Major Canadian forest products companies are joining forces to support a massive reconstruction effort in Japan that will spur much-needed demand for timber and other building materials.
Canadian forestry companies - particularly lumber producers in British Columbia - have carefully built deep relationships in Japan over the past several decades. Now they are rushing to help government-led efforts to rebuild infrastructure and put up new housing for the hundreds of thousands left homeless in the natural disaster that hit last week.
As the reconstruction effort plays out in the coming months, industry experts predict a spike in demand for Canadian lumber and other building products, providing a boost to a sector that continues to struggle with weak markets and slumping U.S. housing demand.
For now, forestry companies are focused on getting an accurate assessment of the damage and what the needs of customers - such as home builders - in Japan are, said Glen Wilson, president of Vancouver-based Interex Forest Products Ltd., a lumber exporter co-owned by five B.C. and Alberta companies.
At the same time, major lumber producers such as Canfor Corp. , West Fraser Timber Co. Ltd. and International Forest Products Ltd. Interfor Ltd. are working together to create a group to co-ordinate co-operation with Japanese authorities and industry on building temporary shelters, and then on a full-scale rebuild program, he said.
The devastation in Japan has hammered the country's factories and industrial production, including mills that produce paper and other forest products, and left a trail of destruction that's expected to cost in the order of $200-billion. As the rebuilding gets under way, demand for lumber and other products - such as plywood - is expected to climb.
"About 35 to 40 per cent of Japan's plywood production has either been completely destroyed or significantly damaged," Mr. Wilson said.
Millions of tonnes of capacity of coated and uncoated printing and writing paper, newsprint, line and carton board, packaging paper and other products have been idled after seven mills in Japan were affected to varying degrees by the impact of the disaster, according to a research report from Gerson Lehrman Group.
"This may be an opportunity for North American mills," the report said.
Canadian lumber producers are known in Japan as well-regarded exporters of high-quality, earthquake-resistant wood for housing. Engineered wood, for example, is the product of several pieces that have been laminated together in order to better withstand the impact. Paul Newman, executive director of market access and trade for B.C.'s Council of Forest Industries, said forestry producers have been working with the Japanese to develop such innovative products ever since the 1995 Kobe earthquake.
"There has been a lot of attention in Japan on earthquakes and wood construction is seen as a positive element in an earthquake-ready society," said Mr. Newman, who was in Japan when the quake hit.
He expects a sweeping post-disaster evaluation - similar to what was done after Kobe - of housing stock to see how it stood up to the 2011 tremor and what can be done to further upgrade Japan's already stringent building code.
Richard Kelertas, a forestry sector analyst with Dundee Securities Corp., said in a recent research note that Japan has substantially increased the use of wood in housing construction because it has proven to be more earthquake resistant than concrete.
A major rebuilding effort in Japan over the next six to 12 months should have a positive impact on most North American lumber, building materials and timber stocks, he said.
Robust wood demand from Japan - coupled with already strong demand from China - might even offset the U.S. housing slump, he said.
"In fact, we believe a lumber super-cycle is now a possibility even without a 'normalized' U.S. housing market," he wrote.
Rick Doman, president and chief executive of Montreal-based Eacom Timber Corp. , said lumber producers in Eastern Canada - who face shipping cost and other constraints when it comes to exporting to Japan - may benefit if West Coast exporters can't keep up with demand.
"My perspective is that Japanese demand, combined with what is already going on in China, is going to drive lumber prices significantly higher," he said. "Quebec and Ontario could benefit from that."
Canadian companies in other forestry segments might also see a jump in demand.
There could well be more newsprint being shipped to Japan from North America, says AbitibiBowater Inc. spokesman Seth Kursman.
Supply disruptions to Japan's coated freesheet exports could also present an opportunity to manufacturers, Mr. Kursman said.Report Typo/Error