Canfor Sees India As New China as Canada Pursues Increased Lumber Exports.

Forest products producer Canfor Corp. is hoping India becomes the new China and eventually delivers explosive demand for Western Canadian lumber.

Lumber shipments have begun to trickle into the world's largest democracy since trade barriers were lifted last December. Volumes are low for now, but Canfor CEO Don Kayne sees opportunities for strong growth.

"We're kind of looking at it as perhaps where China was 10 years ago," he said Friday during a conference call, a day after Canfor released second-quarter results.

In May, China overtook the United States as the largest export market for B.C. lumber. In the second quarter, Asian shipments led by China increased by 71 per cent from a year earlier.

Kayne said he believes the industry can double the volume going to China over the next five years.

"The market continues to expand at a fast rate, much faster than often we think. This whole wood frame construction side is really largely untapped," he told analysts and reporters.

Looking at its next emerging market, Canfor is at the very early stages of a 12-month effort to determine what parts of India offer the greatest opportunities and on which products it should focus its efforts.

Like China, India has a culture of using wood in home construction, but maybe not as much for quality SPF, or spruce, pine and fir timber produced in Canada.

"Clearly there is a desire for wood in that country, Kayne said. "They use a lot of wood today, it's just a question where SPF sits in that."

Besides domestic rivals, European producers are the largest competitors in India, added Kayne.

International Wood Products Group, which tracks Canadian lumber exports, said it plans to start tabulating monthly shipments to India next year.

Industry volumes have surged on a percentage basis off a very low base. "So lots of hype about India and lots of potential, but the actual business volume is insignificant so far in terms of total B.C. or Canada lumber exports," company president Russell Taylor said in an email.

The group says Canadian exports to China increased by 96.6 per cent in the first half of 2011 and China is poised to import about 35 per cent of British Columbia's total lumber production this year.

Shipping problems, including container availability, port loading capacity and high lumber inventories in China could constrain shipments reaching the 35 per cent level, Wood Markets added.

Canfor and other producers have joined forces to build a bulk carrier that is making its second delivery to Shanghai.

China imported 1.8 billion board feet of Canadian lumber in the first six months of the year, compared with about 950 million board feet a year earlier.

U.S. lumber exports to China have grown at an even faster rate than those from Canada, although the first-half total was lower at 825 million board feet.

Late Thursday, Canfor reported that its net profits dropped sharply in the latest quarter as revenues fell on weak lumber prices.

The Vancouver company said earnings fell to $26.2 million for the second quarter, down from $43.7 million from the year-ago period.

Sales decreased to $619.1 million from $634.7 million.

The company reported two cents per share in adjusted earnings, better than the six cents per share loss forecast by analysts, according to Thomson Reuters.

Prices bottomed out in May and were followed by a modest recovery before the end of the quarter as lumber inventories became more balanced.

The average price for spruce, pine and fir lumber fell 19 per cent, although decreases for wider dimensions were less significant.

Canfor said it saw little change in the underlying factors hurting the recovery of North American lumber markets. June housing starts were somewhat encouraging and U.S. corporate earnings appear to be improving, but the U.S. faces uncertainty over its debt crisis and the potential impact on economic growth from deep budget cuts.

"We think their recovery will take some time — 18 to 24 months maybe even longer — and that's what we're preparing for through the diversification that we have in place with Asia...," Kayne said.

Canfor's lumber shipment volumes rebounded after weather-related transportation constraints in the first quarter, increasing by 14 per cent to nearly one billion board feet. Higher demand from China was a major contributing factor.

Canfor has operations in B.C., Alberta, Quebec, Washington state, and North and South Carolina. The forestry company produces softwood lumber, plywood substitute oriented strand board, remanufactured lumber and specialized wood products.

On the Toronto Stock Exchange, Canfor stock was up 16 cents at $10.27 in late-day trading Friday.

Forest products producer Canfor Corp. is hoping India becomes the new China and eventually delivers explosive demand for Western Canadian lumber.

Lumber shipments have begun to trickle into the world's largest democracy since trade barriers were lifted last December. Volumes are low for now, but Canfor CEO Don Kayne sees opportunities for strong growth.

"We're kind of looking at it as perhaps where China was 10 years ago," he said Friday during a conference call, a day after Canfor released second-quarter results.

In May, China overtook the United States as the largest export market for B.C. lumber. In the second quarter, Asian shipments led by China increased by 71 per cent from a year earlier.

Kayne said he believes the industry can double the volume going to China over the next five years.

"The market continues to expand at a fast rate, much faster than often we think. This whole wood frame construction side is really largely untapped," he told analysts and reporters.

Looking at its next emerging market, Canfor is at the very early stages of a 12-month effort to determine what parts of India offer the greatest opportunities and on which products it should focus its efforts.

Like China, India has a culture of using wood in home construction, but maybe not as much for quality SPF, or spruce, pine and fir timber produced in Canada.

"Clearly there is a desire for wood in that country, Kayne said. "They use a lot of wood today, it's just a question where SPF sits in that."

Besides domestic rivals, European producers are the largest competitors in India, added Kayne.

International Wood Products Group, which tracks Canadian lumber exports, said it plans to start tabulating monthly shipments to India next year.

Industry volumes have surged on a percentage basis off a very low base. "So lots of hype about India and lots of potential, but the actual business volume is insignificant so far in terms of total B.C. or Canada lumber exports," company president Russell Taylor said in an email.

The group says Canadian exports to China increased by 96.6 per cent in the first half of 2011 and China is poised to import about 35 per cent of British Columbia's total lumber production this year.

Shipping problems, including container availability, port loading capacity and high lumber inventories in China could constrain shipments reaching the 35 per cent level, Wood Markets added.

Canfor and other producers have joined forces to build a bulk carrier that is making its second delivery to Shanghai.

China imported 1.8 billion board feet of Canadian lumber in the first six months of the year, compared with about 950 million board feet a year earlier.

U.S. lumber exports to China have grown at an even faster rate than those from Canada, although the first-half total was lower at 825 million board feet.

Late Thursday, Canfor reported that its net profits dropped sharply in the latest quarter as revenues fell on weak lumber prices.

The Vancouver company said earnings fell to $26.2 million for the second quarter, down from $43.7 million from the year-ago period.

Sales decreased to $619.1 million from $634.7 million.

The company reported two cents per share in adjusted earnings, better than the six cents per share loss forecast by analysts, according to Thomson Reuters.

Prices bottomed out in May and were followed by a modest recovery before the end of the quarter as lumber inventories became more balanced.

The average price for spruce, pine and fir lumber fell 19 per cent, although decreases for wider dimensions were less significant.

Canfor said it saw little change in the underlying factors hurting the recovery of North American lumber markets. June housing starts were somewhat encouraging and U.S. corporate earnings appear to be improving, but the U.S. faces uncertainty over its debt crisis and the potential impact on economic growth from deep budget cuts.

"We think their recovery will take some time — 18 to 24 months maybe even longer — and that's what we're preparing for through the diversification that we have in place with Asia...," Kayne said.

Canfor's lumber shipment volumes rebounded after weather-related transportation constraints in the first quarter, increasing by 14 per cent to nearly one billion board feet. Higher demand from China was a major contributing factor.

Canfor has operations in B.C., Alberta, Quebec, Washington state, and North and South Carolina. The forestry company produces softwood lumber, plywood substitute oriented strand board, remanufactured lumber and specialized wood products.

On the Toronto Stock Exchange, Canfor stock was up 16 cents at $10.27 in late-day trading Friday.

Source : canadianbusiness.com