After a brief lull this fall, China is back buying B.C. lumber, pushing up prices for construction lumber North America-wide.
"They are definitely back," Chris McIver, West Fraser Timber vice-president of lumber sales said in an inter-view. "They needed to correct their inventory and I think that took less time than most of us expected."
After breaking records earlier in the year, lumber sales to China dropped in July when Chinese buyers cut back on purchases. Tighter monetary policy in China - aimed at taking some of the pressure off China's housing bubble - made it more difficult for lumber importers to obtain letters of credit during the third and fourth quarters.
Also a surplus of new homes created some pricing uncertainty. As a result, log and lumber inventories began building on the docks of Chinese ports.
However, with the Lunar New Year approaching, importers have begun rebuilding their by-now depleted inventories to be ready once the holiday is over, said McIver.
He also said the value of sales is climbing as Chinese remanufactures have discovered they can get more value themselves out of higher grades of B.C. lumber.
Construction-grade lumber that used to go to the United States is now going to China where it is cut into one-inch strips and attached to the walls of concrete apartments.
Drywall is then attached to the wooden strips.
With China committed to building 36 million housing units over the next five years, supplying the wood for attaching drywall becomes a huge market of its own, McIver said.
B.C. is on track to sell a record 4.7 billion board feet of lumber to China this year, Jobs, Tourism and Innovation Minister Pat Bell said. To the end of October, the latest period for which statistics are available, exports totalled 3.7 billion board feet.
"China now represents 32 to 33 per cent of our total lumber production. By comparison, the U.S. is 48 per cent," he said.
Bell said 2012 growth is not expected to continue at the 2011 rate of 65 per cent. Growth in the 20 to 30 per cent is more realistic, he said.
"We would be edging in on six billion board feet if we saw that type of growth in 2012."
Bell characterized the Chinese market as "a steady and growing market."
McIver said Chinese buyers never left the lumber market but they did slow down their buying. Data from the B.C. ministry of forests show both value and volume of sales dropping in July after hitting an all-time record in June. How-ever, sales for the month of October alone, when China was reportedly out of the market, totalled more than $90 million.
The return of China in strength has not only stabilized prices but led to an up-tick, said Keta Kosman, publisher of Madison's Lumber Reporter.
The price of construction lumber climbed from $238 US a thousand board feet last week to $243 US this week, she said in an interview.
West Fraser's McIver also attributed Chinese buying to a tightening of the supply-demand equation.
"All these markets are now inter-related in the fact that they are taking similar products. So if some of the product that was going into North America goes into Asia instead, you have a better supply-demand relationship. It can help on the pricing side for producers. You don't have to take as much production out of the market to stabilize pricing."
At Canfor Corp., the country's largest softwood lumber producer, senior vice-president of sales and marketing Wayne Guthrie said in an email the inventory buildup in anticipation of the Lunar New Year celebration in January is now over.
"Our China volume continues stable and we fully expect another increase for 2012," Guthrie said. "Also, the value of shipments is increasing as B.C. develops markets in China for higher grades of lumber."
He said the B.C. industry is"very bullish" on the Asian market for B.C. lumber.