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Market Discussions – COFFI 2018Asian Market Opportunities – A North American Perspective
Bob Smith – GM Specialty Products & Offshore Sales
November 2018
Lumber Capacity: 13 million m³
Pulp/Paper Capacity: 1.5 million tonnes
United StatesAsiaCanadaOther
Americas
Asia
Europe
2017 LUMBER SALESC$3.5 BILLION
2017 PULP SALESC$1.2 BILLION
About Us24 Sawmills• 13 in Canada• 11 in US• 1 Finger Joint Plant• 2 Engineered Product Mills
1 Green Energy Plant3 Pellet Plants
4 Pulp Mills / 1 Kraft Paper Mill (integrated)
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Our Business
$
A high profile trade dispute with our largest market in the United States Extreme weather events in both Canada and the United States
Escalating costs from transportation to logistics to fibre
Despite all the headwinds, we have realized solid financial results – our company set numerous financial records in 2017.
We have faced a number of challenges over the past 18 months, including:
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• Peak lumber production in 2006 - 35 million m³
• Coincides with peak US housings starts at 2.2 million units
• Projected provincial timber supply forecast is expected to decrease from 64 million m3 in 2010 to 40 million m3 in 2026 for the BC Interior
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
Volu
me
(Mill
ion
m³)
British Columbia Interior Lumber Production
Actual Lumber Production Forecast Lumber Production
Timber Supply Forecast Implications from Decreased Annual Allowable Cut on Lumber Production Key Implications
Source: Government of British Columbia, CANFOR4Source: Statistics Canada, Canfor
Top 10 Fire Seasons in BC Chart shows number of square kilometers burned by wildfire each season.
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Area
(KM
²)
Source: BC Wildfire Services (2018 data is current as of Aug. 29)
Fire, pests and drought are projected to take place in vast areas of Canada’s forests at high to very high risk.
Even when viewed separately, disturbance increases are significant; in combination they overlap and cover nearly all of the managed forests.
Cumulative Natural Disturbances in Canada
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Renewable, sustainable products, like wood products, will displace non-renewable and energy-intensive product, and demand is expected to grow as a result.
Growing Demand
First is global commitments to address climate change
Second is the increasing recognition of the environmental benefits forest products offer
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* Includes Southern Hemisphere and othersSources: WWPA, COFI, China Customs, Japan Customs, US Census Bureau, WoodMarkets, Canfor
Global Softwood Lumber Supply & Demand
48
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Production
Demand
Canada
123
92
Production
Demand
Europe
35
10
Production
Demand
Russia
Supplying Regions
57
80
Production
Demand
USA
26
51
Production
Demand
China
9
15
Production
Demand
Japan
Demanding Regions
Global Supply and Demand*
Million m³ 2018 2019
Demand 363 371
Supply 361 366
Supply Deficit - 2 - 5
Volume (Million m³)
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Global Softwood Lumber Exports by Country Vo
lum
e (m
³)
Source: Global Trade Atlas
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Source: Canfor
151
Mm
³@ 0
.15
per c
apita
184
Mm
³@ 0
.15
per c
apita
Opportunities - Softwood Lumber Consumption Per Capita
Consumption per capita (m³ per person)
10
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CHINA
Urbanization Growing Middle Class GDP GrowthGreen Building
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China Lumber Imports (MMfbm)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Volu
me
(MM
fbm
)
Russia Canada Thailand USA New Zealand Indonesia Malaysia Others
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China Market for Low Grade Products
Concrete Forming
Furring Strips
Mountain Pine Beetle Infested Forest
The Past: BC’s Mountain Pine Beetle Timber = Low Grade End Uses
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Global Market for High Value Products
Furniture
Door Core/ Flooring, etc.
Hybrid Construction
Housing
The Future: BC’s Remaining Green Timber = Mid & High Grade End Uses
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INDIAPopulation Demographics Green Building Economic Growth
20301
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Lumber vs. Logs, Hardwood vs. Softwood
Source : BCFII
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0 or No Data< 2,5002,501-5,0005,001-15,00015,001-25,000>25,000
Board Feet per acre
1.1-1.7 Growth to
Drain Ratio
High Value Southern Pine Lumber Applications
Flooring Edge glued stair treads
Doors Cabinets
US Southern Yellow Pine Softwood = India Hardwood Replacement
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JAPANHybrid Construction Growth In Mid-Rise Declining Population Growth In Non-Residential
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Japan – A Leader in Offsite, Factory Built Construction
Source: Ministry of Land, Infrastructure, Transport and Tourism
Pre-Cut Pre-FabPanelization
Has been dealing with a tight labour market for many years.
Growth in non-residential and mid-rise will increase wood use outside of typical housing segment
1877 Wood Frame Home
2017 Wood Frame Home
Skyscraper
Prefabrication
Tall Building
In North America, labour shortages
are driving a move towards the
industrialization of home
construction, which includes
modular and prefabricated housing.
North America’s Accelerating Journey towards Prefabrication Housing
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Emerging Applications
Seeing tremendous growth in mid-rise and tall wood construction
UBC’s Brock Commons is 53 metres tall.
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Once completed, Microsoft’s new Silicon Valley campus will be the largest-ever mass timber building in North America – both by volume of wood used and by cubic metres.
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There is the opportunity to expand the wood products used through collaboration with the steel and concrete industries in hybrid construction models.
Hybrid Construction
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For lumber producers, a move to modular and prefabricationbrings new requirements for quality and consistency in products.
This will have a significant impact on yields and further constrain supply.
Impacts
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Conclusion
Demand is strong and sustainable
Our products are being used in new and innovative applications
And innovation is entering the construction sector in a meaningful and transformative way
We need to work together to promote sustainable wood use as part of the solution to our many global challenges.
Overall, it is an exciting time to be in the forest products business.
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Thank you