Analysts advise investors that Canada's forest industry is poised for growth, expect supply constraints to support price increases later this year and into 2012

Wendy Lisney

LOS ANGELES , April 29, 2011 (Forestweb) – The Canadian forestry industry is poised for growth as a number of factors converge to support higher prices in the years ahead, analysts say.

Canaccord Genuity,  the global capital markets division of Canaccord Financial Inc., has advised that supply constraints such as the implications of the mountain pine beetle infestation in western Canada, will help lift prices later this year and into 2012, the Financial Post reported on April 28.

Analysts also expect the gradual U.S. housing recovery to offers a source of export growth, especially as 25% of Canadian lumber supplies the U.S. remodeling market which is expected to turn sharply upwards this year.

Canaccord Genuity expects increased exports to Asia to absorb available Canadian lumber, with statistics from the government of British Columbia indicating that Canadian offshore export shipments will grow at a rate of 34% this year. Shipments of lumber from the province to China have doubled from a year earlier.

Toronto Dominion Bank (TD) analysts note that China has surpassed Japan as the largest export market for North American lumber. China mainly uses lumber for industrial applications, but TD believes there is significant room for growth in the wood-frame housing market.

Last month the British Columbian government's trade mission included showing an energy-efficient modular building in Beijing to promote the advantages of wood construction in mid-rise residential buildings, which form 70% of China’s housing development. In this sector, China averages up to 7 million housing starts annually.

According to RBC analysts, Canada was the largest supplier of lumber to Japan in 2010, with 38% of their total softwood lumber imports, and the earthquake and tsunami will also help lumber sales. Wood is the material of choice for builders in Japan who recognize its earthquake-tolerant properties.

PriceWaterhouseCooper said in its 2010 review that the global forestry industry should see a rise in the number of mergers and acquisitions as the industry consolidates, diversifies geographically and diversifies into growth markets.

The primary source of this article is the Financial Post, Don Mills, Ontario, on April 28, 2011.

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