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.
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.
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.