Required Report - public distribution

**Date:** 12/14/2005

**GAIN Report Number:** CA5065

CA5065

**Canada**

**Solid Wood Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Lisa Anderson

U.S. Embassy

**Prepared by:**

Christina Patterson

**Report Highlights:**

Softwood lumber production is forecast to increase in 2006 as a result
of the increase in allowable annual cut in several timber supply areas
in British Columbia, due to the Mountain Pine Beetle infestation.
Exports of softwood lumber are forecast to increase slightly as
production increases and demand remains strong. The pace of housing
starts in Canada is expected to decline slightly in 2006, but the demand
for softwood products, furniture, millwork products, kitchen cabinets,
structural wood products and many other wood products is still expected
to be strong. Increased third country competition, especially from
China, is forcing major changes and consolidations in the Canadian
forestry and furniture industries.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ottawa \[CA1\]

\[CA\]

Table of Contents

[**SECTION 1. SUMMARY 4**](#section-1.-summary)

[SECTION 2. PRODUCTION 4](#section-2.-production)

[2.1 Forest Situation & Outlook 4](#forest-situation-outlook)

[2.11 Issues Facing the Forestry Industry
4](#issues-facing-the-forestry-industry)

[2.11.1 Mountain Beetle Infestation in British Columbia and Alberta
4](#mountain-beetle-infestation-in-british-columbia-and-alberta)

[2.11.2 Certification of Canada's Forests
6](#certification-of-canadas-forests)

[2.11.3 Changes to Quebec's Forestry Industry
6](#changes-to-quebecs-forestry-industry)

[2.11.4 Wood Packaging Regulations 7](#wood-packaging-regulations)

[2.2 Solid Wood Products Situation & Outlook
7](#solid-wood-products-situation-outlook)

[2.21 Consolidation in the Canadian Lumber Industry
7](#consolidation-in-the-canadian-lumber-industry)

[2.22 Impacts on the Canadian Forestry Sector
8](#impacts-on-the-canadian-forestry-sector)

[2.23 Softwood Lumber Dispute 8](#softwood-lumber-dispute)

[SECTION 3. TRADE 9](#section-3.-trade)

[3.1 Overview 9](#overview)

[3.2 Competition and Markets 10](#competition-and-markets)

[3.21 United States 10](#united-states)

[3.22 China 11](#china)

[3.23 Japan 11](#japan)

[SECTION 4. MARKET SEGMENT ANALYSIS
12](#section-4.-market-segment-analysis)

[4.1 Construction Sector 12](#construction-sector)

[4.11 Overview 12](#overview-1)

[4.12 Structural Wood Building Components
13](#structural-wood-building-components)

[4.13 Other Millwork Products 15](#other-millwork-products)

[4.14 Prefabricated Wood Buildings 15](#prefabricated-wood-buildings)

[4.15 Wood Window and Door Products 16](#wood-window-and-door-products)

[4.2 Furniture & Interiors Sector 16](#furniture-interiors-sector)

[4.21 Overview 16](#overview-2)

[4.22 Issues Facing the Canadian Furniture Industry
17](#issues-facing-the-canadian-furniture-industry)

[4.22 Policy 17](#policy)

[4.23 Shipments 18](#shipments)

[4.23 Trade 18](#trade)

[4.23.1 Furniture and Related Products
18](#furniture-and-related-products)

[4.23.2 Office Furniture 19](#office-furniture)

[4.23.3 Kitchen Cabinets 19](#kitchen-cabinets)

[4.24 Market Opportunities 20](#market-opportunities)

[4.3 Material Handling Industry 20](#material-handling-industry)

[Importers of Wood Products for Manufacturing
20](#importers-of-wood-products-for-manufacturing)

[SECTION 5. STATISTICAL INFORMATION
26](#section-5.-statistical-information)

[5.1 Softwood Log Situation/Outlook 26](#softwood-log-situationoutlook)

[Table 1: Softwood Log Supply and Distribution
26](#table-1-softwood-log-supply-and-distribution)

[5.2 Softwood Lumber Situation/Outlook
26](#softwood-lumber-situationoutlook)

[Table 2: Softwood Lumber Supply and Distribution
26](#table-2-softwood-lumber-supply-and-distribution)

[5.3 Softwood Plywood Situation/Outlook
27](#softwood-plywood-situationoutlook)

[Table 3: Softwood Plywood Supply and Distribution
27](#table-3-softwood-plywood-supply-and-distribution)

[5.4 Hardwood Log Situation/Outlook 27](#hardwood-log-situationoutlook)

[Table 4: Hardwood Log Supply and Distribution
27](#table-4-hardwood-log-supply-and-distribution)

[5.5 Hardwood Lumber Situation/Outlook
28](#hardwood-lumber-situationoutlook)

[Table 5: Hardwood Lumber Supply and Distribution
28](#table-5-hardwood-lumber-supply-and-distribution)

[5.6 Hardwood Plywood Situation/Outlook
28](#hardwood-plywood-situationoutlook)

[Table 6: Hardwood Plywood Supply and Distribution
28](#table-6-hardwood-plywood-supply-and-distribution)

[5.7 Oriented Strandboard Situation/Outlook
29](#oriented-strandboard-situationoutlook)

[Table 7: Oriented Strandboard Supply and Distribution
29](#table-7-oriented-strandboard-supply-and-distribution)

[APPENDIX 1. 29](#appendix-1.)

[Find FAS on the World Wide Web: 32](#find-fas-on-the-world-wide-web)

[Recent Reports from FAS/Ottawa: 32](#recent-reports-from-fasottawa)

#  

# 

# SECTION 1. SUMMARY

The Canadian lumber industry continued the trend of consolidation and
mergers throughout 2004 and 2005, in order to better position itself to
compete on the world market. In addition, the industry continued to seek
out new markets and attempted to expand in existing ones. The forest
industry is focused on taking advantage of the rapid growth in China. As
the output of finished wood products from China continues to increase,
Canadian wood exporters are looking to be primary suppliers. The only
problem this creates is that while the forestry industry increases raw
wood exports to China, the finished products are returning to Canada and
competing and sometimes displacing wood products produced in Canada,
like furniture. But as the amount of products from China continues to
increase in Canada, some of the larger furniture markers are looking to
take advantage of that growing economy by outsourcing some of the
production to China. As a result, the furniture industry is going
through another major change, in which it is attempting to survive and
thrive in the face of new market realities.

The U.S. continues to be a primary market for most Canadian forestry and
value-added wood and manufactured products, but Canadian producers,
processors and industries are losing market share in the U.S., due to
increased competition from places like China and some of the other Asian
Pacific countries. Issues like the ongoing softwood lumber dispute with
the U.S. and the infestation of the Mountain Pine Beetle in British
Columbia (B.C.), continue to plague Canada's forest industry. Despite
this, the industry is making efforts to adjust and deal with the issues
head on and continues to be a producer and exporter of Canadian wood
products.

# SECTION 2. PRODUCTION

## 2.1 Forest Situation & Outlook

On an annual basis, Natural Resources Canada publishes *The State of
Canada's Forests* found at the following link:

<http://www.nrcan-rncan.gc.ca/cfs-scf/national/what-quoi/sof/latest_e.html>

The report provides a comprehensive overview of Canada's forests and
forest industry, including production, allowable annual cut per
province, trade statistics and industry information.

### 2.11 Issues Facing the Forestry Industry

#### 2.11.1 Mountain Beetle Infestation in British Columbia and Alberta

#### 

The ongoing Mountain Pine Beetle epidemic in B.C. has, as of 2004,
infected more than seven million hectares of forest in the B.C.
interior, killing more than 283 million cubic meters of timber. This
area is roughly the size of New Brunswick and is continuing to increase.
Five of the seven million hectares are lightly to severely infected,
while the remaining two million have trace amounts of infection. The
estimation is that more than 90 million cubic meters of pine per year
could die and that the epidemic is likely to last another 10 years,
affecting more than 80 percent of merchantable lodgepole pine in the
interior. In 2003, B.C. and Alberta accounted for approximately 33.8%
and 12.5% of the total area harvested for industrial roundwood in
Canada.

In response, the B.C. provincial government developed and is
implementing its 2005-2010 Mountain Pine Beetle Action Plan, which sets
out both the short- and long-term steps to mitigate the beetle's impact
on forest values, communities and the provincial economy. In addition,
the province has committed \$101 million CDN (\$86 million USD) over the
next three years to reforestation of beetle and fire-damaged areas and
to mitigate the economic impact to communities. As the spread of the
beetle infection is not limited by provincial boundaries, the
governments of B.C. and Alberta signed a five-year renewable Memorandum
of Understanding (MOU) to share a one-year cost of \$1.65 million CDN
(\$1.42 million USD) to take measures to slow the spread along the
B.C.-Alberta border. At the request of B.C.'s government, the Government
of Canada contributed \$100 million CDN (\$85.6 million USD) in
financial assistance to help with the impact of the beetle infestation.
As a result, the *Mountain Pine Beetle Emergency Response: Canada-B.C.
Implementation Strategy* was developed to outline how these federal
funds will be used over the next three years to help deal with the
economic, environmental and social challenges created by the pine beetle
infestation. The funding provided by the federal government is expected
to target certain areas such as:

-   Fuel management treatments for communities and First Nations located
    in the mountain pine beetle infested areas.

-   Controlling the beetle's spread in parks and areas along the outer
    edges of the infestation.

-   Research and development of new wood products and markets, and
    research to assist forest management decision-making.

-   Forest cover data to assist forest management decision-making.

-   Ecosystem restoration.

-   Management of range issues.

-   Co-ordination and administration.

In addition to the monetary contributions to fighting the beetle
infestation, B.C.'s Chief Forester continues to review the allowable
annual cuts on an as-needed basis for affected timber supply areas. In
2004, the B.C. government had increased the allowable annual cut in the
Prince George and Quesnel timber supply areas by 4.7 million cubic
meters. The increase resulted in the awarding of four forest licenses to
CH Anderson and Partners. The licenses are for 10 years and 10.5 million
cubic meters of timber, and requires CH Anderson to construct or
significantly expand timber-processing facilities that produce something
other than dimensional softwood timber. CH Anderson is planning on
investing \$110 million in building four plants to manufacture
industrial wood pellets for use as sustainable biofuels in European
thermal power plants. In addition to the four licenses granted to CH
Anderson, two other 15-year forest licenses, totaling 21 million cubic
meters will be awarded in the near future.

In 2005, the allowable annual cuts in the Merritt, the Cranbrook and
Invermere timber supply areas were increased by 1.3 million, 33,000
thousand, and 17,000 thousand cubic meters respectively. Currently, an
increase of 400,000 thousand to 1 million cubic meters in the Okanagan
timber supply area is under review. The increase in allowable annual
cuts in the various timber supply areas is being used to help manage the
mountain beetle infestation.

