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
Ken Shields is the CEO of Conifex Timber Inc. Established in 2008, Conifex is a growth-oriented publicly traded Canadian company operating in British Columbia’s northern interior, with a focus is on forestry, sawmilling, and power generation.
When and why did you start thinking about exporting?
Our very first export sale came in the spring of 2009, shortly after we restarted an idled sawmill complex in Fort St. James, BC, which we purchased in 2008. Our marketing agents had developed a continuing relationship with a lumber distribution company in the Midwest U.S. that purchased lumber from the site when it was operated by the previous owner.
What was your export journey like to get where you are today?
Shortly after restarting operations, we were fortunate to identify and commence doing business with a key customer in Japan. The Japanese market is the most profitable outlet for Canadian lumber and customers in Japan have a long history of paying premium prices for lumber based on its load-bearing capabilities and appearance. We immediately sent a team of sales and quality control specialists to Japan to ensure that our product specifications met the requirements of the Japanese market and that our packaging and delivery-chain infrastructure was sufficiently robust to meet the service requirements of the customer.
What is the biggest difference between selling in Canada and selling in another country? How did you adapt to that difference?
Although China remains a core market, the construction cycle has moderated, and so too has the demand for lumber. Furthermore, lumber pricing in China is now heavily influenced by movements in the currencies of those countries exporting logs and lumber to China. For instance, the devaluation of the Russian ruble has led to lower price realizations on Canadian lumber exports to China. Additionally, European and Scandinavian lumber producers have struggled since the global financial crisis derailed housing and construction markets. The result is that BC lumber producers are experiencing heavy price competition in China and Japan from currency-advantaged European lumber producers, not just Russian producers. We have learned to pay a lot more attention to international currency movements when designing and implementing our marketing plans.
How has exporting changed the way you market/sell your products in Canada?
In aggregate, we sell roughly six times as much lumber to the U.S., Chinese and Japanese lumber markets, leaving only modest volumes available for sale to the relatively small Canadian market.
What have you learned from exporting that has benefitted your sales/ operations in Canada?
Lumber products and grades that are not suitable for the Canadian market are exported, enabling us to deliver products sought by Canadian purchasers.
Can you share the best lesson learned from a bad exporting experience?
Our best lesson came from visiting offshore customers at their facilities, gaining a better understanding of the challenges customers face when our product does not meet their precise specifications, thereby enabling us to better meet customer requirements.
When it comes to exports, what do you know now that you wish you knew then?
With the benefit of hindsight, we wished we had moved more quickly to achieve a closer integration between our customers and our mill people. In the softwood lumber industry, mill people tend to focus on maximizing production and lumber recovery — that is, getting the most lumber out of a given quantity of saw logs. Our marketing people tend to focus on meeting the specific customer requirements in terms of quality and ensuring that there are no deficiencies in packaging and transportation. It has taken us a few years, but from everything I hear, we now have a proper balance between optimizing mill performance and meeting customer expectations.
What is the #1 thing new SMEs need to know about export and trade?
It is crucial to understand and relate to the culture of the countries you deal with. In our case, we believe we benefit by having a diverse sales support team in terms of language skills and style. We believe we have also benefitted by taking full advantage of the guidance and support provided by the commercial officers the government of Canada has located in the foreign markets we serve.
What is the one characteristic that you believe every exporter should possess?