Dream House Canada Opening and MOU Signing with Shanghai Government

On January 24, 2005, Paul Newman participated in an MOU signing ceremony consummated between the Canada Wood Group and the Shanghai Municipal People’s Government Construction and Management Commission, Science and Technology Committee (STC). The MOU endorsed by General Secretary Mr. Xu Junlun of the STC commits the Shanghai government and Canada Wood to cooperate in the development of a local building code for wood construction and the establishment of a wood frame quality inspection system for Shanghai Province.

The local code is intended to complement the national wood design code (GB50005) and address design factors specific to the Shanghai region. In addition there is considerable interest to examine and accommodate the mixed use of wood and concrete in hybrid construction. Forestry Innovation Investment is looking at the possible construction of a multi-family WFC structure which could assist in the facilitation of the code development process.

As a key element of the construction quality initiatives we are pleased to advise that Canada Wood will be locating a construction specialist in Shanghai in early fiscal 2005/06 to support this initiative. The Specialist will directly manage training and on-site inspection activities in the market and help support the construction quality initiative with the STC. (More details to be provided in the future).

On January 25, 2005, BC Minister of Forests, Mike de Jong presided over the opening of the Dream House Canada (DHC) facility located in the Jinqiao District of Shanghai. The event was well attended by both Canadian industry representatives, Shanghai VIPs and government reps form both nations. The DHC facility is an impressive example of mixed wood construction (light frame and heavy timber) and is sure to make a lasting statement on the potential for increased use of structural and decorative Canadian wood products in China.

Canada Wood Group’s Shanghai staff have relocated to this facility and DHC will be the center of future training and technology transfer activities. An innovative aspect of the initiative will be the construction of two wood frame villas adjacent to the presentation centre. These villas will be accessible for viewing and training throughout the entire three year period that Dream Home Canada is in operation.

Fire-proof Initiative:

David Litchfield, Canada Wood Group Director in Japan, advises that 64 new projects have received building authorization and are moving forward using the COFI/Japan 2X4 Association Ministerial fire-proof approvals . The commercial up-take of this new method of fire resistant wood construction demonstrates the potential for wood construction in urban centers of Japan. Building on this success, COFI/Canada Wood and the 2x4 Association will be holding another seminar March 8th in Tokyo. About 200 delegates are expected.

Canada Wood Group has also initiated early cooperation with the Japan Wooden Housing Federation to explore the fire resistant innovations in the construction of post and beam structures thereby enabling these dwellings to meet fire proof standards.

Housing Starts:

Housing starts in December 2004 were 98,849 units, a 2.0 percent decline when compared to the same month last year. However, wooden starts were up 3.2 percent to 44,966 units. 2x4 starts increased 10.3 percent to 7,707 units which is the 12th consecutive monthly year over year increase. Post and beam starts were up 2.8 percent to 35,534 units, the 6th consecutive month of year over year increases.

Japanese Economy:

The Japanese economy contracted for the third straight quarter in the October-December (0.5 percent on an annualized basis) period, technically putting Japan into a recession. While corporate performance is up there is continued uncertainty with wages down, social security costs rising and potential future tax increases. Consumer spending is subsequently down. Economists project some weakening in 2005. Despite the numbers however, policy makers and business leaders maintain this is just a blip in the cycle and deny this as an indication that Japan is dipping into a recession. Real GDP growth for the 2004 calendar year was 2.6 percent, the highest level of growth since 1996 (projections for the full 2004 fiscal year are 2.1 percent).

Code Development:

In late March 2005, Canada Wood Group will be commencing work on the two initiatives covered under the Shanghai MOU. Meetings are scheduled with the Shanghai government to map out the framework and work plan for the local code and the construction quality activities.

Lumber Design Properties:

Work is continuing apace on the lumber in-grade project which has been underway now for two years with the Chinese Academy of Forestry (CAF) in Beijing. This project is intended to familiarize Chinese researchers and code experts with the in-grade method to design value derivation. Ultimately we are hopeful that China will fully accept Canada’s approach of developing lumber properties and will apply it as a yardstick against which to evaluate submissions from other supplying regions. CAF and Canada Wood are scheduled to meet in March to review the current year’s achievements.