Next to controlling and ending the beetle infestation, salvaging the
beetle-damaged wood before the wood loses commercial value is one of the
major hurdles faced by B.C.'s government and lumber industry. One of the
goals of B.C.'s pine beetle action is to create new markets for
beetle-killed timber, thereby utilizing the large volumes of damaged
wood that would otherwise become worthless. The provincial government
introduced and passed a bill in 2004 that allowed it to designate an
area of Crown land as a mountain pine beetle salvage area. Two
non-replaceable forest licenses totaling 1.25 million cubic meters of
wood and roughly 2.5 million cubic meters of beetle-damaged wood have
and will be advertised for tenures through a competitive bid process. In
order to meet that challenge some of the major lumber producers in B.C.
are investing money to expand the capacity of their sawmills to process
the beetle-damaged wood. Canfor Corporation announced plans to spend
\$104 million to expand its Vanderhoof, B.C. mill in order to process
millions of cubic meters of beetle-damaged wood. The expansion will
increase the mill's annual production capacity to 620 million board
feet. West Fraser Timber Co. Ltd. has also announced plans to invest
hundreds of million of dollars to expand the capacity of their sawmills.
The provincial government is offering new harvesting licenses to
companies who are willing to invest in plants that will produce
commodities from the beetle-damaged timber. Ainsworth Lumber Co. Ltd. is
investing \$400 million to build two oriented strandboard (OSB) plants,
which will use logs from the beetle-killed pine stands that have
degraded to such a state that makes them undesirable for lumber
production. The two plants will increase Ainsworth's production capacity
by 43 percent from 3.5 billion square feet of OSB panels annually to 5
billion square feet. Additional uses for the beetle-damaged wood are
blue-stained wood furniture and biomass as a source of energy. The
increased production capacity could possibly lead to higher lumber
exports to the United States in the short-term, but the long-term affect
of the beetle destruction will result in a decrease in both production
and exports from B.C.'s interior region.

The investment of money into expansion of mills, increased lumber
processing capacity, increased OSB production and other product
utilization of beetle-damaged wood will provide increased employment
opportunities in the short-term. Unfortunately, as the beetle-damaged
wood runs outs and B.C. timber supply is dramatically reduced due to the
beetle infestation, the lumber industry will be forced to scale back and
possibly shut down production at certain mills in order to remain
viable. The investment in new mills and plants and the encouragement by
the provincial government to identify new markets for the beetle-damaged
wood, has created a short-term economic boom for B.C.'s lumber industry.
However, over the next 15 years, additional plans will have to be
developed to help the industry deal with the new reality of a
dramatically reduced timber supply.

#### 2.11.2 Certification of Canada's Forests

The increasing demand for certified forest products in the marketplace
has resulted in an increase in the area of certified forests in Canada.
Certification of forest products indicates that those products have
originated from sustainably managed forests. As of April 2005, Canada
had the largest certified area of sustainably managed forests in the
world, with approximately 113.2 million hectares out of a total of 402
million ha of forest and other wooded land certified under one of the
three forest-specific certification systems available in Canada. This
represents an annual allowable cut of over 94 million cubic meters. The
distribution under the three certification systems are -- Canadian
Standards Association (CSA), 67.3 million ha; Sustainable Forestry
Initiative (SFI), 37.2 million ha; and Forest Stewardship Council (FSC),
9.7 million ha. The total amount of certified forested area in Canada is
80 percent higher than what was reported last year and almost five times
what it was three years ago, due to broad industry commitment to
sustainable forest management in order to meet customer needs. At this
pace, Canada is expected to achieve and exceed the January 2002
commitment, which was agreed to by the Forest Products Association of
Canada (FPAC), to have 136 million ha certified by 2006. As forest
certification is occurring in both Canada and the United States, the
increasing supply of certified forest products in North America should
be able to meet demand from consumers. The FAO has indicated that there
is a shortage of supply in certified sawn hardwood. As Canada relies on
imports of sawn hardwood from the U.S., any increase in the production
of certified sawn hardwood in the U.S. could result in an increase in
imports of sawn hardwood from the U.S. to meet Canadian consumers
demands for certified hardwood.

<http://www.forestinformation.com/newenvironmentalism/certification_art1.asp>

**Certification Status in Canada (million hectares)**

  ----------------- ----------------- ----------------- -----------------
                    September 15,     June 06, 2004     June 1, 2002
                    2005                                

  **CSA**           67.3              32.9              8.8

  **FSC**           9.7               4.2               1.0

  **SFI**           37.2              21.4              8.4

  **Total**         113.2             57.7              18.2
  ----------------- ----------------- ----------------- -----------------

Source: Natural Resources Canada

#### 2.11.3 Changes to Quebec's Forestry Industry

In December 2004, the final report on the Commission for the Study of
Public Forest Management in Quebec was made public. The mandate of the
Commission was to examine the management of public forests and make
recommendations in response to the needs of the population of Quebec.
Some of the key findings of the Commission were that Quebec's public
forests are over-harvested and the methods used to assess them and to
evaluate the maximum sustainable yields are inadequate. The report
proposed five major changes: a move towards ecosystem based management
and completion of the protected area network, allocations that consider
tree quality and the accessibility of forest stands in given areas
rather than volume-based wood allocations, better planned silviculture
treatments, preparation for the inevitable consolidation of the wood
products industry, and decentralized forest management. The Commission
indicated that the recommendations be included in the next set of
management plans and that the implementation of the plans be postponed
until 2008 to allow this to be accomplished.

In order to accomplish the goals set out by the Commission, one
component of the recommendations is to reduce the annual allowable cut
for the main softwood species (fir, spruce, jack pine and larch) by 20%
and to maintain this reduction until 2008. Although groups like the
Quebec Forest Industry Council (QFIC) favorably view many of the
recommendations, they firmly oppose the immediate 20% reduction of the
allowable annual cut. Instead, the QFIC proposed that the government
implement a gradual approach to the reduction in which the annual
allowable cut would be implemented starting with a 10% reduction in
2005-06, a 15% reduction in 2006-07, and finally a 20% reduction in
2007-08. However, rather than heeding industry advice, the government of
Quebec implemented the 20% reduction in a blanket approach across all
regions of the province. The reduction took effect April 1, 2005. Quebec
is the second largest producer of softwood products in Canada next to
British Columbia. Although Quebec will be reducing its softwood
production, this should be more than compensated for by the increase in
production in B.C., due to the increase in annual harvest levels in
several timber supply areas in the province as a result of the beetle
epidemic. Although B.C. will most likely compensate for what is lost in
production from Quebec, there is a possibility of tighter softwood
lumber supplies as demand continues to be strong and is expected to
increase with the rebuilding of the areas devastated by the hurricanes
in the United States.

Quebec Forest Industry Council

<http://www.cifq.qc.ca/html/english/index.php?PHPSESSID=817fab774f9c5b342b940398083566d5>

Coulombe Commission Final Report Summary

<http://www.commission-foret.qc.ca/rapportfinal/Report_Summary.pdf>

#### 2.11.4 Wood Packaging Regulations

On September 16, 2005, Canada began the first implementation phase of
the new regulations of wood packaging under the *International Standard
for Phytosanitary Measures (ISPM) No. 15*. During the first phase of
implementation, which runs until January 31, 2006, shipments with wood
packaging materials found to be infested will be refused entry. Notices
of non-compliance will continue to be issued to importers where no pests
are found, but where shipments are non-compliant. Post-entry treatment
of infested wood packaging materials will be discontinued. From February
1, 2006, non-compliant wood packaging will be refused entry into Canada.
However, Canada has established bilateral phytosanitary measures with
the United States. Therefore, existing phytosanitary import measures
applying to forest products produced in the U.S. provide sufficient
phytosanitary protection for Canada. Any Canadian or U.S. untreated wood
that has moved internationally is not eligible to enter or re-enter
Canada without treatment.

The Canadian Food Inspection Agency Forestry Section:

<http://www.inspection.gc.ca/english/plaveg/for/cwpc/wdpkge.shtml>

## 2.2 Solid Wood Products Situation & Outlook

### 2.21 Consolidation in the Canadian Lumber Industry

In order to remain competitive in the global market, Canada's lumber
industry has been consolidating operations to become more efficient,
reduce costs and enhance the industry's ability to respond to market
challenges. Increased competition from third countries, the stronger
Canadian dollar, increasing energy costs and higher delivered wood costs
have resulted in mill closures across Canada and numerous mergers and
acquisitions of various lumber companies. Additionally, the ongoing
softwood lumber dispute with the United States has also been a driving
force for companies to significantly reduce costs through consolidation,
enabling the Canadian lumber industry to remain competitive, in spite of
tariffs on their products being exported to the United States. Another
driver for the mergers of companies in the lumber industry has been the
consolidation of buyers, who are demanding increased security of supply,
better services and inventory management, and lower prices.

In 2005, mergers and consolidation continued in the lumber industry.
Pope & Talbot Ltd. acquired the Canfor-Fort St. James Sawmill Division
for \$39 million CDN (\$33 million USD) plus the value of inventory.
Brascan Corporation purchased Weyerhaeuser Company, B.C. Costal Group
for \$1.2 billion CDN (\$1.0 billion USD) plus working capital. Brascan
acquired 5 sawmills and 2 remanufacturing facilities in the deal.
Cambuim Group bought Bowater in Degelis, Quebec. Springer Creek Forest
Products Ltd. purchased the Canfor-Slocan Sawmill in B.C. for \$6.2
million CDN (\$5.3 million USD) plus the value of inventory. The mergers
and consolidation was not limited to lumber companies purchasing their
competitors or their facilities within Canada. International Forest
Products Limited purchased Floragon Forest Products Mollalla Inc., in
the U.S. Pacific Northwest for \$50 million (US) plus inventories. There
have also been rumors speculating that Canfor Corp. and West Fraser
Timber could be interested in purchasing U.S. forestlands and sawmills
from International Paper, one of the founders of the U.S. Coalition for
Fair Lumber Imports, which announced in July that it was changing its
business direction away from lumber, to concentrate on two key platform
businesses - uncoated papers, and consumer and industrial packaging.
International Paper owns 6.8 million acres of U.S. forestlands and its
wood products business produces 2.5 billion board feet of lumber, as
well as plywood, utility poles and engineered wood products. The
possible purchase of sawmills and forestlands by either or both of these
Canadian companies could have a significant impact on the viability of
the U.S. Coalition for Fair Lumber Imports and its standing in the
softwood lumber dispute. In the continuing mergers and consolidation
trend, Western Forest Products Ltd. is considering selling some of its
assets as a follow-up to a restructuring of its B.C. sawmilling
operations. By selling some of its assets, the company is attempting to
reduce costs in the face of a high-interest debt. As with many
companies, the impact of high lumber manufacturing costs, duty payments
on softwood lumber exported to the U.S., falling realization on company
pulp and lumber sales, as well as interest payments on its debt, has
resulted in the company restructuring its sawmill operations through the
closing of its Silvertree mill and an indefinite curtailment of its
Saltair mill. The restructuring is expected to improve productivity and
lower costs.

### 2.22 Impacts on the Canadian Forestry Sector

### 

High energy and wood delivery costs, the strong Canadian dollar and the
ongoing U.S.-Canada softwood lumber dispute have all taken a toll on the
Canadian lumber industry. In addition to consolidation and mergers, the
Canadian lumber industry has turned to government assistance at both the
provincial and federal levels for financial aid and tax breaks, which
can help it survive and remain competitive.

Quebec's forest industry has been hurt by the softwood lumber dispute,
soaring wood fiber prices and a shrinking North American newsprint
market. The mandatory harvest reduction is also expected to negatively
impact the province's forest industry. As a result, Quebec's forest
industry has received money from both the federal and provincial
governments. For Quebec, the federal government announced a \$50 million
CDN (\$42.8 million USD) investment plan over the next four years,
expected to start within the 2005 fiscal year, but subject to many
factors. The plan targets communities affected by the 20-percent
reduction in logging of softwood timber and offers loans to businesses
looking to diversify their operations. Quebec's provincial government is
providing the forestry sector with \$450 million CDN (\$385 million USD)
over the next three years to help it cope with the 20-percent reduction
in harvest. Of the money announced, only \$140 million CDN (\$120
million USD) is new. The money is allocated for use in job creation,
worker training, research and development, and tax breaks.

