Forestry Revival - The Revolution in Canadas Forest Industry

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Forestry Revival - The Revolution in Canada’s Forest Industry

Summary

        Analysts are saying the Canadian forestry industry is poised for growth. Although the industry has long been an underdog, many factors are converging to support higher prices in the years ahead.  Supply-side constraints, such as the implications of the mountain pine beetle in western Canada, will help lift the prices of lumber later in 2011. In addition to this, high timber demands from the U.S. and Asia will further increase the price of Canadian lumber. These implementations will bring hefty profits to both Canada’s forestry industry and lumber investors. The U.S. currently holds 25% of Canada’s lumber demand due to its nationwide home remodeling projects. These projects call for building homes in replace for those lost to natural disasters, and this figure is expected to rise in 2011. Asia is the other major importer of Canadian lumber, in demand for over 34% of Canada’s export. This export is fed mainly to China and Japan. In China, the lumber is used for industrial applications and in 70% of consumer housing development, whereas Japan (already receiving 38% of its softwood import from Canada) will require even more lumber to structurally rebuild its cities after tsunami devastations. Investors are encouraging Canada to pour more institutional funds into timberlands while trading globally to maximize benefits. Timber has traditionally been a good barrier against inflation and has provided stable investment returns for shareholders.

Analysis

        In my opinion this major Canadian forestry ‘revival’ has come as a great advantage to Canada’s economy, however it was bound to happen at some point in the near future. The article states that Canada’s forestry industry has always been an ‘underdog’ to its other primary industries, providing employment to less than 1.9% of Canada’s workforce. However this figure encompasses tens of thousands of jobs. In addition to this, forestry is a primary industry, meaning it provides many more job opportunities for secondary and tertiary industries that are based on wood products. In reality, this industry is of major Importance to Canadians because of its direct involvement with its environment and economy. Canadian forestry hauls in a whopping 73 046 million dollars in revenue (based on 2001 data), and forests cover close to half (4 187 820 km2 or 42%) of Canada’s total area.  As for its environmental impacts, logging methods and ecologic hazards could paint a bleak future for Canadian forests. Although a major economic backbone, all forests are prone to forest fires, pest attacks, acid rain, and clear-cutting – a damaging yet cheap method of harvesting wood. When forests are endangered by such factors, logging companies must immediately minimize their operations and hope for the best. If today’s current generation deplete Canada’s natural resources, we will have lost the precious gifts which Mother Nature had blessed upon our country millions upon millions of years ago. To prevent this, we, as Canadians, must put behind our financial greed and do all we can to live a ‘green’ lifestyle.

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        Lumber is finally paying off for its investors due to high demands and low supplies of wood products. This uneven balance enables the industry to charge higher prices for its products. Right now we see high demands from mainly the U.S., China, and Japan who wish to employ lumber in their construction/reconstruction efforts. For example, Japan had recently been hit by two earthquakes and a massive tsunami, and is now suffering major economic losses. These earthquakes occurred because Japan sits in a conjuncture of four tectonic plates: the Eurasian plate, the North American plate, the Philippine Sea plate, and the ...

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