The housing crisis seemed to affect everything. It certainly hurt Canada’s timber export to the United States.
In 2005, when U.S. housing starts peaked at 2.5 million, 17 billion board feet of lumber left British Columbia for American consumers.
We all know how the housing market turned out, but the decrease in U.S. demand wasn’t necessarily the worst thing. It gave Canada room to branch out.
Enter China.
But that wasn’t the only reason for British Columbia’s lumber boom in the middle kingdom.
The Chinese have recently been subjects of a Russian imposed 25% export tariff on logs headed to China. The Russians were trying to promote more direct investments in Siberian sawmills, which they got from Chinese companies, but it still takes time for production to settle in.
So what did China do? Reach out for an alternative source of lumber to avoid that pesky 25% tariff.
Thanks to the Chinese, British Columbia is 70% ahead of last year’s timber output. And let’s not forget, Canada exported 1.6 billion board feet of lumber to China last year, an 800% increase from 2006!
Increasing demand from China has helped lift timber prices over the past 18 months. But even though timber has outperformed the Dow by four times since January 2009, prices are still nearly 40% lower than their 2004 highs.
There are many ways investors can get exposure to timber without growing a forest. In a recent article for Weath Daily, analyst Luke Burgess gives speculators three options for timber investments. You can read his article, titled Five Gold Investment Alternatives, by clicking here or copying and pasting the following link into your internet browser’s address bar: http://www.wealthdaily.com/articles/five-gold-investment-alternatives/2811
Good Investing,
Michael Boytano
Editor, Wealth Daily
