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“
Many people can quote their grandfather, but only a few can use the inherited words of wisdom to help run an enterprise their grandfather started more than half a century ago.
Brad Thorlakson can.
He’s the third generation to run Vernon, B.C.-based Tolko Industries Ltd., which was started by his grandfather, Harold Thorlakson, in 1956. With 3,500 employees in B.C., Alberta, Saskatchewan and Manitoba, the company is one of Canada’s major exporters of lumber and paper products.
The U.S. has traditionally been a major market, but venturing beyond North America came early in the company’s history. Harold started shipping lumber to Japan in the early 1970s. And his sons, Al and John, continued to expand that market over the years and also began making inroads into China, as well as selling kraft paper to Mexico, South America and the Middle East.
Exports were always a boon to business, but after the U.S. housing bubble burst in 2008, these markets became even more important to the company.
“Pre-2008, we were only about 10 to 15 per cent in exports beyond North America. Now we are about 30 per cent in these export markets,” Thorlakson says. “That’s been crucial to us.”
Tolko was one of the B.C. companies who worked with EDC and the provincial and federal governments to develop more business in Asia, especially in China, as the U.S. downturn began to bite. New customers in Asia have not only helped B.C. companies survive, but have helped other Canada lumber companies as well.
“Every time we ship product offshore, Eastern Canadian producers have a larger market in North America,” Thorlakson says. “The work that EDC did and the provincial and federal governments did to develop those markets benefitted the whole Canadian industry and helped it stabilize quicker than it otherwise would have if we hadn’t had access to those international markets.”
Tolko’s products can now be found in 30 countries. After Canada and the U.S., China is now its third largest customer for softwood lumber and Japan is its fourth largest.
Even though residential construction has resumed in the U.S., the company plans to keep focused on exports, especially in Asia. It has people on the ground in both China and Japan and will continue to build on relationships in both those markets.
While business in Japan has been steady, Thorlakson says China still has a lot of growth potential even though its economy has slowed.
“The new China is China,” he says, sharing a sentiment being expressed these days by industry executives when asked what the ‘new China’ will be. “If you have 6 per cent growth in a country with 1.4 billion people, you’re still seeing good demand for our products. We anticipate that will continue for many years to come.”
As with other Canadian companies serving the Chinese construction market, Tolko has been shipping mainly low-grade lumber used in the concrete forming process. But the company is now seeing more interest in higher-grade lumber for interior finishing and furniture manufacturing. And higher-grade lumber usually means higher profit margins.
Meanwhile, Tolko is participating in the government and industry push to convince more Chinese builders to consider wood frame construction. The effort includes working with Chinese officials on enhancing building codes and providing instruction to builders on how to work with wood.
The cause is being helped by the fact that wood is a renewable resource and building with it has less of a carbon footprint than building with concrete and steel. “If you put a properly engineered low-rise building against a properly engineered steel and concrete building, I think it is competitive,” Thorlakson says.
He hopes more customers will see that too, so that Tolko can expand its exports and continue to grow as the business conditions ebb and flow in various markets around the globe.
As his grandfather always used to say: “It’s better to have more customers than capacity because that’s what allows us to secure employment for our employees.”