China is poised to pour substantial money into Canada's forestry sector, with a series of companies seeking new ways to transform British Columbia trees into furniture, fuel and profit.
A cluster of private investors represented by the China New Energy Chamber of Commerce was among a handful of groups to sign deals with Canadian interests Tuesday in Beijing as B.C. Premier Christy Clark lent her signature to agreements that set the stage for more lumber and wood products to flow to China. In B.C., meanwhile, First Nations are developing plans to use Chinese money and markets and to vastly expand their own forestry operations.
Though the bid to sell oil and natural gas to China has dominated diplomatic efforts by Canada and its western provinces, forestry has quietly burgeoned into one of the most important elements of the trading relationship between the two countries.
"Ten years ago B.C.'s trade with China was quite small. Today it has grown by over 500 per cent to $5-billion," Ms. Clark said Tuesday. "And that has been driven primarily by exports of wood."
Now, companies on both sides of the Pacific are seeking ways to trade higher-value products, after years of selling unmilled, so-called "raw" logs to China.
The early-stage agreement between the New Energy Chamber and the B.C. government, for example, could see as much as $1-billion invested in Canada by Chinese companies. Among the areas of interest is development of B.C. wood pellet plants that, if the market can be developed, stand to supplant some of China's use of coal. China has some 600,000 boilers, 85 per cent of them burning coal. But coal's use has come under increasing scrutiny as China struggles to find ways to clean its fouled skies.
Wood pellets, though barely used today, are one potential option. They are more expensive than coal, but cheaper than natural gas, which is today the primary alternative.
"The heat value of pellets is equivalent to coal, but with far fewer emissions. It doesn't have sulphur and the nitric oxide" – typically referred to as NoX – "is very low," said Kelvin Hong, the chamber's chairman.
"Canada makes wood pellets and exports them into the European market. Why not export the same to China?"
Another agreement will see Vancouver-headquartered forestry giant Canfor Corp. work to build a new "secondary manufacturing" plant in China. Through a joint venture, the plant would slice B.C. two-by-tens and two-by-twelve planks into custom sizes for Chinese interests looking to use Canadian wood for furniture, doors, windows and mouldings.
The plant will be an "eight-figure" investment, Canfor chief executive officer Don Kayne said in Beijing Tuesday evening. "I would expect we would have something well under way by the back half of next year," he said. This year, Canfor expects to sell 1.1-billion board feet of softwood lumber to China, nearly 30 per cent of its Canadian output. But much of that is poorer quality wood used, for example, to build forms for pouring concrete. And the low end of the market is beginning to reach its limit.
Conversely, at the high end of the market, "there is huge room" for growth, assuming Canada can successfully compete against wood coming in to China from Russia, New Zealand, the U.S. and Europe, said Jim Jia, the General Manager of CFD Wood Industry Co. Ltd. Expectations for the new plant are significant. It could eventually take 150 to 200-million board-feet of lumber, Mr. Kayne said, roughly equivalent to the output from a soon-to-close mill in Quesnel, B.C., which has for the last three years sent much of its output to China.
"If you take a look at the green building and the focus on the environment here, the opportunities to replace some of the other building materials – it's big," Mr. Kayne said.
On Sunday, another contract between Burnaby's Bluestar International Business and Sichuan Xilin IM/EX Co. Ltd. will see $80-million (U.S.) worth of Canadian lumber exported to China for use in building rail lines, houses and other infrastructure.
One of the biggest Canadian beneficiaries, however, may be the First Nations of northwestern B.C., some of whom have gained rights to harvest vast tracts of forest. The Lax Kw'alaams First Nation is already in discussions with private Chinese investors toward building a pellet plant and sawmill in Terrace, B.C. The Chinese wood pellet trade is "not a market that has been developed yet," acknowledged Wayne Drury, the chief executive of Coast Tsimshian Resources LP, which is owned by the Lax Kw'alaams.
But there is ample incentive for the First Nation to try. Roughly half the north-western B.C. wood basket is too poor to use as lumber. It can, however, be used as pellets, and a pellet plant could also make a sawmill sustainable by providing a way to convert its leftovers into wood fuel. The two plants could employ 200, Mr. Drury said.
"We believe the economics are getting there where a pellet plant in the northwest is getting to be a viable opportunity," he said. He hopes the plants can be built and operating "within the next year to two years."