"If one word were chosen to describe this structure," reads the blurb for the city of Vancouver’s Shanghai Expo pavilion, "it would be ‘light’." While the inside of the pavilion is indeed well-illuminated, the phrase also refers to the weight of the structure, held up by a wood frame made from Canadian spruce/pine/fir (SPF) lumber, and finished with hemlock, cedar and maple highlights.
Like other pavilions, Vancouver’s offering contains a subtle marketing pitch. Canada, home to the world’s second-largest boreal forest, is trying to push the benefits of wood-frame construction in China, where nearly all buildings are being built from concrete, steel and brick. Growth prospects are decent, but they are blocked by import-substitution policies and cultural attitudes toward wood housing.
The British Columbia (BC) government and Canadian lumber companies claim steady progress promoting a culture of building with wood in China, but so far it’s not the sort of culture they want. About 80% of lumber exports to China are "economy" and "Grade-3" class, low-grade woods so riddled with defects they are unusable for structural applications.
While China surpassed Japan as Canada’s second-largest lumber export market by volume last year, doubling in size, that volume only generated US$327 million in revenues, about US$200 million less than the value of exports to Japan. It may be unfair to use Japan as a benchmark of comparison. The Japanese are as perfectionist about wood as they are about bluefin tuna, so much so that the top-grade class of lumber is called "J" grade, after Japan.
"J-grade has been very profitable," said Pete Acierno, who has worked as a lumber grader at Galloway Mills in British Columbia for 27 years. "Japanese people frame their houses with it and have a party with people coming to look at the stick frame. That’s why it is important that every piece is perfect – no stains, nice knots, no wane [holes or missing chunks] – so they can show it off."
In China, most wood is regarded as a raw commodity to be chopped, ripped and used a handful of times – in concrete forms, or crate or pallet construction – and then simply thrown away or burned as fuel. The remainder is remanufactured into higher-valued finished products and furniture. There are also some niche applications for certain species of Canadian wood in China, but generally speaking, Chinese people have little use for wood as a high-quality structural product. They therefore have little interest in importing more expensive Canadian lumber.
Thanks be to Russia
This is not to say Canada’s position has not improved. Its relative share of Chinese lumber imports (China imports roughly one-third of all its wood) has increased recently, thanks largely to a strange decision by Russia. Given its proximity to China and the fact that the Siberian taiga is home to the world’s largest boreal forest, Russia was by both tradition and logic China’s only lumber source of note.
But over the last few years Moscow contrived to lose its lumber monopoly.
"Russian timber was well below world market prices, so any gaps that China had with raw material supply, Russia made up the difference," said Russell Taylor, president of research firm and consultancy International Wood Markets Group. "Then along came the Russian log export tax and everything changed."
In January 2007, Russia began implementing a series of export taxes on logs to all markets, including red pine crossing the border south. The initial levy was 6.5%, but it increased to 10%, then 20% and finally 25% by April 2008.
"When the tax got to 20% that was the first real shock," Taylor said. "Russia was even planning to go to 80% on January 1, 2009, and that was only stopped because of the world economic downturn. Ever since then, there’s been nervousness in China to secure low-cost and/or consistent sources of raw materials."
Moscow’s decision did have a basis in logic. Besides raising its wood prices on exports closer to international levels, the government wanted to attract timber investment into the country – having foreign companies build mills in Russia, creating local jobs and value-added products.
Unfortunately, this scheme failed, due in no small part to poor timing. The launch of the tax coincided with the onset of the collapse of the US property market. As US housing starts stumbled, so did prices of SPF lumber, declining to around US$140 per cubic meter for Grade-3 lumber, which is below cost. As the rot set in, many mills closed down.
The Russian tax achieved one thing: Canadian lumber suddenly became price-competitive.
"The prices got us into the market with low-grade wood, which gave us an opportunity to get our product into the hands of the Chinese and let them use it," said Chris McIver, vice president of lumber and panel sales for Vancouver-based West Fraser Timber, one of the country’s top wood exporters to China.