Work has also commenced on the development of a Chinese standard for machine stress rated lumber. Forintek Canada Corporation is representing Canada’s interests on this activity and is developing a submission.

CAF Wood Frame Evaluation Project:

The Chinese Academy of Forestry recently commissioned the construction of two wooden structures with the purpose of evaluating their performance and attributes. The first structure, a Japanese post and beam dwelling, was built in Anhui Province in southern China apparently with the assistance of the Japanese government. The second project, a North American light frame dwelling is nearing completion in the Beijing area. Canada Wood Group, with the generous support of Canfor Ltd and Ainsworth Lumber Company Ltd. provided building materials and minor funding support to assist in its construction. The structure will undergo evaluation testing in 2005/06. In preparation for this phase CWG has funded instrumentation of the structure to measure temperature, humidity and moisture content in the wall cavities. This data will be used to verify output from our moisture risk simulation project with the National Research Council of Canada. The structure will also be evaluated for its acoustical performance and other parameters such as vibration and VOC emissions. The opening celebration is planned for March 23rd in Beijing and further details will be forthcoming as this date approaches.

Research Update:

Canada Wood has commissioned Beijing’s Tsinghua University to undertake a computer simulation exercise evaluating the comparative energy performance of wood frame construction vs concrete in a standardized design. This assessment is nearing completion and results should be available shortly. We plan to continue research on this topic in 2005/06 and to widely publicize the results of the evaluation.

Preliminary results have been received from the National Research Council in Ottawa on the Chinese moisture risk assessment underway. The project involves computer analysis of actual recorded weather data from selected locales in China and simulates the risk of cyclic moisture accumulation throughout the year in different wall and roof assemblies. The output is confirming that certain wall and roof configurations should be preferred. Once complete, this information will support recommendations made in publications like our Guide to Good Practice.

Beijing Office:

In accordance with the decision made by the joint Market Access and SPF Group Committee in January, COFI has advised the service contractor in Beijing that we will not be renewing the SPF Group’s contract for market representation. Instead Canada Wood Group will be establishing a small office presence in the capital for both market access and promotion. Steps are underway to place a full-time SPF representative in the market. More details will be forthcoming.

Wood Frame Construction Publicity:

The MOU signing and Dream House Canada opening was covered extensively in the Chinese press. COFI/Canada Wood Shanghai PR firm Edelman arranged two press conferences. Stories appeared in the national and local press. Paul Newman appeared on a clip aired on the national CCTV2 network and also participated in the shooting of a 30 minute documentary on the opportunity for wood frame construction in China. This episode will air later this spring.

Training Needs Assessment:

Wayne Iversen, SPF Group program manager led a training needs assessment mission to Korea in November, 2004. The team, including a qualified building inspector and a builder/vocational school instructor, investigated the current skills situation and identified gaps and key hurdles standing in the way of sustainably growing the wood frame construction segment. Recommendations from their report have been incorporated into our 2005/06 applications to CWEP and FII.

MOCT-CMHC Sub-Committee Meetings:

It was agreed at the 2004 bi-lateral meeting between CMHC and the Korean Ministry of Construction and Transportation (MOCT) that formation of a sub-committee to focus on technology issues and construction training would be a practical mechanism to achieve meaningful progress in these two areas. The first meeting of this new sub-committee took place in Seoul on February 24/25. Wayne Iversen led a delegation of Canadian specialists to meet with the Korean side. The event was well attended by senior government officials, research groups and industry associations. It was agreed that future work would focus on building envelopes, fire safety, air quality, wood product certification as well as training initiatives for construction quality and key players such as builders, designers and inspectors. The next session is tentatively scheduled for September 2005 in Vancouver.

Improving Prospects:

A recent article in the Chosun Daily which surveyed eight of the largest construction companies in Korea indicated that they are optimistic for 2005. On a combined basis firms indicated that they expect their building activity to increase by 37% over 2004. (2004 was a relatively poor year for housing in Korea with units constructed falling 30.8% to 463,800 from the 585,362 constructed in 2003.) Although this does not necessarily correlate with the consumption of wood products, it is an indication that prospects in Korea seem to be looking up for this coming year. The Ministry of Construction and Transportation is projecting 520,000 units to be built in 2005.

