By David F. Rooney
Forestry Minister Pat Bell is crossing his fingers and being cautiously optimistic these days when he tells interested audiences that the forestry industry may be poised to make a comeback of sorts.
“It doesn’t matter whether you’re looking at the European marketplace or Saudi Arabia or South Americas or the United States — it’s all pretty ugly right across the spectrum,” he told an audience at the Regent Inn Monday evening. “The one exception has been China, which has been quite exceptional. As of the end of November we were at 1.6 billion board feet of lumber into the Chinese marketplace. And that’s compared with the United States which will cap out last year somewhere around 9 or 10 billion board feet.”
He said the Chinese market for BC lumber has “come out of nowhere.” In 2008 the province sold about 720 million board feet to China and in 2007 about 320 million board feet. This growth has happened at a time when timber companies are finally emptying their inventory of lumber and logs.
“Inventory is now at an all-time low in the system,” Bell said.
“The supply and demand is beginning to re-balance and more importantly the big bulge of inventory is coming out of the marketplace. We’re now reaching a place where any uptick in demand is resulting in a market response in terms of pricing.”
The price of lumber is now at $314 per 1,000 board feet on the composite index, up from about $200 not that long ago. Any continued and steady rise will have a net positive impact on the BC forestry industry, particularly with regard to the U.S. market because if the composite index stays above $315 for a quarter the tariffs imposed on Canadian lumber drops by 50 per cent and continues to drop with each increase until it disappears at the $350 mark, Bell said.
“Those are very important numbers to watch right now and is cause for cautious optimism,” he said. “But I think the recovery is very fragile right now and it is subject to a real surge in supply coming back into the market. If all of a sudden we saw a whole lot of mills being reopened and much more lumber being produced we could see a downward movement of price very quickly.
“The good news is that we’ve had some tough weather recently… there’s no way that loggers can move the kind of timber they typically would move to this point in time. We already have road bans on in many parts of the province.”
Bell said it could well be the end of the summer or sometime next autumn before British Columbians see any increase in timber supply in the marketplace.
“It will be interesting to watch over the next little while,” he said. “Those with logs will be able to replenish themselves and reposition themselves. Those without logs I’m sure will be out there scrambling and trying to get as many into their yards as quickly as they can. So I have a much greater sense of optimism for the industry today than I did even four, five or six months ago.”
And that sense of optimism will grow if BC can better penetrate the Chinese market. Bell said there is no reason why the province can’t double the amount of board feet ti is currently sells, perhaps to as much as four billion board feet, within two years. BC lumber is cheaper to transport and is often of much higher quality than the timber being shipped by rail to China from Russia — a fact that many Chinese businesses are beginning to understand, Bell said.
“If we can continue to accelerate our growth int he Chinese marketplace we will be able to sustain our recover,” he said.