Exports to help wood profits double in 2012

A long-awaited
recovery in U.S. housing markets and growing demand in China and Japan
are responsible for this more promising forecast, according to The
Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Wood Products Industry—Autumn 2011.

“Canada
has been diversifying its export markets away from the United States
for several years, and gains in export sales will be responsible for
industry growth in the next few years,” said Michael Burt, Director,
Industrial Economic Trends.

“The overall fragility of the
American economy and continued U.S. softwood lumber litigation are
contributing to Canadian wood producers’ search for further export
markets. Ongoing demand in China—and Japan’s need for wood to rebuild
following the March 2011 earthquake and tsunami—will support growth in
Canadian wood exports to these Asian countries.”

Between January
and September of this year, 63 per cent of Canadian wood exports went
to the U.S, down from 86 per cent in 2006. In contrast, exports to China
grew from less than one per cent of the Canadian total in 2006 to 14
per cent so far in 2011. Even though the U.S. housing market is expected
to begin recovering in 2012, the share of Canadian exports to the
United States is not likely to return to previous peaks.

Nevertheless,
the U.S. market remains important to Canadian producers. Double-digit
growth in Canadian wood exports is forecast in both 2012 and 2013, due
not only to overseas markets, but also to U.S. housing demand.
Indicators such as homebuilder confidence, housing starts, and
inventories are looking more positive than they have in years. The
recovery in the American housing market is, however, contingent on
whether U.S. and European governments take measures that avert another
global recession.

The outlook for exports to the United States
also remains uncertain because of the continuing softwood lumber dispute
between the two countries. Canada has already lost two arbitration
cases with the United States under the 2006 softwood lumber agreement,
and the U.S. brought a third complaint last year.

Overall, the
Canadian industry has rebounded from its 2008 and 2009 woes, when it
lost more than $800 million each year. After returning to profitability
in 2010, profits are expected to end the year down almost 40 per cent to
$283 million. In 2012, however, the industry is expected to post
profits of $565 million, and subsequently enjoy profit growth of more
than 20 per cent annually for at least two additional years.