The Ontario provincial government has provided its forestry sector with
\$330 million CDN (\$283 million USD) over the next five years to help
boost job creation. Increasing energy prices have had a significant
impact on the industry in Ontario.

The Forest Products Association of Canada (FPAC) has recently called on
the federal government to provide the forestry industry with tax breaks
to help the industry become more energy self-sufficient through the use
of wood waste products such as biomass instead of fossil fuels. The FPAC
indicated that forestry companies lack the capital to make the
investment to convert their boilers to run on biomass; this is a result
of several factors including high energy costs, the soaring Canadian
dollar and the duties companies have had to pay out in the softwood
lumber dispute.

### 2.23 Softwood Lumber Dispute

A resolution to the ongoing softwood lumber dispute between the United
States and Canada still seems be remote, due to continued challenges and
appeals of the various and conflicting NAFTA and WTO rulings. Most
recently, in August 2005, the NAFTA Extraordinary Challenge Committee
(ECC) ruled against the U.S. in its determination that a previous NAFTA
panel had acted correctly in arriving at its September 2003 and
subsequent 2004 decisions that, unlike the U.S. International Trade
Commission's (ITC) threat of injury determination, there was in fact no
injury to the U.S. industry. The resulting expectation by the Canadian
government was that the duties on Canadian softwood lumber exports to
the United States would be subsequently removed and the duties collected
to date would be duly returned. However, the U.S. government then
indicated that the ruling by the ECC would have no impact on its
anti-dumping and countervailing duty orders and that the duties already
collected would not be returned. Recently, in its fifth NAFTA ruling on
the subject, a panel again ordered the U.S. to recalculate its duties on
Canadian softwood lumber imports. The panel, which is comprised of three
Americans and two Canadians, ruled unanimously that the U.S. Department
of Commerce (DOC) erred in the way it calculated log seller profits in
Quebec, Ontario, Manitoba and Saskatchewan and that it should
recalculate the countervailing duty (CVD) level. The previous ruling
resulted in the CVD dropping from 18.79 percent to 1.21 percent in July.
As a result of this ruling, the DOC issued a fifth remand determination
and found a new CVD rate of 0.80 percent. The DOC has also conducted an
administrative review of its CVD and anti-dumping duties in this case
and has announced these at
<http://w01.international.gc.ca/minpub/Publication.asp?publication_id=383532&Language=E>.
The Government of Canada and the industry will closely examine the
administrative review results to determine the next step.

However, in a separate ruling in August 2005, the World Trade
Organization (WTO) supported the 2004 ITC determination that Canadian
lumber does indeed pose a threat of injury to the U.S. lumber industry
and that the U.S. complied with international law when it implemented
duties on Canadian softwood lumber exports.

These conflicting determinations seem to indicate that any resolution to
this longstanding dispute will not be forthcoming any time soon. In the
meantime, Canadian exports of softwood lumber to the U.S. continue to be
strong and are expected to remain that way as the U.S. housing market
continues to boom and the southern states rebuild from the disaster
caused by several hurricanes.

# SECTION 3. TRADE

## 3.1 Overview

In spite of increased global competition, Canada remains one the largest
exporters of forest products in the world, accounting for roughly 16% of
world trade. In 2004, Canada exported \$44.6 billion CDN (\$38.2 billion
USD) in forest products, which includes softwood lumber, wood pulp,
newsprint, wood-based panels (structural), other wood products, builder
joinery and carpentry, wood-based panels (non-structural), and other
paper and paperboard. This was an increase of 12.6% over 2003 forestry
exports, due to the strong U.S. housing market. The United States
remains Canada's major export destination with exports totalling \$35.5
billion CDN (\$30.4 billion USD). Exports of Canadian forestry products
also played a major role, contributing \$34.5 billion CDN (\$29.5
billion USD) to Canada's trade balance in 2004.

![](media/image2.wmf)

Source: Natural Resources Canada

2005 exports of major forestry products to the U.S. are expected to
increase over 2004 exports as the demand for lumber remains strong due
to the continued boom in the U.S. housing market and the additional need
for lumber in order to rebuild from the hurricanes. Increased
competition from Chinese imports into the U.S. is displacing some
Canadian forestry exports to the U.S. and Post predicts this trend to
continue in the 2005 and 2006 calendar years. In addition to increased
competition from China, Russia and the Baltic States could also become
major competitors of Canada's forest industry. In order to maintain
Canada's position as the leading exporter of forest products, the
federal, provincial and territorial governments are working with
wood-product associations and the forestry industry to diversify
Canada's wood-product exports, and to expand overseas market
opportunities. Particular emphasis is currently being directed towards
China, a growing market that has now become Canada's fourth most
important wood-product customer.

## 3.2 Competition and Markets

### 3.21 United States

Despite various government and industry moves to seek out and establish
new export markets for Canadian forest products, the U.S. is and will
continue to be Canada's primary export market. The booming housing
market in the U.S. is showing very few signs of significantly slowing
down, as seen by the number of building permits reaching a 32-year high.
This is beneficial for Canadian forest products, as the demand for them
will continue to be strong. Moreover, with the significant destruction
caused by hurricanes in 2005 in the southern U.S., Canadian exports of
softwood lumber, OSB, and plywood are also expected to increase.

The Canadian furniture industry and other value-added wood industries
rely on imports of U.S. hardwood in order to produce for export. 2004
imports of hardwood lumber from the U.S. declined from 2003, as
restructuring in the furniture industry reduced demand. In particular,
the demand for oak has declined while demand for other U.S. hardwoods
such as cherry, western red alder, and hard maple increased in 2004.
This trend is expected to continue in 2005, as imports of oak lumber in
the first nine months of 2005 have declined in comparison to the same
2004 time frame. Imports of beech have declined in 2004 and in the first
nine months of 2005. Imports of other hardwoods have also benefited from
the decline in oak and beech imports and may be indicating a trend away
from beech and oak products towards cherry and maple products, within
the Canadian industry. U.S. hardwood lumber imports account for
approximately 98% of total hardwood lumber imports into Canada. The
impact of increased foreign competition in traditional markets for
Canadian products, the high Canadian dollar, and high energy costs, all
of which have impacted Canadian furniture producers, is resulting in a
lower demand for hardwood lumber products from outside Canada. U.S.
hardwood lumber imports are expected to remain an integral part of
Canadian furniture production in 2006, but imports are forecast to
decline again, as the industry continues to restructure and tries to
reduce costs by relying on domestically-produced lumber.

### 3.22 China

Through its recent trade missions and government consultations, the
Canadian government has been promoting its forest industry products in
China. With China's large and growing population and the demand for
forestry products continually increasing to meet the country's
manufacturing demands and domestic needs, Canadian officials and lumber
companies see China as a new and substantial outlet for Canadian
forestry products. With Russia and the Baltic States having a
geographical advantage, and other major forestry products producers,
including the United States, all attempting to take advantage of the
significant opportunities presented by the Chinese market, competition
is expected to be very strong.

Forestry Innovation Canada Ltd. (<http://www.bcfii.ca/>), a British
Columbia government marketing agency, has been very active in trying to
develop additional markets for B.C. lumber. The group works with lumber
industry companies to:

-   Increase access to the Chinese market through the introduction of a
    new Chinese building code that recognizes Canadian wood and
    construction standards for the first time

-   Increase awareness of wood product opportunities and applications in
    China through the five-year \$12 million Dream Home China
    demonstration project, phase 1 of which recently opened in Shanghai

-   Increase acceptance of wood-frame 2x4 housing systems in Japan. B.C.
    is now the largest supplier to the 2x4 housing segment of the
    Japanese home building industry, the largest growing segment of the
    Japanese housing sector.

In addition, projects for 2005 are:

-   Introduce a broader range of Coastal wood products, such as
    kiln-dried wood into the Japanese post and beam housing sector

-   Strengthen the U.S. market against competing non-wood products

-   Expand market opportunities for North American 2x4 construction in
    the fast growing Chinese marketplace

-   Position B.C. structural lumber for expected greater demand in Korea

-   Support research into structural properties of mountain pine beetle
    wood during different stages of attack and conducting a Chinese
    market analysis specifically for beetle wood

### 3.23 Japan

In addition to developing and increasing market presence in China, Japan
continues to be a critical marketplace for Canadian forest products.
This is especially true for B.C.'s Coastal forest industry. Coastal
Forest, a regional industry advocate, has launched programs to market
its products in Japan. Some of the initiatives taken by Coast Forest in
the Japanese market are:

-   Separation and differentiation of Canadian (BC Coast) Hemlock from
    the U.S. Hemlock lumber

-   Establishment of a name (Canada Tsuga) and brand (stylized house)
    for Canadian Hemlock lumber that is now readily identified in Japan
    by all end-users of Canada Tsuga

-   Initiation of research testing of Hemlock technical properties in
    Japanese building components

-   Development and launch of a new Hemlock product line in October
    2001, that is graded and grade-stamped as E 120, and approved by the
    Japanese government agencies, which identifies this product as being
    one of the strongest wood products in the Japan marketplace.

In addition, a second phase of lumber promotion in Japan has been
launched. Coast Forest is also working with the other groups in B.C. to
promote B.C. lumber in China.

# SECTION 4. MARKET SEGMENT ANALYSIS

## 4.1 Construction Sector

## 

### 4.11 Overview

According to Statistics Canada, 2004 was an outstanding year for
residential construction, with the total value of investment reaching
\$70.4 billion CDN (\$60.3 billion USD), the sixth consecutive year of
increased investment. All three components of investment in residential
construction (new housing, renovations and acquisition costs) recorded
strong gains over 2003. Low mortgage rates, the strong employment
situation, high consumer confidence and low apartment vacancies in a
number of major centers all contributed to the strong demand for new
housing. Investment in new housing construction reached \$36.0 billion
CDN (\$30.8 billion USD) in 2004, a 14.6% over 2003. Not only was there
an increase in investment in single-family homes, but there was also a
significant increase in investment in new apartment/condominium units,
due to an increase in housing starts and the rise in the average value
of these starts. Expenditures on renovations jumped by 13.6% to \$28.0
billion CDN (\$24 billion USD) in 2004. A contributing factor to the
increase was the high level of existing homes for resale in recent
years. Acquisition costs increased by 14.7% to \$6.3 billion CDN (\$5.4
billion USD) in 2004. Residential construction investment continued to
climb during the first two quarters of 2005. Residential investment
increased 8.6% and 6.7% in the first quarter and second quarter of 2005,
respectively. As was seen in 2004, low mortgage rates and their impact
on affordability, higher disposable income and employment levels, and
strong consumer confidence all helped to boost the housing market.
Higher housing prices also contributed to the increase in residential
construction outlays. Expenditures on new housing construction increased
6.6% in the first quarter and 4.3% in the second quarter in 2005, in
comparison to the first and second quarters of 2004. In both the first
and second quarter of 2005, an increase in spending on new
apartments/condominiums was the largest contributor to the increase in
new housing construction. Investment in single-family dwellings also
increased in both quarters. Investment in renovations is showing no
signs of slowing down as spending jumped 10.8% and 8.5% in the first and
second quarter of 2005, respectively. Acquisition costs rose by 9.7% in
the first quarter and 11.9% in the second quarter of 2005 over the same
periods in 2004. Higher housing prices is expected to contribute to a
forecast increase in residential construction outlays in 2006, despite
the fact that housing starts are expected to decline.

