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West Fraser shipping 30 per cent of product to China

A worker at the West Fraser Timber sawmill in Quesnel, B.C.


West Fraser Timber Co. Ltd. exported roughly 30 per cent of its Canadian lumber shipments to Asia in the past quarter, up from virtually nothing just five years ago, chief executive officer Hank Ketcham says.

"We anticipate continued strong growth in this market as long as the Chinese economy remains healthy," Ketcham told a conference call with analysts Wednesday.

"This has been a great new market opportunity for us and the industry and we don't see any reason right now why it won't continue to grow."

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The growth in China comes as the U.S. recovery remains stalled and the outlook for new housing starts south of the border remains dim after two of the worst years in the industry's history.

For decades, Canadian lumber exports had gone mostly to the United States, where they took up to a third of the American market.

However, U.S. softwood trade restrictions and the plunging demand caused by the U.S. housing collapse forced Canadian companies such as West Fraser, Canfor Corp. and others to expand their markets in Asia, mainly China and Japan.

West Fraser reported late Tuesday that it earned $18.9-million or 44 cents a share in its quarter ended March 31, compared with a profit of $28.9-million or 67 cents in the same period a year ago.

Sales in the quarter totalled $687-million, compared with $687.8-million a year earlier.

Mr. Ketcham said he couldn't predict where the Chinese market was going to go, but said he expected it to continue to grow.

The Chinese economy is one of the fastest-growing in the world and the housing and industrial building markets have been booming there.

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West Fraser's Canadian lumber mills ran at full capacity during the quarter, while the company's U.S. mills ran at 75 per cent of capacity. Production in Canada was up 9 per cent from the previous quarter, while U.S. production was up 8 per cent.

Mr. Ketcham noted that prices in the quarter were up from the fourth quarter last year, but had started to slip in recent weeks as more capacity in the industry was brought into production.

"The U.S. housing market remains extremely depressed which continues to inhibit a sustained recovery of lumber prices," he said.

"On the positive side, spending on home repairs and renovations continues to increase as does spending in the industrial and commercial sector."

A report by business consulting firm PwC has suggested that the need for wood fibre around the world will grow as its uses are increased, offsetting a decline in demand for paper.

Demand for fibre, particularly driven by China will likely far outstrip supply, the PwC report says.

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