China: Strategic Opportunity

Carl Dobler, General Manager, Export Sales & Marketing
September 12, 2017

Interfor has explored international markets for more than half a century. We opened our first overseas office in Japan in the early 1960s. While we always saw great potential in China, that market remained small until a decade ago, when three distinct events occurred, laying the foundation for the development of our growth opportunity with China.

The first was the US housing crash of 2008. The second was a flare-up of the Softwood Lumber dispute between Canada and the United States that resulted in heavy tariffs for Canadian lumber companies. And the third was rapid growth in China, characterized by mass re-urbanization and residential construction.

So whereas both the demand for our lumber - and sales returns for producers - had taken a hit, China presented a new opportunity for Interfor.

The challenge was that the Chinese construction industry works almost exclusively with concrete - they only wanted Canadian wood to make concrete foundation forms and furring strips to hang wall and ceiling panels. Still, that business was profitable for lumber producers, and a welcome recourse from some of the market challenges they were facing at the time. At its peak, Canadian exports to China rose 300 per cent, to $1.5 billion (CDN) from $362 million (CDN), over a five-year period.

Demand for lumber in China continues to grow, along with a new appreciation for the range of applications for wood construction. Current market trends back this up: rapid, sustainable urbanization; green development; construction industrialization and prefabrication; and a rising middle class with an eye for quality and variety.

As China’s housing and infrastructure needs evolve, so do Interfor’s opportunities in the market. With four strategic regions, we are able to offer customers a broad range of options. Today, we are leveraging our established contacts in China to move increasing amounts of Southern Yellow Pine to that market and other markets in the Asia-Pacific region, which is a huge benefit to our mills across the US South.

Commodity lumber will always be our core business in China, but with a solid, loyal customer base, we are now offering higher value products to that market as well. These products include stock for furniture, decking, and a new innovation - prefabricated, non-load bearing, energy-efficient wood wall (PEEWW) technology, or “in-fill” walls. These structures replace concrete blocks used in wall and window openings.

With the world’s largest construction market, a growing fiber deficit, and a robust housing and infrastructure development plan, China’s demand for imported lumber will continue to present exciting opportunities for Interfor well into the future.