However, despite the strong residential investment, Canadian housing
starts in 2005 are starting to show signs of slowing down, decreasing
10% from 2004, due to a small increase in mortgage rates. The decline in
housing starts in October is part of a general trend of gradual cooling
in the housing sector from its red hot pace in 2004. Nevertheless,
housing starts are still considered to be strong and are expected to
continue to remain so for the rest of the year and into 2006. According
to the Canadian Mortgage and Housing Corporation (CMHC), housing markets
across Canada will continue to respond to low mortgage rates, but
increased competition from the existing home market, rising mortgage
carrying costs due to strong house price growth, and modest increases in
mortgage rates will all contribute to the slight cooling in the pace of
new home construction in 2006. Housing starts are forecast to remain
over 200,000 units in 2006, the fifth consecutive year that starts will
be over the 200,000 levels. The slow down in the housing sector can also
be seen in the decline in reduction of number of residential building
permits during the first nine months of 2005. According to Statistics
Canada, the number of new units (seasonally adjusted) approved since the
beginning of 2005 has declined 3.3% to 175,560 units from 181,498 units
in the first nine months of 2004. Despite the decline in the number of
units, the total value of the permits has increased by 4.1% to \$28.4
billion CDN (\$24.3 billion USD), as a result of the increase in the
price of new dwellings. The strong value of residential permits has
contributed to an overall increase in total value of building permits
(both residential and non-residential) and has offset a decline in the
value of non-residential permits. The total value of permits from
January to September of 2005 was \$45.2 billion CDN (\$38.7 billion
USD), a 10.7% increase over the first nine months of 2004. The increase
in value of residential permits from August to September of this year is
attributed to a rebound in the value of multi-family permits and a small
increase in single-family permits.

The strong housing markets and renovation activity in both Canada and
the U.S. is creating supply pressures on building materials. Lumber
prices hit a 10-year high in 2004, as the active 2004 hurricane season
and an already hot U.S. housing market further spurred demand. Price
corrections are expected to reduce Canadian export earnings, as well as
capacity constraints and transport bottlenecks. The strong demand for
building materials is placing renewed strain on transportation capacity.
Canadian mills, particularly in the west, have been experiencing railcar
shortages in 2005. Increased lumber loadings and fewer railcars are
creating problems moving product. Strong demand and supply constraints
have helped keep lumber prices high in 2005. With the reduction in
production in Quebec, the supply constraints situation may become worse
if B.C. is not able to cover the loss in supply. This should cause
lumber prices to stay at higher levels in 2005 and possibly into 2006.

### 4.12 Structural Wood Building Components 

The strong growth in the construction sector in both the U.S. and Canada
has fueled the demand for wood structural building components over the
last 10 years. Production of glulam, trusses, arches, I-beams or
I-joists, laminated veneer lumber (LVL) and other products used in the
construction of building have been increasing at a rapid pace. Glulam,
I-beams and LVL fall under the category of engineered wood products or
EWP, but other structural products are also considered EWP. Glulam is a
structural timber product manufactured by gluing together individual
pieces of dimensional lumber and is used for headers, beams, girders,
columns, and heavy trusses. It is often used where the structure of a
building is left exposed as an architectural feature and offers
architectural freedom without sacrificing structural requirements.
Canadian glulam is manufactured in three species combinations: Douglas
Fir-Larch, Hem-Fir and Spruce-Pine. According to the UNECE/FAO, glulam
production in Canada reached a record high of 40,000 cubic meters in
2004, due to the strong housing market and stock beam capacity that was
available to service increased demand. Production is forecast to decline
slightly in 2005, as consumption and exports are forecast to drop
slightly from 2004. The U.S. is the primary market for Canadian glulam.

I-beams are made by gluing sold sawn lumber or LVL flanges to a plywood
or OSB panel web to produce a dimensionally stable light-weight product.
I-beams are well suited for longer span joist and rafter applications
for both residential and commercial construction. In some instances
where large dimensions of solid sawn framing lumber is difficult to
obtain, I-beams can be used as floor joists and as deep, insulated roof
joists. In addition, I-beams are an economical alternative to open web
steel joist. According to UNECE/FAO, I-beam production in Canada reached
122.5 million linear meters in 2004, as strong residential construction
increased demand. Production is forecast to decline slightly in 2005 as
the number of housing starts begins to slow down.

LVL is a layered composite of wood veneers and adhesive and can be cut
into stock for headers and beams, flanges for I-beams or for other
specific uses. Common species used for LVL are Douglas fir, larch,
southern yellow pine and poplar. LVL is used for beams and headers where
high strength, dimension stability, and reliability are required. LVL is
used primarily as structural framing for residential and commercial
construction and is well suited to applications where web steel joists
and light steel beams might be considered. According to the UNECE/FAO,
Canadian LVL production soared in 2004 to 220.9 thousand cubic meters as
a result of the boom in the housing sector. In addition, the increased
use of LVL by home design engineers also helped fuel the increase in
production of LVL. Production of LVL in 2005 is forecast to remain
around the same level as 2004 despite the fact that housing starts are
slowing down. LVLs are being used more in beams and headers than on
I-beam flanges, which should help maintain the demand.

Another EWP is parallel strand lumber (PSL), which is a high strength
structural composite lumber product produced by gluing strands of wood
together under pressure. In Canada, PSL is produced from Douglas fir.
The product has consistent properties and a high load carrying ability.
The creation of PSL enables smaller plantation and second growth timber
to be utilized. PSL is used for beams, columns for post and beam
construction, and for beams, headers and lintels for light framing
construction. It is also used for large members in residential
construction and as intermediate and large members in commercial
building construction. Market acceptance of structural wood products,
the shift from larger dimension lumber to EWPs and the shift from stick
build homes to factory-built homes, have all contributed to the growth
of the structural wood products industry.

The overall increase in production of fabricated structural wood
products has been a result of the changing nature of the softwood fiber
supply, a need to optimize wood products output from a changing timber
resource and the prevalence of wood-frame construction within North
America. As more and more lumber is being sourced from second and third
cuts, which tend to be smaller diameter trees, the wood products
industry has had to adjust. Structural wood products (SWP) utilize wood
fiber from smaller trees very efficiently and in some instances can be
manufactured from certain species that are underutilized and relatively
inexpensive. The development of SWP is also a result of industry efforts
to create products that perform better than traditional wood products.
Solid sawn lumber is restricted by the size of the log from which it is
cut and its strength is inherently variable due to natural
characteristics of the log. In contrast, SWP can be manufactured in a
variety of sizes and dimensions to match specific applications.
According to the APA-The Engineered Wood Association, SWP have
consistent, stable dimensions, a high strength to weight ratio, the
ability to span long distances, and specific design values. In addition,
SWP are easier to work with than traditional dimensional lumber, speed
up the construction process, require less on-site labor, increase design
flexibility by providing longer spans and wider spacing, reduce the need
for skilled construction workers, require less cleanup of the job site,
are less likely to be stolen, and reduce callbacks.

Structural wood building components have displaced dimensional lumber to
some extent in certain residential construction applications. Roof
trusses have replaced traditional roof framing, I-beams and floor
trusses have taken market share from dimensional lumber in floor joist
applications, and LVL and glulam have taken market share from
dimensional lumber in beam and header applications. The result has been
an overall increase in the demand for structural wood products in
Canada. According to the Wood Products Council, the average amount of
engineered wood used per housing start for single-family detached houses
in Canada nearly tripled between 1995 and 1998 and the average amount of
engineered wood used per housing start for townhouses and apartments in
Canada more than tripled between 1995 and 1998. The demand and use of
structural wood building products is expected to continue to remain
strong in the coming years, but the demand for these products is
expected to slow down in pace as many have already replaced traditional
building components and products, thereby resulting in a more steady
demand, rather than a fast paced increase in demand.

The development and growth of value-added woods products like structural
wood products has been driven by changes in the industry and partially
funded by the various levels of government in Canada. In addition to
competing with traditional wood products, there is competition between
the various structural wood products for use by the construction sector.
The fluctuation in the production of the various products can be
attributed to competition within the structural wood industry. But
despite the competition, the overall production of structural wood
products has been increasing the in last several years. Exports of
structural wood products has also been increasing over the last ten
years, with the U.S. being the primary export market for Canadian
structural wood products. In many instances, exports of structural wood
products from Canada to the U.S. are from plants in Canada that are
owned and operated by companies in the United States. As a result, some
of the exports coming from Canada to the U.S. are actually U.S.
companies bringing their own products, typically made from Canadian
wood, into the U.S. from their factories in Canada, not Canadian
companies supplying the U.S. market. Exports of structural wood products
are impacted by the strength of the Canadian dollar and by the Canadian
housing market and domestic demand. This, in combination with the slight
decline in pace of the housing industry, has resulted in a slight slow
down in the pace of exports of structural wood products to the U.S.
during in 2005. Increased competition from other countries is also
expected to impact Canadian exports of structural wood products to the
United States in 2005 and in 2006. Japan is the second largest market
for Canadian structural wood exports.

Imports of structural wood products into Canada continue to remain
relatively small, but are increasing. The U.S. is the primary source of
structural wood imports into Canada, but imports from other countries
have been increasing over the last 5 years, reducing the U.S. share of
total imports of structural wood products.

As primary forest sources continue to change and the lack of skilled
workers within the Canadian construction industry continues, the demand
for structural wood products is forecast to continue to increase. The
development of new uses and applications will continue to drive the
demand for traditional and new structural wood products both in the in
the residential and non-residential industries. Despite the slowing pace
of housing starts, the continued expectation of growth in the new
housing industry and the strong renovation market will all help drive
demand for structural wood products. The demand for structural wood
products is forecast to be strong in 2006, although not as strong as
2005, due to an expected decline in the number of housing starts.

### 4.13 Other Millwork Products

The production and shipment of products that fall under the Other
Millwork category (see page 31 for definition) has increased over the
last 10 years. The products that fall under this category are used in
the construction of houses and other buildings. The boom in the housing
market has driven up the demand and production of these products. Since
1994, the value in shipments from principal establishments has increased
250 percent to \$3.5 billion CDN (\$3.0 billion USD) in 2003. Exports
accounted for approximately 16% of manufacturer shipments in 2003,
indicating that a large portion of product is utilized within Canada.
Manufacturer shipments for 2004 are expected to be higher than 2003 as a
result of the record number of housing starts in 2004. Total exports
increased in 2004 by 10.5% from 2003, with exports to the U.S. also
increasing by 13.7% in 2004. Exports to the U.S. accounted for 93% of
the total exports in 2004. Total Canadian exports of other millwork
products have tapered off in the first eight months of 2005, falling
approximately 5.0 percent and exports to the U.S. have declined by 7.0
percent, due to combined factors of the cooling housing market and
increased competition from China. Exports of other millwork products are
forecast to continue to decline in 2006, as the pace of housing
continues to slow, competition from China remains strong and the strong
Canadian dollar hampers exports.

