber sales to China topping out: Canfor Add to ...

China’s appetite for Canadian lumber has reached a peak, according to new figures from Canfor Corp. , the Vancouver company that pioneered sales of British Columbia wood in the country.

Canfor said late Thursday that its sales to China in the fourth quarter are “projected to ease somewhat” from the third quarter, its best-ever period of sales to China. The October-December fourth-quarter is normally the busiest period of the year.

More related to this story

Canfor is the latest big name hit by China’s slowing economy. West Fraser Timber Co. Ltd. , the largest lumber maker, earlier this week said its third-quarter sales to Asia were lower than the second quarter.

Canadian lumber is piling up on docks in China, as the country’s housing market rapidly cools, hit by government measures to slow lending to quiet inflation.

Canfor, which only briefly noted China in its third-quarter earnings release, did not provide a 2012 forecast for the country.

A company spokeswoman suggested the sales peak is a temporary situation rather than an extended problem.

“We expect continuing strong demand from China in 2012,” said spokeswoman Christine Kennedy.

The company hosts a conference call at 8 a.m. PT on Friday.

The piles of lumber on docks in China waiting for buyers is a “normal inventory correction,” according to RBC Capital Markets, but the issue means “historically strong [fourth-quarter]export volumes will be tempered as a result.”

B.C. foresters, suffering in a five-year industry depression, have depended on the boom in China to sell wood as the key housing market in the United States remains moribund. Sales to China have helped keep some B.C. mills running that would otherwise be shuttered, including Canfor’s operation in Mackenzie.

Canfor’s forecast of lower sales in the fourth quarter suggests the industry could experience its first period of decline in the country since the selling boom to China began in 2007 and 2008.

This year’s sales to China by the B.C. industry of $731-million through August have already reached record territory – all of 2010 brought in $668-million. August, 2011, sales alone topped sales in all of 2006 but growth in August was a fraction of surprisingly strong growth recorded earlier in 2011.

Even if fourth-quarter sales decline from 2010, the B.C. industry this year is still likely to top $1-billion of sales to mainland China for the first time, cementing the country as B.C.’s No 2 customer.

Annual sales to China exceeded those to Japan – the long-time second market to the United States - for the first time in 2010. Sales to Japan first cracked $1-billion in 1989 and exceeded that level until 2005. The peak was $2.5-billion in 1995.

A slowdown in China is especially bad news because it comes as a hoped-for recovery in the U.S. market seems as distant as ever.

Canfor provided little detail about what’s happening to its business in China. The company, starting a decade ago, was the first to push to win sales there. Canfor blamed “part” of the slowdown due to Chinese New Year, which is Jan. 23. In 2011 it was Feb. 3. An earlier New Year means companies may not be able to get ships docked and unloaded in the last weeks of December, said Ms. Kennedy of Canfor.

With the housing market weakening, especially in cities, where sales of apartments are in freefall and prices plummeting, Ms. Kennedy noted that Canfor still sees growth in the use of wood to make products such as furniture, as well as wood sold for use in rural areas.

“Canfor has an exceptional customer base in China,” she said.

In the third quarter, offshore sales, which include China, accounted for a third of Canfor sales.

B.C. companies, led by the province’s Premier Christy Clark, undertake the largest trade mission to China next month. More than 120 companies will make the trip. China is Nov. 5-10 and an India visit is Nov. 11-17. The trip is an expansion of an annual trip made since 2007 by the forestry industry, which has been key to stoke sales in China.

“We’re setting out with three goals in mind,” said Ms. Clark in a news release on Thursday afternoon. “Strengthening our existing relationships in the Asia-Pacific region; opening new doors; and setting the stage for future opportunities with China and India.”

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular