Introduction

Welcome to our latest edition of the Canfor Customer Update. Scroll down for the following articles:

  • North American Market Update
  • China Market Update
  • Softwood Lumber Agreement
  • Official Headquarters Established for Canfor Southern Pine
  • Canfor-Anthony Forest Products Co-Brand Underway
  • Tall Wood Construction News
  • Increasing Opportunities in China
  • Further Market Expansion in Southeast Asia

As always, we welcome and appreciate your feedback at any time, and it helps us identify the topics that are most important to you.

We wish you and yours a safe and happy holiday season and a Happy New Year. We sincerely appreciate your business and look forward to a successful 2017.

 

Sincerely,
Wayne 

North American Market Update

As we look back on 2016, it has been a positive and favourable year in North American lumber markets. We witnessed many of you, our customers, grow their business this year, and are proud and appreciative to be a small part of your success. We truly appreciate the partnerships we have throughout North America with you, our valued customers. It comes down to one of Canfor’s core values – We succeed when our customers succeed.

Building on the growth in 2016, we look forward to working on ways to improve our business together next year.

Looking ahead to 2017, regardless of the uncertainty around the SLA negotiations and litigation, we expect demand to continue to grow at a steady pace. We expect U.S. starts to expand by 6% to 1.26 million units (figure 1). We also expect the recent strength in R&R consumption to continue, as an aging housing inventory will continue to require additional work. We see the R&R sector also growing by approximately 6%.

This will add 2-3 billion FBM to U.S. consumption for 2017 vs. 2016 (figure 2). Since this will outstrip any new supply, we expect positive price trends through next year.

Turning to Canada, we see continued strength in the BC and Ontario markets, and a bit of rebound in Alberta consumption as the rebuild after the fires and floods of recent years continues. Canadian consumption will be a net positive to the North American lumber market for 2017.

Also, we continue to find new applications for wood in non-residential buildings, as well as in taller structures. Six-story midrise wood-frame construction is a fast-growing trend in many parts of North America and even taller wood buildings are being developed. This will all add to the consumption of lumber products for 2017 and beyond.

In summary, the future looks bright for lumber consumption in North America in 2017. We look forward to working with you moving forward, and we sincerely thank you for your business and your continued confidence in Canfor.

Figure 1:


Figure 2:


China Market Update

I just recently returned from visiting key customers in China, and was encouraged by their outlook for 2017. Canadian SPF inventory is near record-low levels compared to the last five years. Demand is expected to continue to grow in 2017, and we expect SPF shipments to rebound next year after the drop in 2016.

The Economic Intelligence Unit shared in a recent report that they expect China’s middle class to grow 35% by 2030 from 132 million to 480 million. The significant growth of this segment of the population is expected to alter the consumer landscape in China. We anticipate that this will positively impact the construction market and more specifically, the forest products market.

2016 saw large increases in Russian and European lumber shipments to China (see chart below). Growing consumption, a drop in North American shipments, and a ban on domestic harvesting created a shortage that was filled by the increased shipments of Russian and European lumber.

Looking ahead to 2017, we see the weak Russian currency continuing to allow them to increase market share but at a more modest pace. The available fibre is now further north of the border, lessening their competitiveness. Europe is not increasing production at any material pace, so their ability to grow in China will also be limited. This will allow SPF to regain some market share going forward.

Canfor will continue our focus on higher-value products in China, following the lead of the European suppliers. We continue to see furniture and other interior applications as target areas for increase.

Softwood Lumber Agreement

On October 18, we sent an update to customers regarding the Softwood Lumber Agreement. Since that time, the U.S. Lumber Coalition decided in late November to petition the U.S. government to launch Countervailing Duty (CVD) and Anti-Dumping Duty (ADD) investigations against Canada’s softwood lumber exports to the U.S.

We are disappointed with this action taken. We believe that if duties are imposed that there will be negative impacts on both side of the border. On the U.S. side, the cost of homes would increase and this would dampen the U.S. housing recovery. Furthermore, according to the NAHB, a 15% tariff of Canadian lumber would cost 4,666 U.S. jobs, and $265.4 million lost wages and salaries for U.S. workers. In Canada, the duties, without doubt, will hurt the communities that rely on the forestry industry to drive their economies.

Canfor, along with other Canadian lumber producers, will work alongside the Canadian and British Columbian governments to successfully defend our timber pricing policies against unfair allegations of subsidy, as we have done in the past. At the same time we will continue to support negotiations to secure a new softwood lumber agreement that will bring stability to the market and our customers.