Total imports of other millwork products increased 25% to \$536 million
CDN (\$459 million USD) since 2003, due to an increase in 2004 housing
starts. Imports from the U.S. in 2004 increased 3.5% over 2003 and
accounted for approximately 40.6% of the total imports. The U.S. share
of total imports has been declining over the last several years as
imports from other sources like China and Austria have both increased
dramatically. The rapid rise in Chinese imports and imports from other
countries have been displacing imports of other millwork products from
the United States over the last several years. During the first eight
months of 2005, total imports have increased by 16.7% compared to the
same period in 2004, with imports from China and Brazil increasing 72.1%
and 60.7% respectively, reducing the U.S.'s market share in 2005 to 37.3
percent. In contrast, imports from the U.S. have only increased by 1.3%
so far in 2005. Total imports are expected to be higher in 2005,
compared to 2004, despite the slow down in the housing market, as the
demand for these products continues to be strong for use in the
renovations of older houses and the completion of the new houses.
Imports for 2006 are forecast to continue to increase, as demand is
expected to remain strong for renovations and the new housing market.
Imports from China are forecast to continue increasing, taking a larger
portion of the Canadian market, thereby further reducing the U.S. market
share.

The strong housing market in the U.S. has helped maintain demand for
Canadian manufactured wood products, including those that fall under the
Other Millwork category. Some of these products are made from hardwood
lumber and logs. Canada is limited in the volume of hardwood logs and
lumber it produces and as a result, the manufacturers of these products
import the lumber and logs primarily from the U.S. and export the
finished products back to the United States.

### 4.14 Prefabricated Wood Buildings

2003 prefabricated wood building shipments declined 5.7% to \$681.4
million CDN (\$583.2 million USD) after peaking in 2002, due to a
reduction in the number of principal establishments in 2003. In
addition, exports dropped by approximately 10% as exports to Canada's
two largest markets, the United States and Japan, declined, due to a
shift in preference for other forms of housing structures. Exports
continued to decline in 2004 as the demand for prefabricated wood
buildings further decreased due to the strong Canadian dollar and
increased competition from countries like China. However, exports during
the first eight months of 2005 have rebounded, mainly due to increased
U.S. demand resulting from the natural disasters in the southern United
States. 2006 exports of prefabricated wood buildings are forecast to
remain at a similar level as 2005 exports, as the rebuilding efforts in
the southern U.S. continue. If Canadian exporters are able to capitalize
on the growing Chinese market, 2006 exports may even increase slightly
above 2005 export levels.

Total prefabricated building imports jumped by 37% in 2004 to \$151
million CDN (\$129 million USD), as the housing market continued to boom
in Canada. The U.S. accounted for approximately 85% of total imports.
Prefabricated wood buildings accounted for roughly 4.2% of the total
prefabricated building imports in 2004, with the U.S. prefabricated wood
building imports accounting for the overwhelming majority. Prefabricated
wood building imports are steadily accounting for a larger and larger
percentage of the total prefabricated building imports. Imports of
prefabricated buildings and wood buildings have increased dramatically
in the first eight months of 2005, with increases of 20% and 32.8%
respectively, mostly from the United States. Besides the U.S., Sweden,
Finland and Belgium primarily supply the prefabricated wood building
import market. Although there has been a reduction in the number of
establishments producing prefabricated buildings in Canada, demand
remains high and a result of the strong housing market -- a trend that
is expected to continue in 2006.

### 4.15 Wood Window and Door Products

Over the last ten years, there has been considerable growth in the
production, and number of establishments and shipments of the Canadian
wood window and door industry, with manufacturer shipments increasing
82% since 1993. That said, 2003 shipments in the wood window and door
industry were unchanged from 2002, remaining at approximately \$2.0
billion CDN (\$1.7 billion USD), due to increased competition from metal
windows and doors. However, in 2004, exports of wood windows and doors
increased by 12.4% to \$508 million CDN (\$435 million USD) in 2004,
with exports to the U.S. accounted for 97.4% of the total. The strong
housing market in the U.S. is the primary driver behind this increase in
exports. Exports to Japan, Canada's second largest market, have steadily
declined since 2000, but increased slightly in 2004, due to an increase
in housing starts. Exports for the first eight months of 2005 increased
over the same period in 2004, forecasting an overall increase in exports
in 2005, due to an increase in demand from the U.S. and Japanese markets
resulting from strong housing starts. Competition from other countries
and from metal windows and doors, and the slow down in housing starts in
the later half of 2005 and into 2006 are forecast to result in a decline
in exports in 2006.

Total 2004 imports of wood windows and doors increased 15.6% to \$156
million CDN (\$133 million USD) from 2003 due to strong demand. The
demand for products like wood windows and doors is strongly tied to
housing starts. As housing starts remain strong, so does demand for wood
windows and doors. The U.S. is the primary source of wood window and
door imports, accounting for 77.4% of total 2004 imports. U.S. imports
into Canada have been relatively stable over the last five years, but as
total imports have continued to climb, the percentage of imports from
the U.S. has been declining, due to increased competition from China. As
a comparison, 2000 imports of wood windows and doors from China
accounted for less than 1% of total imports, whereas, 2004 imports
accounted for 9.3% of total imports. Imports from other countries like
Brazil have also increased significantly since 2000. Total imports of
wood windows and doors are forecast to decline in 2005 as housing starts
have slowed. Imports in 2006 are forecast to decline in conjunction with
the slower pace of housing starts.

## 4.2 Furniture & Interiors Sector

### 4.21 Overview

The demand for furniture tends to follow the trend in the housing
markets. After several years of booming housing markets in both the U.S.
and Canada, the demand for furniture remains high, despite the recent --
albeit slight -- cooling in the housing market. This, in combination
with low interest rates and strong employment growth has resulted in
increases in demand and purchasing of larger ticket items like
furniture. Furniture sales are expected to remain strong for the next
couple years as the purchase of furniture for new housing is typically
spread over a few years. In addition, the strong renovation market is
also spurring demand, as new furniture is expected to replace older
furniture. Indoor furniture sales in Canada for the first two quarters
of 2005, based on unadjusted retail numbers from Statistics Canada, have
increased 6.4% from the same period in 2004, due to the strong demand.
Indoor furniture sales includes mattresses and foundations, nursery
furniture and equipment, and all other indoor furniture, including home
office furniture. The forecast for the remainder of 2005 and for 2006 is
for furniture sales to slow, mirroring the slight decline in the housing
market. The U.S. continues to be the primary market for Canadian
furniture exports, with 2004 furniture exports to the U.S. valued at
approximately \$5.0 billion CDN (\$4.3 billion USD). This includes
office furniture and household furniture.

### 4.22 Issues Facing the Canadian Furniture Industry

The increasing importation of Asian-manufactured furniture is forcing
Canadian companies to become more efficient and competitive. For
example, Shermag, Canada's largest furniture manufacturer is in the
process of undergoing changes to ensure it remains competitive on the
global market. Shermag has worked towards differentiating its domestic
production through the customization of its products while
simultaneously using global sourcing to broaden its assortment and
maintain a low cost position. Globally-sourced products represented
approximately 20% of Shermag's revenue in 2004/2005. In addition,
Shermag will be undergoing significant consolidation in its domestic
operating activities and a reduction of cost structures. Shermag is one
of the few companies that acquired it's own hardwood sawmills, which
enables the company to utilize hardwood and veneer produced at its own
facilities. The factors influencing Shermag's market, namely interest
rates, housing sales and house remodeling, and personal income growth,
are not expected to change dramatically in the near term. The U.S./CDN
exchange rate is expected to stabilize at current levels. Consequently,
Shermag must continue to adapt to a changing North American economic
environment for the furniture industry. Other large furniture companies
like Palliser have also been making changes to the way they operate in
order to continue to compete globally. Palliser also sources furniture
from other markets, like Indonesia. In addition, the company's leather
furniture destined for the U.S. market will be produced in Mexico. Its
production in Canada is focused on goods for the Canadian market and
value-added products for the U.S. that tend not to be adversely affected
by currency. The company is citing the weakness of the U.S. dollar, a
very competitive environment, and inefficiencies within its own business
as reasons for a decline in net earnings. Strong competition from Asia
has seriously limited the possibility of increasing prices to compensate
for the weaker U.S. dollar. Production of low-margin products has been
shifted to Asia. Many Canadian factories are being converted from
mass-market to made-to-order productions, which takes time.

China is a major competitor in the wood furniture industry. Low labor
costs, low capital investment in manufacturing plants, and logs from
Russia allow Chinese wood furniture manufacturers to produce furniture
at lower cost and rapidly export it in large quantities to the U.S.
market, thereby displacing Canadian furniture manufacturers. In addition
to sourcing raw materials from Russia, China imports raw materials from
Canada, utilizing them to produce wood furniture that then competes with
Canadian wood furniture in the U.S. and Canadian markets. While the
Canadian forest industry is actively promoting this and is attempting to
increase raw material exports to China, the result is many of the
products created out of Canadian wood are returning to compete and in
some cases displace domestically-produced wood products, both within
Canada and the United States. As a result, the Canadian wood furniture
industry is undergoing major changes and, within the next five years, is
not expected to look anything like it currently does. The signing of
NAFTA in the 1990s resulted in the first series of major changes to the
Canadian furniture industry; now this second series of major changes is
required in order to effectively compete with lower-cost Chinese
imports. However, despite the increased competition with Chinese
imports, there is a recognition within the Canadian furniture industry
that there is and will continue to be a demand for higher quality pieces
of furniture produced by Canadian and U.S. furniture manufacturers. As a
result, some Canadian furniture companies will continue to cater to the
higher end market, thereby creating an exclusive market, which the lower
quality imports will be unable to access.

### 4.22 Policy 

In early November 2005, The Canadian Council of Furniture Manufacturers
(CCFM) filed a complaint with the Canadian International Trade Tribunal
(CITT), seeking an inquiry into household furniture imports from China.
The CCFM is an umbrella organization, made up of the Quebec Furniture
Manufacturers Association, the Ontario Furniture Manufacturers
Association and Furniture West. The CCFM contends that the rapid
increase in Chinese furniture imports has disrupted the Canadian
furniture market, resulting in material injury to the Canadian industry.
It maintains that Canadian manufacturers are losing market share and in
order to adjust to the realities of the new market, Canadian
manufacturers need more time to adjust, given the pace at which Chinese
imports have been increasing. The CITT has 21 days (some time in
December 2005) to decide if an investigation is warranted and then has
90 days (some time in March 2006) to make recommendation to the
government. CCFM's complaint to the CITT has met with resistance from
some of the larger Canadian furniture importers, who maintain that
duties on imported Chinese furniture would increase costs for retailers
and decrease consumer demand for furniture in general.

### 4.23 Shipments

Shipments of furniture and related products from principal
establishments (incorporated establishments with employees, primarily
engaged in manufacturing and with sales of manufactured goods equal or
greater than \$30,000) fell 2.5% to \$12.9 billion CDN (\$11.1 billion
USD) in 2003. Household furniture shipments accounted for 32.2% of total
furniture and related products shipments, with a value estimated at
\$4.2 billion CDN (\$3.6 billion USD). Wood furniture accounted for well
over half of the household furniture shipments (61.9% in 2003). The wood
furniture sector also accounted for 20.2% or one-fifth of shipments
within the broader furniture industry.