Construction of New Town Approved:

As part of Korea’s drive to decentralize away from Seoul a number of new cities are underway or in the planning. The latest development has been announced (http://times.hankooki.com/lpage/nation/200502/kt2005021717390911990.htm). It is anticipated that new town development will be a major opportunity for wood frame construction in the future.

An inbound mission to Canada from the Taiwanese Construction and Planning Administration arrived in Vancouver on February 20, 2005. The objective of this mission was to investigate the code and construction quality systems in Canada. Canada Wood has been working with Taiwan for the last 3 years and along with US initiatives was successful in establishing a wood frame code for Taiwan. The authorities now wish to move beyond this to establishing a builder registration system and have come to Canada to research this end.

Softwood Packaging Requirements Implementation:

The international community is moving aggressively forward to implement requirement of the International Plant Protection Convention (IPPC) standard ISPM #15 addressing regulation of softwood packaging materials. A summary of the implementation schedules for ISPM #15 can be found on the CFIA website at http://www.inspection.gc.ca/english/plaveg/for/cwpc/ispm15e.shtml)

An international conference is being held in Vancouver on Feb 28 – Mar 4th to discuss implementation of ISPM #15 and related issues. COFI will have a representative present and we will circulate a summary report afterwards.

The European Union:

The EU recently announced that it would implement provisions of the International Wood Packaging Standard (ISPN 15) on March 1, 2005. However a subsequent news report from Reuters indicated that the EU would be delaying enactment of the new requirements after the United States complained that the measures would be trade restricting.

According to Canadian Food Inspection Agency (CFIA), the exact compliance requirements for the EU are still unclear and shippers of commodity lumber products should be able to satisfy the yet-to-be enacted requirements provided they continue to follow the existing derogation i.e. softwood dunnage attached to lumber is heat-treated along with the lumber or separately kiln dried.

A key point appears to be the amount of bark that will be permitted on lumber used as packaging (even if heat-treated). We will provide further advice on the EU situation as and when we receive notification from CFIA.

Korea:

Confirmation has been received via CFIA that the Koreans have officially reinstated the previous provisions allowing for the import of Canadian wood products into Korea under a Government of Canada plant health certificate. These requirements apply to shipments containing pines or larch. Wood products must be heat treated (KD/HT) and be accompanied by a GOC Phytosanitary Certificate.

Market Access and Promotion Committee:

On January 12th, 2005 the newly established joint committee for COFI market access and SPF promotion programs appointed COFI as the project manager and administrator for the SPF Group initiative. Wayne Iversen will serve as the Vancouver based SPF Group program manager.

Mr. Tom Temple of Canfor was elected as the Chair of the new committee and Mr. Glen Wilson of Interex Forest Products as Vice-Chair. The joint committee provides industry input and oversight into COFI’s overseas market access programs and SPF promotional initiatives.

COFI is hosting its 2005 Annual Convention – Securing the Future – 2010 & Beyond – at the Prince George Convention Centre on April 14 and 15th.

Attendance at the conference will include industry CEO’s, vice presidents, marketing and production managers, senior representatives from suppliers and equipment firms, law firms, financial institutions, senior federal, provincial and local government staff, chambers of commerce, Mayors, MLA’s and MP’s, as well as local, regional and national media.

The convention brings together industry and community leaders to identify key challenges and successes in the quest for long term industry competitiveness and community well being. Over 1200 delegates are expected to attend.

Executive panels cover the industry’s financial performance and global market challenges; a look at key BC issues affecting communities and the industry i.e. the Mountain Pine Beetle and the Softwood Lumber Dispute; supplier exhibits; and, networking opportunities including the traditional themed networking reception on Thursday evening.

Speakers include Gordon Campbell, Premier of BC, Frank McKenna, Canada’s Ambassador Designate to the United States, Jim Shepherd, President & CEO, Canfor, Hank Ketcham, President & CEO West Fraser, David Emerson, Industry Minister (invited), Don Roberts, Managing Director, CIBC World Markets and Reid Carter, Managing Partner, Brascan Financial Corp.

For the full convention agenda visit www.cofi.org/whatsnew/ac2005/index.htm

Registration deadline is March 25, 2005.