12 10 8 6 4 2 US
Import Regions Canada exports of softwood lumber, combined North American construction and economy/utility grade categories 2011
12 10 8 6 4 2 Canada
Export Regions China imports of softwood lumber, combinedNorth American construction and economy/utility grade categories
come from a deeper understanding of the needs and desires of the market place (ie ‘value’ to whom?). While one of these values will continue to be low cost commodities for home construction by builders and developers, there are opportunities to expand products and markets in more complete building systems, offering increased speed of construction, lower on-site labour needs, increased environmental attributes (such as cellulose based insulation), and a growing focus on appearance products. All of these end-uses require unique optimization processes right back to the forests. Dr Chris Gaston is an associate professor in the Faculty of Forestry and a senior
research scientist with FPInnovations. To help with the needed linkage of market signals back through manufacturing, log allocation (and, therefore, forest policy) Chris and his colleagues have been investigating supply and global trade modelling techniques that allow for greater product flexibility. The models being developed allow us to forecast the effects of changing the balance of log and lumber grades among possible end-uses and geographic markets, along with the ability to run “what-if” scenarios. This work is further developing a trade model initially developed by Chris and coworkers over 15 years ago. With the 2013 improvements, the researchers can run supply and demand scenarios
for 3 categories of lumber (representing appearance, construction and economy grades), 3 categories of logs (high and low grade sawlogs, and pulpwood), and ‘bio-mass’ (represented by wood chips and wood pellets). Concurrently, a supply model is being developed using BC as a case study, incorporating cross-price effects of the 3 log categories. As an example of a scenario analysis, the graphs show simulated trade (Canada exports and China imports) of 2 combined lumber categories, being that represented by North American construction grade and economy/utility grade. The scenario run included: 1) decreased supply over time due to the BC Mountain Pine Beetle and harvest reductions in Ontario and Quebec; 2) increase in US importer demand due to rising housing starts, and an increase in China’s demand. It is interesting to see that in this forecast scenario that Canada exports to China decreased, with the growing demand being met by the Russian Federation. It is also interesting to see that Canada does not export any of this category of lumber to any of the listed import regions other than to the US, China, or the small amount to ‘Rest of World’ (RoW). These are the types of questions that are investigated in market-driven value chain optimization. • How would increased demand for glue-laminated timber in North America play out in terms of capital investments in manufacture, grade of lumber demand and log allocation in eastern versus western Canada? • Who would ‘win the fibre auction’ with further increases in the demand for bio-energy; a pellet plant or low-grade lumber producer? • What will be the after-effects of the Mountain Pine Beetle epidemic? • What are the effects on factors such as exchange rates and oil prices on optimal fibre allocations? • What are the policy implications of these scenarios? For further information on this research contact Dr Chris Gaston at email@example.com.