### 4.23 Trade 

#### 4.23.1 Furniture and Related Products

Furniture and Related Products exports have increased by 1.4% in 2004 to
\$6.99 billion CDN (\$5.99 billion USD). In 2004, the U.S. remained the
primary destination for Canadian furniture and related products exports,
with exports increasing marginally by 1.3% to \$6.74 billion CDN (\$5.78
billion USD). An increase in exports in the office furniture category --
approximately half of total furniture and related products exports -
helped offset the decline in exports in the household and institutional
furniture and kitchen cabinets category. Overall household furniture
exports declined by 4.5% to \$1.79 billion CDN (\$1.54 billion USD) in
2004, due to increased competition within the U.S. and in third markets,
and a strong Canadian dollar. Within the household furniture category,
overall wood furniture exports declined by 3.5% and by 3.2% to the
United States for this same reason. Wood furniture accounted for 72.3%
of total household furniture exports and approximately 20% of total
furniture and related product exports in 2004. For the first eight
months of 2005, exports of household furniture declined by 11.9% and
wood furniture exports have declined by 11.2% in comparison to the same
time frame in 2004. Reflecting this general decline, 2005 exports to the
U.S. are down since 2004, but exports to the United Kingdom have
rebounded and exports to Thailand continued to increase due to an
increase in consumer demand in those countries and the efforts by the
furniture industry to supply other markets. Canadian furniture exports
are forecast to decline again in 2006, as the industry continues to
adjust, competition remains strong, the Canadian dollar stays high and
housing markets begin to cool. Despite the declining trend in Canadian
furniture exports, Canada continues to be one of the leading furniture
exporters in the world.

After declining in 2003, imports of furniture and related products
imports increased by 22.2% to \$4.5 billion CDN (\$3.86 billion USD) in
2004, due to strong housing starts and the continued influx of Chinese
furniture. Most of this increase was in household furniture imports,
which accounted for 81.8% of total furniture and related products
imports. Imports of household furniture from China continued to increase
at a rapid pace in 2004, up 35.6 percent, from 2003 and increasing its
share of total imports to 42% at the expense of imports from the United
States. From 2000 to 2004, the U.S. share of total imports declined from
46% to 25%, while China's share of total imports increased from 23% to
42 percent. Data for the first eight months of 2005 indicate that this
trend will continue, with Chinese household furniture imports up 9.4%
and U.S. furniture imports increasing very slightly over the same period
in 2004. China had been gaining ground in household furniture imports
since 2000, but only officially overtook the U.S. as the dominant
household furniture supplier in 2003. Wood furniture accounted for 44.8%
of household furniture imports in 2004. Wood furniture imports increased
21% in 2004 and are following the same trend as household furniture
imports, with China becoming the dominant supplier and the U.S.
continuing to lose ground. Imports of furniture in 2006 are forecast to
increase slightly over 2006, as consumer demand continues to remain
strong. Imports from China are forecast to increase again in 2006,
unless a tariff is placed on Chinese furniture imports (see 4.22
Policy). The size of the tariff placed on Chinese furniture imports
could negatively impact Chinese imports, but provide an opportunity for
other countries, including the U.S., to increase furniture imports to
meet market demand.

#### 4.23.2 Office Furniture 

Total office furniture (includes wood and non-wood office furniture)
exports increased by 5.5% in 2004 to \$3.46 billion CDN (\$2.97 billion
USD) since 2003, due to strong non-residential building starts. Office
furniture exports to the U.S., which accounted for 96.5% of total office
furniture export sales, increased by 5.4 percent. Wood office furniture
exports accounted for 18.3% of total office furniture exports, but did
not follow the upward trend of the industry, with exports dropping by
3.8% in 2004. Wood office furniture exports to the U.S. declined by 4.6%
in 2004. Wood office furniture exports have been declining since peaking
in 2000, due to increased competition in the U.S. marketplace and
declining demand for wood office furniture. Total office furniture and
wood office furniture exports have both declined in the first eight
months of 2005, compared to the same period in 2004, as non-residential
building starts have slowed. Exports of office furniture are forecast to
decline again in 2006 as the Canadian dollar remains strong, competition
from China continues to increase and the non-residential buildings
starts continue to cool.

Office furniture imports into Canada also increased in 2004 to \$2.21
billion CDN (\$1.90 billion USD) from \$1.72 billion (\$1.48 billion
USD) in 2003. Imports from the U.S. account for 56.8% of the total
office furniture imports in 2004, which is a decline from 2000 when
imports of U.S. office furniture accounted for 69% of the total. As with
household furniture imports, office furniture imports from China are
rapidly increasing and displacing U.S. imports, but not as rapidly.
Although wood office furniture imports only made up 5.5% of total office
imports in 2004, this represents an increase over 2005. For the first
eight months of 2005, imports of U.S. wood office furniture have
declined 10.1% and Chinese imports have increased 19.1 percent. Total
office furniture imports for 2006 are forecast to remain at a similar
level as 2005 imports, as demand remains relatively constant. Imports of
Chinese office furniture are forecast to increase yet again in 2006,
further displacing U.S. office furniture imports.

#### 4.23.3 Kitchen Cabinets 

Canadian kitchen cabinets shipments increased 5.2% in 2003 to \$2.4
billion CDN (\$2.1 billion USD) from 2002. Since 1993, manufacturer
shipments of kitchen cabinets have increased approximately 167% to \$2.4
billion CDN (\$2.1 billion USD) in 2003. In addition, the number of
principal establishments has increased from 698, with 9,981 employees in
1993, to 946, with 23,262 employees in 2003. Like many other value-added
wood industries, the kitchen cabinet industry is primarily located in
Ontario and Quebec, with a smaller, but growing, presence in British
Columbia. The strong housing markets in the U.S. and Canada, plus the
signing of NAFTA, has contributed to the steady growth of the kitchen
cabinet industry. However, despite the strong demand, 2003 exports of
kitchen cabinets declined 6.5% to \$1.16 billion CDN (\$0.99 billion
USD) since 2002 and accounted for less of total shipments due to the
rise in the Canadian dollar and increased competition. Exports of
kitchen cabinets continued to decline in 2004, dropping slightly to
\$1.15 billion CDN (\$0.99 billion USD), as increased competition from
China and the high Canadian dollar negatively impacted export sales. For
the first eight months of 2005, exports are 6.5% lower than in the same
2004 time period, due to the same reason. With exports to the U.S.
accounting for 98.7% of total kitchen cabinet exports in 2004, the U.S.
is by far the main market for Canadian kitchen cabinet exports. The
kitchen cabinet industry has been attempting to increase exports to
other countries, such as Bermuda and Japan, but these countries still
represent less than 2% of total Canadian exports. Overall kitchen
cabinet exports, including those to the U.S., are forecast to fall again
in 2006, despite a forecasted increase in exports to markets outside the
United States, due to strong competition from countries like China and
the unfavorable exchange rate for Canadian goods.

Total kitchen cabinet imports for 2004 dropped 1.9% to \$102 million CDN
(\$87 million USD) from 2003, as the reduction in exports provided more
products for the Canadian market. In 2004, imports from the U.S.
declined by 11%, but still accounted for 72% of total kitchen cabinet
imports, while imports from China continued to increase in 2004, jumping
76% and accounting for approximately 14% of total kitchen cabinet
imports. Imports of kitchen cabinets from China have been gaining a
larger portion of the Canadian market, at the expense of U.S. imports.
Overall kitchen cabinet imports have increased 9.1% in the first eight
months of 2005 compared to 2004, as result of the strong housing and
renovation market. Imports from the U.S. have also increased by 2.64%,
but account for only 69% of total imports in 2005. In addition, imports
from other sources, like China, Slovakia, Malaysia, Denmark and others,
have increased significantly in the first eight months of 2005.

### 4.24 Market Opportunities

The Canadian furniture market is very similar to the U.S. market, both
of which are driven by housing starts and house renovations. Both
markets are facing a similar situation in terms of increased competition
from Chinese imports. A possible tariff on Chinese furniture imports may
help to stem the flow into the Canadian market, thereby also providing
U.S. furniture manufacturers some relief and the opportunity to regain
some of the Canadian market share. The demand for high-quality, high-end
furniture, as well as customized furniture products, is always present
and provides an opportunity for U.S. manufacturers to take advantage of
this market.

## 

## 4.3 Material Handling Industry

Canadian Wood Container and Pallet Manufacturing Industry:

<http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis32192defe.html>

# Importers of Wood Products for Manufacturing

The importers list below comprises those companies that collectively
account for the top 80 percent of all imports in terms of value. These
importers are not necessarily the end users. The wood products imported
by the companies listed below all originated in the United States, but
do not account for the total imports of each product into Canada in
2004.

Major Canadian Importers for 2004, Source: Industry Canada

  ----------------------- ----------------------- -----------------------
  Product                 Company Name            Province

  **440710-Lumber                                 
  (Thickness \>6mm) --                            
  Coniferous Wood**                               

  A D Bernier Inc                                 Quebec

  AFA Forest Products Inc                         Ontario
  Ontario                                         

  Allmar Distributors                             Manitoba

  B B Pallets                                     Quebec

  Boccam Inc                                      Quebec

  Bois Demers Lumber Inc                          New Brunswick

  Bois Omega Limitee                              Quebec

  Canadian National                               Quebec
  Railway Company                                 

  Century Truss Company                           Ontario
  Canada                                          

  City Lumber Sales and                           British Columbia
  Services Ltd                                    

  Colonial Pillars Inc                            Ontario

  Dynamic Forest Products                         Ontario
  Ltd                                             

  Futura Properties Ltd                           British Columbia

  Goodfellow Inc                                  Quebec

  Great Lakes MSR Lumber                          Ontario
  Limited                                         

  Green River Log Sales                           British Columbia
  (1996) Ltd                                      

  Heatwave Technology                             British Columbia
  Inc.                                            

  Interbois Inc                                   Quebec

  Jacomau Inc                                     Quebec

  Jeld-Wen of Canada Ltd                          Manitoba
  Head Office                                     

  Keystone Forest                                 British Columbia
  Products Ltd                                    

  KML Windows Inc                                 Ontario

  Les Industries P F Inc                          Quebec

  Les Sechoirs a Bois                             Quebec
  Rene Bernard Ltee                               

  Lighthouse Lumber                               Nova Scotia
  Wholesalers Ltd                                 

  Loewen Windows                                  Manitoba

  Marwin Industries Inc                           British Columbia

  Masonite International                          Ontario
  Corporation                                     

  McIlveen Lumber                                 Alberta
  Industries (Alta.) Ltd                          

  Moulure Alexandria                              Ontario
  Moulding Inc                                    

  North Pacific Group Inc                         Oregon

  Northern Building                               British Columbia
  Supply Ltd                                      

  Ontario Wholesale                               Ontario
  Lumber                                          

  Phaze 2 Investments Ltd                         Alberta

  Radisson Design Inc                             Quebec

  Roland Boulanger & CIE                          Quebec
  Ltee                                            

  Sawmills Division                               New Brunswick

  Sechoirs De Beauce Inc                          Quebec

  Shaw Wood Industries                            Nova Scotia
  Ltd                                             

  Shy's Forest Products                           British Columbia
  Ltd                                             

  Stella-Jones Inc                                Quebec
  Westmount                                       

  SWP Industries Inc                              New Brunswick

  Taiga Forest Products                           British Columbia

  Terminal Forest                                 British Columbia
  Products Ltd                                    

  TFL Forest Ltd                                  British Columbia

  Tolko Industries Ltd                            British Columbia

  Trentonworks Limited                            Nova Scotia

  Triad Forest Products                           British Columbia
  Ltd                                             

  West Bay Forest                                 British Columbia
  Products and                                    
  Manufacturing Ltd                               

