While the U.S. has always been and remains the biggest market for Canadian lumber and other wood products, Japan and China have, for a couple of decades now, been the next two most important markets for B.C. wood products.
But both of those markets are shrinking, in no small part because their populations are shrinking.
The decline in log and lumber imports is most stark in China, and reflects China’s economic decline over the last four years.
BC export statistics show the value of lumber exports from B.C. to China dropped from $1.8 billion in 2013 to $268 million in 2023, and softwood lumber imports in China from all countries are down 35 per cent since 2019, global wood markets analyst Russ Taylor said Tuesday at the Global Wood Summit.
The value of exports to Japan have also declined, though less drastically, from $825 million in 2013 to $382 million in 2023.
China is suffering from both population decline and a faltering economy, which has led to a real estate crisis and sharp decline in new home construction.
“The trends were pretty ugly when I was in China last,” Taylor said.
China has never really recovered from the COVID-19 pandemic, he said.
“Since they shut down the economy during pandemic, consumer confidence never came back and that has collapsed the housing market.”
Housing starts in China peaked in 2019. Since then, there has been a 70% decline in new housing starts Taylor said, and there are 48 million homes that were pre-sold but not completed. At the current pace of construction, it would take eight years to finish building those 48 million new homes, Taylor said.
As a result of the slowdown in China’s housing and construction market, softwood lumber imports in China are down 35 per cent since 2019.
Russia has long been China’s biggest supplier of softwood, providing about 60 per cent of the country’s imports, with Canada (mostly British Columbia) providing 10 to 20 per cent.
China’s demographics suggest it could be now headed for the kind of demographic decline that started in Japan 15 years ago.
“Like Japan, the demographics now are turning negative, and only recently have we seen the deaths outnumber the births in China,” Taylor said. “So that's not good news. And of course, 14 per cent of the population is over 65 in 2021. That increases to over 30 per cent by 2035.
“It’s not all bad in China,” Taylor said.
While lumber imports are way down, there has been four to five per cent increase over the past two years in the use of other wood products for furniture, finishings, decoration, pallets and packaging.
“And engineered wood is moving in China -- even mass timber is moving,” Taylor said. “So the other segments have been growing.”
Surprisingly, should demand for logs and lumber improve in the coming years in China, Japan may end up grabbing some of that market share.
Japan has become more self sufficient, thanks to a reforestation effort that started after World War Two, which had razed Japan’s forests.
Harvest levels in Japan have risen over the past 20 years, said Don McGregor, vice president of sales for Western Forest Products (TSX:WEF). On the demand side, less wood is being used.
“Right now, Japan is about 50 per cent self sufficient for both lumber and their plywood needs," McGregor said.
Japan is an important market for Western Forest Products, which makes specialty wood products made from cedar, Douglas fir and hemlock.
Japan’s forests were razed during the Second World War. Fifty years after the forests were replanted, Japan’s forests are once again mature enough to be harvested, and Japan’s government has provided subsidies to build new sawmills.
McGregor said Japan has an estimated 5 billion cubic metres of timber reserve available.
“They could double their harvest rate right now and still have enough wood to sustain themselves," he said. "But they won’t do that because it’s a very difficult place to log, they have very fragmented land ownership, logging costs are extremely high, they have a huge shortage of labour.”
On the demand side, Japan’s home construction has declined with its population, with new housing starts dropping from about 1.7 million new housing starts per year in 1990 to less than 800,000 this year. By the end of the decade, it is expected to hit 630,000.
About 50 per cent of the new homes built in Japan are made from wood, and the Japanese government has been promoting more use of wood in new home construction, as part of climate action policies.
New housing starts are not only shrinking in number in Japan, but in size as well, as families are getting smaller, all of which means for lower demand for lumber.
“It’s all driven by demographics,” McGregor said. “They’re losing population at the rate of about half a percentage a year.”
“There’s no question housing is going down in Japan.”
As domestic demand for logs and lumber decreases, McGregor said Japan may start filling some of China’s demand for logs and lumber.
“We see the logging exports increasing over time," he said, adding Japan could even begin competing for market share in the U.S.
“There will be more lumber exports out of Japan to the U.S.”
