Is China the future for B.C. lumber?
Canada’s key export-support organization boldly predicts China will surpass the United States as British Columbia’s top market for forest products within 12 years, if long-term trends hold.
“This is really about differential growth in the markets,” said Peter Hall, chief economist for Export Development Canada. “China has long and strong potential growth and the U.S. is a fully developed economy.”
That projection appears to counter a short-term decline in lumber sales to China following the country ’s meteoric rise in imports over the last 15 years.
After years of a provincial hardsell in the country, China emerged as a major customer for B.C. forestry exports following the 2008 global recession, surpassing Japan as the province’s No. 2 market for lumber in 2009.
By volume, B.C.’s exports to China peaked in 2013 when timber companies sold 7.9 million cubic metres worth of processed wood to Chinese buyers, versus 13.6 million cubic metres to the U.S.
However, while lumber exports to the U.S. increased to 17.9 million cubic metres in 2016, exports to China slipped to 5.9 million cubic metres.
B.C.’s total exports of lumber shrank by nine per cent in 2017, a year plagued by forest fires in the Interior and the challenge of shrinking timber supplies after the mountain pine beetle infestation.
However, by taking exports of raw logs, pulp and paper into account, the value of shipments to China have continued to climb. Raw log shipments to China, by value, have risen 43 per cent over the past three years, hitting $479 million last year. Log exports to the U.S. over the same period shrank 33 per cent to just $44 million.
Hall said there is no consensus among economists about Canada’s prospects for boosting exports to Asia. In October, after the three parties concluded the U.S. Mexico Canada Agreement, prominent University of Calgary economist Jack Mintz argued that diversifying trade from the dominant U.S. market would be difficult.
Mintz wrote that Canada sold to the U.S. three-quarters of the $545 billion in goods and $110 million in services it exported in 2017.
“Our next-largest export markets are fractions of that,” Mintz said, with China at No. 2 buying just 4.3 per cent of all Canada’s exports.
Hall, however, said he is in the camp of economists who believe Canada is in a position to make significant increases in trade with China, not unlike Australia.
“If there is any place in Canada that gets that more it is B.C., because it’s already the most diversified in terms of merchandise trade,” Hall said.
Hall was in Vancouver this week delivering the organization’s latest short-term export forecast, which calls for a modest four per cent increase by the end of this year and by a similar amount in 2019.
Hall said weak commodity prices for base metals such as copper, a key B.C. export, and coal used in steel making will hold back some of that export growth, as will a recent sharp drop in lumber prices.