  Western Whitewood                               British Columbia

  Weston Forest Corp                              Ontario

  Weyerhaeuser Company                            British Columbia
  Limited                                         

  **440391-Wood in the                            
  Rough - Oak**                                   

  Bois Bohemia Inc                                Quebec

  Bois Franc Cyclone Inc                          Quebec

  Bois Francs Kingsey Inc                         Quebec

  Bois Hunting Inc /                              Quebec
  Hunting Lumber Inc                              

  Bois-Franc Cambium Inc                          Quebec
  / Cambium Hard Wood Inc                         

  Eloi Moisan Inc                                 Quebec

  Foresbec Inc                                    Quebec

  General Woods & Veneers                         Quebec
  Ltd                                             

  Les Bois Francs                                 Quebec
  St-Charles Inc                                  

  Les Bois Poulin Inc                             Quebec

  Les Entreprises J M                             Quebec
  Champeau Inc /                                  
  Enterprise J M Champeau                         
  Inc                                             

  Malette International                           Quebec
  Inc                                             

  Manufacture de Lambton                          Quebec
  Ltee                                            

  Multibois F L Inc                               Quebec

  Norcraft Canada                                 Manitoba
  Corporation                                     

  Roland Boulanger & CIE                          Quebec
  Ltee                                            

  Scierie Dion & Fils Inc                         Quebec

  Ste-Therese Div of                              Quebec
  Commonwealth Plywood Co                         
  Ltd                                             

  Transylve Inc                                   Quebec

  Vexco Inc                                       Quebec

  **440392 -- Wood in the                         
  Rough - Beech**                                 

  Albert Larocque Lumber                          Ontario
  Ltd                                             

  Bois Franc Spec Inc                             Quebec

  Dalkeith Lumber Inc                             Ontario

  Groupe Pare-Brossel                             Quebec
  Ltee "En Faillite"                              

  Les Bois Jean-Pierre                            Quebec
  Ltee                                            

  Les Bois Poulin Inc                             Quebec

  Les Produits Forestiers                         Quebec
  Becesco Inc                                     

  Megabois (1989) Inc                             Quebec

  Sawmills Division                               New Brunswick

  Scierie West Brome Inc                          Quebec

  **440399 -- Wood in the                         
  Rough Nes and Logs for                          
  Pulping**                                       

  Amex Bois Francs Inc                            Quebec

  Baronet Inc                                     Quebec

  Bois Bohemia Inc                                Quebec

  Bois Franc Cyclone Inc                          Quebec

  Bois Hunting Inc /                              Quebec
  Hunting Lumber Inc                              

  Columbia Forest                                 Ontario
  Products Ltd                                    

  Domtar Inc / Wood                               Quebec
  Products Group                                  

  Foresbec Inc                                    Quebec

  Garant GP                                       Quebec

  General Woods & Veneers                         Quebec
  Ltd                                             

  Gibeault & Fils Limitee                         Quebec

  Industries                                      Quebec
  Manufacturieres                                 
  Megantic Inc                                    

  Joseph Audet Ltee                               Quebec

  Les Billots Select                              Quebec
  Megantic Inc                                    

  Les Bois Jean-Pierre                            Quebec
  Ltee                                            

  Les Bois Poulin Inc                             Quebec

  Les Entreprises J M                             Quebec
  Champeau Inc /                                  
  Enterprise J M Champeau                         
  Inc                                             

  Megabois (1989) Inc                             Quebec

  Panneaux Maski Inc                              Quebec

  Produits Forestiers                             Quebec
  St-Armand inc                                   

  Sawmills Division                               New Brunswick

  Scierie Arbotek Inc                             Quebec

  Scierie Dion & Fils Inc                         Quebec

  Scierie Leclerc Et                              Quebec
  Tremblay Inc                                    

  Ste-Therese Div of                              Quebec
  Commonwealth Plywood Co                         
  Ltd                                             

  Transylve Inc                                   Quebec

  **440791 -- Lumber                              
  (Thickness \> 6mm) --                           
  Oak**                                           

  A & D Wood Turning                              Ontario

  Alpa Forest Products                            Ontario
  Inc                                             

  Aurora Timberland                               Ontario
  Wholesale Hardwood                              
  Lumber Inc                                      

  BFS 2002 Inc                                    Quebec

  Craftsmen Hardwoods                             Ontario

  Cut Rite Lumber Limited                         Ontario

  Defehr Furniture Ltd                            Manitoba

  DZD Hardwood Export Inc                         Quebec
  / La Compagnie                                  
  D'Exploitation du Bois                          

  Erie Flooring & Wood                            Ontario
  Products                                        

  Foresbec Inc                                    Quebec

  Formations Inc                                  Alberta

  Goodfellow Inc                                  Quebec

  Groleau Inc                                     Quebec

  Hardwoods                                       British Columbia

  Hardwoods Specialty                             British Columbia
  Products LP BC Group                            

  Herwynen Saw Mill Ltd                           Ontario

  Industrial Hardwood                             Ontario
  Holdings Ltd                                    

  Interforest Lumber Inc                          Quebec

  Lancashire Saw Sales &                          Saskatchewan
  Service (Canada) Ltd                            

  Lauzon -- Planchers de                          Quebec
  Bois Exclusifs Inc                              

  Les Bois Jean-Pierre                            Quebec
  Ltee                                            

  Les Entreprises Exulon                          Quebec
  Inc                                             

  Les Parquets Dubeau                             Quebec
  Ltee                                            

  Les Produits Forestiers                         Quebec
  M E S Inc                                       

  Master Woodworking                              Ontario
  Centre Ltd                                      

  Moulure Alexandria                              Ontario
  Moulding Inc                                    

  Nicholson and Cates                             Ontario
  Limited                                         

  Ontario Hardwood                                Ontario
  Products Limited                                

  Pallan Timber Products                          British Columbia
  (2000) Ltd                                      

  Peter Thomson & Sons                            Ontario
  Inc                                             

  Planchers Des                                   Quebec
  Appalaches Ltee /                               
  Appalachians Flooring                           
  Ltd                                             

  Preverco Inc                                    Quebec

  Reimer Hardwoods Ltd                            British Columbia

  Renyco Inc                                      Quebec

  Satin Finish Hardwood                           Ontario
  Flooring Ltd                                    

  Sauder Hardwoods Inc                            British Columbia

  Sechoirs J S Inc                                Quebec

  Ste-Therese Div of                              Quebec
  Commonwealth Plywood Co                         
  Ltd                                             

  Taiga Forest Products                           British Columbia
  Ltd                                             

  Tembec Industries Inc                           Ontario
  -- Pulp Group Kraft                             
  Plant                                           

  The Oliver Lumber                               Ontario
  Company of Toronto Ltd                          

  Upper Canada Forest                             Ontario
  Products Ltd                                    

  Weston Forest Corp                              Ontario

  Woodland Supply & Mfg                           Manitoba
  Co                                              

  **440792 -- Lumber                              
  (Thickness \>6mm) --                            
  Beech**                                         

  BOA-Franc Inc                                   Quebec

  Bois Peladeau Inc                               Quebec

  C A Spencer Inc                                 Quebec

  Chipco BWC Inc                                  Ontario

  Erie Flooring & Wood                            Ontario
  Products                                        

  Industries Bois Ditton                          Quebec
  Inc / Ditton Wood                               
  Industries Inc                                  

  Lauzon -- Planchers de                          Quebec
  Bois Exclusifs Inc                              

  Les Bois J M Arbour Inc                         Quebec

  Peter Thomson & Sons                            Ontario
  Inc                                             

  Preverco Inc                                    Quebec

  Societe en Commandite                           Quebec
  Prolam                                          

  Tembec Forest Products                          Ontario
  Inc                                             

  Upper Canada Forest                             Ontario
  Products Ltd                                    

  **440799 -- Lumber                              
  (Thickness \>6mm) --                            
  Birch, Maple, Poplar,                           
  Aspen and Other Nes**                           

  Alpa Forest Products                            Ontario
  Inc                                             

  Aurora Timberland                               Ontario
  Wholesale Hardwood                              
  Lumber Inc                                      

  Barco Materials                                 Ontario
  Handling Limited                                

  BOA-Franc Inc                                   Quebec

  Bois Franc Spec Inc                             Quebec

  Bois Peladeau Inc                               Quebec

  Brenlo Ltd                                      Ontario

  Britannia Inc                                   Ontario

  C A Spencer Inc                                 Quebec

  Carlwood Lumber Ltd                             British Columbia

  Corporation de Bois                             Quebec
  Rimprex                                         

  Cut Rite Lumber Limited                         Ontario

  Durham Furniture Inc                            Ontario

  DZD Hardwood Export Inc                         Quebec
  / La Compagnie                                  
  D'Exploitation du Bois                          

  Eldcan Forest Products                          British Columbia
  Ltd                                             

  Erie Flooring & Wood                            Ontario
  Products                                        

  Finmac Lumber Limited                           Manitoba

  Foresbec Inc                                    Quebec

  Formations Inc                                  Alberta

  Goodfellow Inc                                  Quebec

  Hardwoods Specialty                             British Columbia
  Products LP BC Group                            

  Interforest Lumber Inc                          Quebec

  Jamie Boomhower Wood                            Quebec
  Finishing Inc                                   

  Kamloops Forest                                 British Columbia
  Products Ltd                                    

  Kitchen Craft of Canada                         Manitoba
  Ltd., KC Manitoba Ltd                           

  Lauzon - Planchers de                           Quebec
  Bois Exclusifs Inc                              

  Les Bois J M Arbour Inc                         Quebec

  Les Entreprises Exulon                          Quebec

  Les Produits Forestiers                         Quebec
  M E S Inc                                       

  Les Produits Forestiers                         Quebec
  P M S Inc                                       

  Maritime Dimension                              New Brunswick
  Hardwoods Inc                                   

  Maritime Lumber Limited                         New Brunswick

  Metric Woods Limited                            Ontario

  Nicholson and Cates                             Ontario
  Limited                                         

  Olympic Forest Products                         Ontario
  Inc                                             

  Ontario Hardwood                                Ontario
  Products Limited                                

  Ornamental Mouldings                            Ontario
  Company                                         

  P.J. White Hardwoods                            British Columbia
  Ltd                                             

  Peter Thomson & Sons                            Ontario
  Inc                                             

  Planchers Des                                   Quebec
  Appalaches Ltee /                               
  Appalachians Flooring                           
  Ltd                                             

  Preverco Inc                                    Quebec

  Primewood Lumber                                Quebec

  Reimer Hardwoods Ltd                            British Columbia

  Renyco Inc                                      Quebec

  Sauder Hardwoods Inc                            British Columbia

  Sawmills Division                               New Brunswick

  Societe en Commandite                           Quebec
  Prolam                                          

  Ste-Therese Div of                              Quebec
  Commonwealth Plywood Co                         
  Ltd                                             

  Tembec Forest Products                          Ontario
  Inc                                             

  Tembec Inc                                      Quebec

  Tembec Industries Inc                           Ontario
  -- Pulp Group Kraft                             
  Plant                                           

  The Oliver Lumber                               Ontario
  Company of Toronto Ltd                          

  Upper Canada Forest                             Ontario
  Products Ltd                                    

  Weston Forest Corp                              Ontario

  **441214 -- Plywood                             
  (Plies\<6mm Thick) --                           
  At Least 1 Outer Ply of                         
  Non-Coniferous Wood**                           

  Bluelink Building                               British Columbia
  Products Canada Ltd                             

  Canwel Building                                 Newfoundland and
  Materials Ltd                                   Labrador

