Forestry Investment Blog

According to Tony Hu, managing director of Toronto’s Monarch Corp. in Shanghai developers are raising less than 600 wood framed houses each year and few of the approximate 1.3 billion people living in China have the luxury of calling a house with a garden their home.

“What I’m talking about is 100 per cent two-by-four housing market. The whole structure is made by wood,” Hu says. “Overall this is a tiny market in China.”

In the past post and beam buildings was traditionally the norm, so it’s not like China is unfamiliar with wood buildings. After the formation of the Communist Party-led country on mainland China in 1949 the People’s Republic of China turned to building soviet style six storey concrete and steel apartment buildings. This accomplished two objectives, first it relieved pressure on China’s already depleted forest resources and it also helped China cope with its growing population migrating to urban areas.

Today there is a new class of people with self made wealth who are in the market for wood framed homes built from Canadian lumber. While this market is small at the moment Hu believes that in the next 10 to 20 years the wood framed residential building market could be “huge”. Hu claims that a greater awareness about the low carbon impact of wood will drive demand especially at a time when the national government is creating policies designed to protect the environment.

Hu works closely with Canada Wood Group and Forest Investment Innovation Ltd, which are two of Canada’s main forest product organisations who have been chipping away at China’s massive but largely untapped potential market.

For the past few years the Canadians have been trying to create a demand for wood. In 2008 they rebuilt a school that was destroyed in the Sichuan earthquake using Canadian wood; it is now designated as a safe zone due to its structural stability. They have also been involved in helping to reform building codes and teaching industry players and academics to consider lumber. The centre of Canada’s wood industry presence in China is in Pudong, a bustling district in Shanghai and China’s financial hub.

At the Shanghai Expo 2010 workers at the Vancouver pavilion are putting up a wooden roof truss to top a facility that will serve as a showcase for B.C. wood products and designs. The demonstration projects, which have had the blessings of Chinese governments, have been a good way to show Canadian products in use. But a big part of the job in China has been engaging the industry and teaching the next generation of architects, designers and developers.

Despite it still being early days for Canada’s wood industry in China inroads have been made. In 2007 Russia imposed a bigger tax export on logs as a direct result of this British Columbia saw exports of SPF lumber to China grow. Currently the tax is at 25% and eventually there are plans to increase that to 80%. Timber imports through the Suifeihe Port, the entry point for Russian wood, were down 40% for the first nine months of last year compared to the same period in 2008. During the same period timber entering through the Taicang Port (northwest of Shanghai and in the Yangtze River Delta) where Canadian timber usually arrives in China was up 79% as of September 2009.

According to Forest Investment in the third quarter of 2009 timber volume from all sources entering through the Taicang Port surpassed one million cubic meters. At that point China became the second largest consumer of Canadian forest products after the US, overtaking Japan.

Hogan from Forest Investment has watched as industry players from countless countries have dropped into China in recent years looking for a quick ‘yes’ or ‘no’ answer on whether there are markets for their products.

“The truth is always in a grey area and Canadians want a black-and-white answer. In Canada, everything is so mature. But in China, it isn’t,” Hogan says. “People show up with these ideas and a bunch of money and mostly they go home with no more money and not much to show for it and they blame the Chinese, but they don’t do the market research beforehand. They don’t hire people to follow through on stuff, they don’t check to see who they’re talking to,” he says. “So you have to do all of that stuff first.”

Hogan also stresses the importance of having a presence on the ground in China when trying to build a market. Now that Forest Investment is doing business in Hebei, Hogan’s organization gets calls daily and weekly to help sort out such logistical issues as delivery routes for lumber. “In Canada we’re very much focused on building with wood so the infrastructure is invisible,” he says.

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This entry was posted on Thursday, March 4th, 2010 at 3:25 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.