No matter what road lies ahead, Canfor is prepared to weather the various options that may come of this trade resolution and serve our customers.

We will continue to keep you informed on any developments.

Official Headquarters Established for Canfor Southern Pine

In October, Canfor opened our newly established U.S. headquarters for our Canfor Southern Pine operations in Mobile, Alabama.

This important milestone reflects our company’s significant growth in the southern U.S over the past 10 years. It also marks the success of many years of work, and new friendships and partnerships with the leaders in the U.S. lumber industry – all of which have played a key role in Canfor achieving our success in the U.S.

Our office in Myrtle Beach, SC will continue to operate as usual and serve as the administrative hub for our U.S. east side operations.

At the grand-opening reception from L-R: Michael Korenberg, Chair of Canfor and Canfor Pulp Boards of Directors; Fred Stimpson, President, Canfor Southern Pine; and Don Kayne, President and CEO, Canfor Corporation.

Canfor-Anthony Forest Products Co-Brand Underway

Following Canfor’s purchase of Anthony Forest Products (AFP) which concluded late last year, the integration of the AFP brands into the Canfor brand is well underway. This includes new wraps for AFP lumber products, which leverage the reputations of both companies.

We’ve also rebranded AFP’s Lumber Span Calculator for Wood Joists and Rafters app and encourage our customers to download this useful tool. The app is available for Android, iPhone and iPads.

Get it on Google PlaySpan Calculator for Wood Joists and Rafters available on Android.

Available on the App StoreSpan Calculator for Wood Joists and Rafters available on iPhone and iPad.

The Canfor Span Calculator app is available for download.

Tall Wood Construction News

Tall wood buildings in residential and non-residential construction are catching on around the world and the projects continue to get taller, which underscores the increased confidence of wood in this application.

The 18-storey mass wood structure at the University of British Columbia (UBC) called Brock Commons has received global attention for being the world’s tallest wood building as well as for the impressive efficiency of the wood construction (complete in only 9 ½ weeks and four month ahead of schedule).

Other tall wood buildings are under construction or recently completed in the U.S., Europe, Australia, Canada and United Kingdom and the trend is that the buildings are getting taller. Last year, the world’s tallest wood building, located in Norway, was 14 storeys. Today, UBC’s 18-storey Brock Commons holds the world record but is expected to be beat in 2018 when Austria’s 24-storey HoHo Vienna is complete. In 2019, the 19-storey Sida Vid Sida won’t hold the world record but will be taller than UBC’s Brock Commons.

With wood’s aesthetic attributes combined with lower economic and environmental costs in comparison to other traditional building materials, it’s no surprise that global demand for wood in tall wood applications is on the rise.

Canfor is proud to have been a key supplier of specialty lumber to the already completed Brock Commons and is well positioned to be a supplier to all other tall wood projects scheduled.

World’s Tallest Wood Buildings Location Height Status
Brock Commons Canada (Vancouver) 18 storeys Wood structure complete
HoHo Vienna Austria (Vienna) 24 storeys Expected completion 2018
Sida Vid Sida Sweden (Skelleftea) 19 storeys Expected completion 2019

Brock Commons Facts

Canfor customer, Structurlam Products Inc. manufactured the following key building components which included:

  • 78 glulam columns per floor (all comprised of Canfor lumber)
  • 29 CLT panels per floor (1/3 of lumber supply from Canfor)

Time-efficiency facts:

  • 5-10 minutes = the time required to install one glulam column
  • 6-12 minutes = the time required to install one CLT panel
  • 9 1/2 weeks = time to complete the wood structure

Environmental facts:

  • 2,432 metric tonnes of CO2 = total potential carbon benefit
  • 1,753 metric tons of CO2 = carbon stored in the wood
  • 679 metric tons of CO2 = avoided greenhouse gas emissions

 

Increasing Opportunities in China

When visiting the area of Chengdu, in the south east region of China earlier this year, we were pleased to see new opportunities for our higher-grade lumber. This is in part a result of increasing popularity of wood-frame houses.

We also identified new opportunities in the area’s furniture manufacturing industry. SYP is widely used in furniture frame construction in China and preferred for its fibre strength.

Overall, we expect to see a positive trend in high-grade demand in this area.



Further Market Expansion in Southeast Asia

We continue to see increasing opportunity for our SYP and SPF products in Southeast Asia with Canfor now shipping to Kuala Lumpur, West Malaysia. This follows our entry into the Indonesian market last year.

We are optimistic that this entry into West Malaysia will lead to many successful exports; the availability of tropical hardwoods is decreasing and our SYP and SPF products are good options for this market to supplement the shortage to come.