Capturing the Chinese market: A view from the frontlines with BC’s Conifex Lumber

Capturing the Chinese market: A view from the frontlines with BC’s Conifex Lumber

This story is part of the softwood lumber series.

To learn more about export opportunities for companies in this sector, please read Canada’s softwood industry needs innovation for long-term growth, not just a hot U.S. housing market

For a vivid story about the difference foreign markets can make to business, one need look no further than Conifex Timber Inc. of Vancouver.

After the U.S. housing crash crippled the Canadian lumber industry, the company bought idled forestry and sawmilling assets in two locations in the B.C. interior – the Fort St. James plant from Pope & Talbot Inc. in 2008 and the Mackenzie plant from Abitibi-Consolidated in 2010. At that time, hundreds of people once employed by these operations were either out of work or had left the area for opportunities in the oil patch.

Today, Conifex employs 500 people at these two softwood lumber plants.

The difference? China.

“When those sites were closed, they had been selling 85 per cent of their lumber to the United States,” says CEO Ken Shields. “Then, when we restarted, we had the benefit of a rapidly growing Chinese economy.”

Tapping into that market was not easy – it took the federal and provincial governments, as well as the companies themselves, working collaboratively to realize the potential. But the effort paid off.

“In 2012, there were quarters when we shipped more than half of our lumber to China,” Shields says. “In my opinion, capturing the Chinese lumber market is one of the most significant trade stories in Canadian history.”

Shields derives immense personal satisfaction from visiting Fort St. James and Mackenzie and seeing firsthand what restarting the mills has meant for these two lumber-dependent communities.

“If you go back to what it was like, the mayors and councils were just desperate. Unemployment levels were very high. The tax base to support municipal programs was in jeopardy because the main taxpayers were in bankruptcy proceedings,” he says. “It’s a great feeling just to go back to those communities today. They’ve all got a bounce in their step, activity levels are back to normal and there’s just a much more positive view.”

Now that U.S. housing construction is back and the Chinese juggernaut has slowed, Conifex is shipping about half of its Canadian lumber south. But a quarter of it – accounting for more than $50-million in revenue last year – is still going to China. And the company has no intention of abandoning the inroads it has made in that vast market.

According to Hans Thur, senior vice president of sales and marketing, Conifex will continue to build on the relationships it has established and its reputation for top-notch customer service. “We have a partnership with customers there that have some long tenure now and even though there’s not as much volume going there currently, we sense that the groundwork has been laid and that as world currencies shift around, that market is open to us for the future.”

Thur says the biggest surprise about China was how fast Conifex and other BC companies gained traction there. “I don’t think anybody dreamed in British Columbia of the volume of timber that we would have going over to China in a five-year period,” he says.

Conifex first approached China with the intention of marketing higher-end wood there, but most of its volume has been lower-grade product used in the concrete forming process, as well as lumber to be remanufactured into laths for finishing interiors. The company is also working to promote frame construction.

“It’s a long-term process, but we’re making inroads on a yearly basis,” Thur says.

After the U.S. and China, the company’s biggest export market is Japan, which is accustomed to wood-frame building and has had a longstanding appetite for the high-quality wood. Conifex also ships to Mexico, the Philippines, Taiwan, Vietnam, India, Pakistan and the Middle East and is trying to increase its presence in these areas.

In courting a new market, patience is key, Thur says. “It doesn’t happen overnight. You might get some pretty decent wins and then things start to slow down a little bit. But you don’t just give up. It will come back as long as you continue to focus on it,” he says.

Conifex has worked diligently to establish and maintain connections that allow it to export directly to customers rather than relying on middlemen. This gives it more control over customer service, as well as the ability to hold down costs.

According to Chief Financial Officer Yuri Lewis, the company has taken pains to employ a diverse group of people who can aid the process of exporting directly to customers.

“It requires language skills and cultural resources appropriate for each of the markets,” she says.

It also helps to have government support to pave the way into new countries and to help with transactions. “If we can’t get a degree of comfort on the credit, we use EDC insurance,” concludes Yuris.

Get more export insights from Conifex’s Ken Shields here.

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