The advantage proved sustainable. Even as the North American market began to recover in 2009, pushing up lumber prices, Chinese buyers found they were hooked. "The initial reaction from Chinese customers [to price increases] was ‘That won’t work!’" said McIver. "But the prices of their other options had also risen, so we’ve been able to put through pretty substantial price increases."
Current prices for Grade-3 lumber to China (including customs, insurance and freight) are about US$210 per cubic meter. What’s more, with only so much low-grade wood available to ship to China, McIver says that his firm has been able to introduce increasing amounts of Grade-2 lumber to fill the gap, albeit at discounted prices compared those it can demand in the US market.
Not so fast
The Canadians have been hammering at China to buy high-quality lumber for a some time. In 2004, the BC government unveiled an ambitious five-year strategy to promote wood-frame building construction with its first demonstration project: Dream Home China, a wood-framed demonstration villa built in Shanghai’s Jinqiao District. It was followed by other demonstration units; a wood-framed school built in Sichuan province in the aftermath of the Wenchuan earthquake, renovation projects in Qingdao and multi-family buildings in Beijing.
The goal of these demonstration projects is simply to reintroduce Chinese consumers, who have built with concrete and brick for the past 60 years, to the construction medium that once held up so much of their traditional architecture.
This will take time. Wood still has an image problem in China. As impressive as they are, massive wood-frame villas reinforce the perception of wood as an expensive bourgeois building material, suitable only for stand-alone single-family homes. And respect for traditional architecture is mostly limited to placing traditional roofing atop concrete boxes.
At the same time, wood is also paradoxically associated with instability and inferiority. "People in China may still perceive wood-frame homes as shacks and outhouses – or temporary structures. The popularization of wood-frame construction will probably take up to a generation in time before its practical benefits are more widely accepted," said Taylor.
Unfortunately for Canadian exporters, consumer attitudes are only half of the problem. Canada has also had to lobby Chinese policymakers to adopt wood-frame building codes and set construction standards allowing for their use.
Mike Hogan, general manager of Forestry Innovation Investment (FII), a BC government-owned group that has promoted wood-frame construction for seven years in China, has worked with the Ministry of Construction and Ministry of Housing and Urban-Rural Development at the national level. He finds the policy environment confusing and contradictory.
"There is no single government position on wood-frame houses," he said. "We’re getting a lot of cooperation from government at all levels, but I can also point to regulations or statements or positions that are inconsistent with that."
To change the attitude at state level, Canadian wood proponents like Hogan stress the product’s virtues and how it is aligned with Beijing’s goals concerning sustainable construction. They argue that properly built wood-framed buildings are more energy efficient, lighter, require less foundation, are sourced from carbon-neutral plantations, and are more seismically stable than brick and concrete structures.
The low number of wood-frame buildings constructed in China – and ongoing cement overcapacity – makes it hard to compare the cost of building with wood versus concrete in China. But Hogan points out that the wood-frame school in Sichuan that FII China helped build cost 10% less than neighboring concrete schools built after the quake.
Wood framing is also compatible with Chinese construction preferences, he said. "The vast majority of residences in China are six-story-and-under walk-ups. That happens to be the very best use for wood-frame construction."
Still, the central government is wary of growing dependent on foreign imports of a key building material. Beijing wants to be self-sufficient in wood by 2015.
Fortunately for Canada, it is highly unlikely that China will pull this off. In fact, Wood Markets’ Taylor believes that China will actually have to maintain or increase imports in the coming years. China’s total demand for wood by 2015 is estimated at 350 million cubic meters roundwood equivalent (which includes every form of wood, from wood chips and logs to recycled newspaper).
Though China is home to the world’s largest tree plantation, it is dominated by fast-growing trees mostly useful for paper and pulp rather than lumber. Domestic supply is projected at only 200 million cubic meters, so the gap will need to be made up by more imports.
Canada hopes that the Chinese government will ultimately throw its weight fully behind the concept of wood-frame construction, as Japan did after the devastating Kobe earthquake in 1995. If so, Canadian lumber mills might find themselves in a golden age of plenty.?It is also possible that China will find a new way to use the wood. "A lot of lumber imports could be used in wood-frame construction, but we don’t need put it in the same box we do in North America," said McIver of West Fraser. "The Chinese will use our lumber in ways we’ve never thought of."