  Georgia-Pacific                                 British Columbia
  Building Materials                              
  Sales, Ltd                                      

  Gesco Industries Inc                            Ontario

  Goodfellow Inc                                  Quebec

  Hardwoods                                       British Columbia

  Hardwoods Specialty                             British Columbia
  Products LP BC Group                            

  Richelieu Hardware                              Ontario
  Canada Ltd                                      

  Sauder Hardwoods Inc                            British Columbia

  Ste-Therese Div of                              Quebec
  Commonwealth Plywood Co                         
  Ltd                                             

  Weyerhaeuser Company                            British Columbia
  Ltd                                             

  **441219 -- Plywood                             
  (Plies \<6mm Thick) --                          
  At Least 1 Outer Ply of                         
  Other Wood Nes**                                

  AFA Forest Products Inc                         Ontario
  Ontario                                         

  Alpine Forest Products                          Alberta
  (2001) Ltd                                      

  Bluelinx Building                               British Columbia
  Products Canada Ltd                             

  Canwel Building                                 Newfoundland and
  Materials Ltd                                   Labrador

  Georgia-Pacific                                 British Columbia
  Building Materials                              
  Sales Ltd                                       

  Goodfellow Inc                                  Quebec

  Green River Log Sales                           British Columbia
  (1996) Ltd                                      

  Griff Building Supplies                         British Columbia
  Ltd                                             

  Les Fourgons Transit                            Quebec
  Inc                                             

  Marwin Industries Inc                           British Columbia

  R.J. Millwork Co. Ltd                           Manitoba

  Silvaplex a Div of                              Ontario
  Forestply Ltd                                   

  Skana Forest Products                           British Columbia
  Ltd                                             

  Taiga Forest Products                           British Columbia
  Ltd                                             

  Weston Forest Corp                              Ontario

  Weyerhaeuser Company                            British Columbia
  Ltd                                             

  **441021 -- Particle                            
  Boards of Wood --                               
  OSB/Waferboards --                              
  Unworked, Sanded**                              

  Canwel Building                                 Newfoundland and
  Materials Ltd                                   Labrador

  Les Chantiers                                   Quebec
  Chibougamau Ltee                                

  Louisiana-Pacific                               Nova Scotia
  Canada ltd                                      

  Weyerhaeuser Company                            British Columbia
  Ltd                                             

  **441029 -- Particle                            
  Boards of Wood --                               
  OSB/Waferboards --                              
  Other Nes**                                     

  Goodfellow Inc                                  Quebec

  Lamwood Products (1990)                         Ontario
  Limited                                         

  Taiga Forest Products                           British Columbia
  Ltd                                             
  ----------------------- ----------------------- -----------------------

The following table indicates the value of the imports of the listed
products imported by the companies listed in the previous table. As is
indicated by this table, the U.S. is either the only source or the
primary source of the listed products.

  ------------------- ---------------- ----------------- ----------------
  **Product**         **Value of U.S.  **Value of U.S.   **Total Value of
                      Imports 2003     Imports 2004      Product Imports
                      (CDN)**          (CDN)**           2004 (CDN)**

  **440710** --       \$138.2 million  \$138.3 million   \$152.8 million
  Lumber (Thickness                                      
  \>6mm) Coniferous                                      
  Wood                                                   

  **440391** -- Wood  \$76.2 million   \$86.2 million    \$87.3 million
  in the Rough -- Oak                                    

  **440392** -- Wood  \$564,000        \$222,684         \$299,480
  in the Rough --                                        
  Beech                                                  

  **440399** -- Wood  \$193.6 million  \$197.3 million   \$197.6 million
  in the Rough Nes                                       
  and Logs for                                           
  Pulping                                                

  **440791** --       \$262.2 million  \$234.9 million   \$235.0 million
  Lumber (Thickness                                      
  \>6mm) -- Oak                                          

  **440792** --       \$2.9 million    \$2.2 million     \$3.4 million
  Lumber (Thickness                                      
  \>6mm) -- Beech                                        

  **440799** --       \$291.0 million  \$305.1 million   \$314.5 million
  Lumber (Thickness                                      
  \>6mm) -- Birch,                                       
  Maple, Poplar,                                         
  Aspen and Other Nes                                    

  **441214** --       \$39.7 million   \$37.8 million    \$95.3 million
  Plywood (Plies\<6mm                                    
  Thick) -- At Least                                     
  1 Outer Ply of                                         
  Non-Coniferous Wood                                    

  **441219** --       \$33.5 million   \$41.4 million    \$52.0 million
  Plywood (Plies                                         
  \<6mm Thick) -- At                                     
  Least 1 Outer Ply                                      
  of Other Wood Nes                                      

  **441021** --       \$27.1 million   \$27.6 million    \$27.9 million
  Particle Boards of                                     
  Wood --                                                
  OSB/Waferboards --                                     
  Unworked, Sanded                                       

  **441029** --       \$10.7 million   \$12.4 million    \$14.8 million
  Particle Boards of                                     
  Wood --                                                
  OSB/Waferboards --                                     
  Other Nes                                              

  **TOTAL OF VALUE OF **\$882.1        **\$886.1         **\$983.3
  IMPORTED PRODUCTS** million**        million**         million**
  ------------------- ---------------- ----------------- ----------------

# SECTION 5. STATISTICAL INFORMATION

## 5.1 Softwood Log Situation/Outlook

### Table 1: Softwood Log Supply and Distribution

![](media/image3.wmf)

## 5.2 Softwood Lumber Situation/Outlook

### Table 2: Softwood Lumber Supply and Distribution

![](media/image4.wmf)

## 5.3 Softwood Plywood Situation/Outlook

### Table 3: Softwood Plywood Supply and Distribution

![](media/image5.wmf)

## 5.4 Hardwood Log Situation/Outlook

### Table 4: Hardwood Log Supply and Distribution

![](media/image6.wmf)

## 5.5 Hardwood Lumber Situation/Outlook

### Table 5: Hardwood Lumber Supply and Distribution

![](media/image7.wmf)

## 5.6 Hardwood Plywood Situation/Outlook

### Table 6: Hardwood Plywood Supply and Distribution

![](media/image8.wmf)

## 5.7 Oriented Strandboard Situation/Outlook

### Table 7: Oriented Strandboard Supply and Distribution

# 

# ![](media/image9.wmf)

# 

# APPENDIX 1.

Definitions of Products

**FURNITURE AND RELATED PRODUCTS:**

-   **Household and Institutional Furniture and Kitchen Cabinets**

-   **Office Furniture (including Fixtures)**

-   **Other Furniture-Related Products**

**HOUSEHOLD FURNITURE:**

-   **Upholstered Household Furniture**

    -   Chesterfields

    -   Reclining chairs

    -   Furniture

    -   Sofas (including sofa beds)

    -   Spring cushions

-   **Other Wood Household Furniture**

    -   Bedroom furniture, wood

    -   Chairs, wood household (except upholstered)

    -   Bookcases, wood household

    -   Dining room furniture, wood

    -   Cabinets, wood household (e.g., radio, television, stereo,
        sewing machine)

    -   Furniture, wood household

    -   Cedar chests

    -   Kitchen cabinets, freed standing, wood

    -   Living room furniture, wood

> Excludes:

-   Manufacturing wood kitchen cabinets and bathroom vanities designed
    for permanent installation

-   Manufacturing upholstered household furniture

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-   **Household Furniture (except Wood and Upholstered)**

    -   Baby seats for cars,

    -   Rattan furniture

    -   Brass furniture

    -   Stools, household (except wood)

    -   Card table and chair sets, metal

    -   Wicker furniture

    -   Kitchen cabinets (free standing), metal

    -   Wrought iron furniture

**INSTITUTIONAL FURNITURE:**

-   Chairs, portable folding

-   Church furniture

-   Draughting tables (without attachments)

-   Factory furniture (e.g., stools, work benches, tool stands,
    cabinets)

-   Public building furniture

-   Restaurant furniture

-   School furniture

> Excludes:

-   Manufacturing laboratory and hospital furniture

**WOOD KITCHEN AND COUNTER TOPS:**

-   Bathroom vanities, wood

-   Kitchen cabinets (except free standing), wood

-   Table or counter tops (e.g., kitchen, bathroom, bar), plastic
    laminated

**RESIDENTIAL FURNITURE:**

-   **Upholstered Household Furniture**

-   **Other Wood Household Furniture**

-   **Household Furniture (except Wood and Upholstered)**

-   **Other Furniture-Related Products, such as Mattresses, Blinds and
    Shades**

**OFFICE FURNITURE (including Fixtures):**

-   **Wood Office Furniture, Including Custom Architectural Woodwork**

    -   Bookcases

    -   Cabinets

    -   Chairs

    -   Custom-designed office interiors (i.e., furniture, architectural
        woodwork and fixtures)

    -   Desks

    -   Modular furniture systems

    -   Visible record equipment (e.g., filing cabinets, boxes)

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-   **Office Furniture (except Wood)**

-   **Showcase, Partition, Shelving and Lockers**

**OTHER MILLWORK:**

-   Baseboards, floor, wood

-   Parquet flooring, hardwood

-   Flooring, hardwood

-   Planning mills (i.e., dressing purchased rough lumber)

-   Flooring, softwood

-   Prefabricated fences and fence sections, wood

-   Mantels, wood

-   Stair railings, wood

-   Molding, wood

-   Stairs, prefabricated wood

-   Paneling, wood

-   Wood squares, blanks

-   Woodwork, interior and ornamental (e.g., windows, doors, sash,
    mantels)

Excludes:

-   Carpentry, including installing prefabricated stairs in buildings

-   Manufacturing dressed lumber from logs

**WOOD WINDOW AND DOOR**:

-   Door frames and sash, wood and covered wood

-   Shutters, door and window, wood and covered wood

-   Doors, wood and covered wood

-   Window frames and sash, wood and covered wood

-   Garage doors, wood

-   Window units, wood and covered wood

Excludes:

-   Installing prefabricated windows and doors in buildings

-   Manufacturing metal windows and doors

PREFABRICATED WOOD BUILDING MANUFACTURING

-   Comprised of establishments that engage in manufacturing
    prefabricated or pre-cut wood buildings, sections and panels

-   Log cabins and log houses

Excludes:

-   Constructing wood frame buildings on site

# Find FAS on the World Wide Web: 

Visit our headquarters' home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/) for a complete
listing of FAS' worldwide agricultural reporting.

# 

# Recent Reports from FAS/Ottawa: 

  ----------------- ---------------------------------------- -------------
  Report Number     Title of Report                          Date

  CA5063            Deciduous Fruit Annual                   9/15/2005

  CA5061            Kosher Report                            9/6/2005

  CA5060            Canada Connect Matchmaker Program        9/1/2005

  CA5059            Poultry Annual                           9/12/2005

  CA5058            This Week in Canadian Agriculture, Issue 9/1/2005
                    30                                       

  CA5057            This Week in Canadian Agriculture, Issue 8/26/2005
                    29                                       

  CA5056            Livestock Annual                         8/26/2005
  ----------------- ---------------------------------------- -------------

VISIT OUR WEBSITE: The FAS/Ottawa website is now accessible through the
U.S. Embassy homepage. To view the website, log onto
[http://www.usembassycanada.gov](http://www.usembassycanada.gov/); click
on Embassy Ottawa offices, then Foreign Agricultural Service. The
FAS/Ottawa office can be reached via e-mail at: <agottawa@usda.gov>