This year marks the 10th year since the outbreak of the Asian financial crisis in 1997. Indeed, Koreans have learned their lessons from the 1997 crisis, and the economy is now in much better shape to withstand any buffeting from international financial markets than it was ten years ago. There will be no need for the kinds of sacrifices Koreans made ten years ago when housewives lined up to donate their gold to help pay the national debt.

At the time of the 1997 crisis, Korea was heavily in debt to foreign creditors, but the situation today is vastly different. Today, Korea is a net creditor to the rest of the world, with foreign assets of US$ 379 billion, versus foreign debts of US$ 286 billion. This surplus of US$ 93 billion contrasts with the net foreign debt of US$ 65 billion on the eve of the 1997 crisis.

Korea's economy has rebounded, from US$ 10,000 GDP per capita in 1995 to an estimated US$ 20,000 GDP mark at the end of this year. The Korean wood industry has been longing to see this US$ 20,000 GDP per capita mark which could initiate a boom in the wood framed housing market. To the country, this means the opening of new economic horizons to become an advanced nation. To the Korean wood industry, this means the opening of a new era to build and develop 10,000 buildings for the wood frame construction market per year.

In line with the meaningful sign of the US$ 20,000 GDP per capita mark, the Korean wood industry also foresees that a new market for multi-family housing can be generated when the market size of wood framed buildings reaches 10,000 buildings per year. Of course, there are pre-requisite things we have to solve to make this happen in Korea. The building code and standards development work to allow wood use for multi-family and commercial construction is the key challenge. This past year, Canada Wood Korea is in active talks with the Korean government and industry along with the Korean technical group to revise and develop these building code and standards to specify and favor WFC.

Canada needs to take the initiative in opening up the multi-family wood framed housing market in Korea. There is no doubt that the Korean wood market will grow significantly upon entering this new growing sector of multi-family construction.

Building permits and housing starts for the first seven months of 2007 increased to 25.1% and 33.9% respectively to 131,020 buildings and 104,145 buildings. The increase was mainly attributed to the increase of Gross National Income. GNI, a key indicator of purchasing power, which rose 2.2 % during the April-June period, marking a turnaround from the previous quarter's 0.9 percent contraction. The gap between the growths of GDP and GNI has been significantly reduced, which reflects growing purchasing power and improvement in domestic consumption over time.

During the first seven months of 2007, the wood frame housing construction remarkably increased in line with the domestic wood industry's expectations of US$ 20,000 GDP per capita mark at the end of 2007. Both building permits and starts for wood frame construction during the January-July period dramatically rose to 121.5% and 123.7% respectively to 5,180 buildings and 3,960 buildings compared with the same period of 2006. Both these numbers already reached the total numbers of 2006 and the industry foresees the total number of building permits for wood frame construction will be around 10,000 buildings at the end of 2007.

(Source: Ministry of Construction and Transportation)

Korean Wood Market Update:

Korean imports of logs for the first seven months of 2007 increased 36.1% to US$ 550,674,000, while Canadian log imports sharply rose to 62.7% to US$ 45,163,000 accounting for a 8.3% share in the total Korean log import market owing to the continuous Russian log price hike and the log shortage in European countries.

Korean lumber imports for the first seven months of 2007 compared with the same period of 2006 rose 23.9% to US$ 173,122,000 while Canadian lumber imports increased 20.2% to US$ 26,222,000 accounting for 15.1% of total lumber imports without reflecting difficulties in Canadian lumber imports caused by temporary mill shutdowns by a major Canadian lumber supplier and an extended rail strike. However, the Korean wood industry is concerned that the strike at coastal logging and saw milling operations by the United Steelworkers Union which began July 2007 may further threaten the stable supply of Canadian logs and lumber to Korea during the second half of 2007.

(Source: Korea Customs Service)

In the Spotlight - Canada Wood Partner Profile: Gaining a Foothold in the Korean Building Code - Meet Dr. Shim

Dr. Shim (right) talks to Mr. Lee of Samjung construction at the Forintek lab. Hands-on Experiences of Wood Frame Construction for Future Architects

Dr. Kook Bo Shim , visiting Korea Forest Research Institute scientist, has been working collaboratively with Forintek scientists since January 2007. Dr. Shim will stay at Forintek until December 2008 with the support of Canada Wood to identify the key factors to be considered in the development of seismic provisions for the new Korean Building Code. Currently Dr. Shim is researching earthquake design provisions for small wood buildings, lateral load resisting systems for engineered wood construction, analysis of Korean and Canadian seismic design codes and regulations, and comparison of design values of structural softwood lumber designated in Korean and Canadian lumber standards such as KS F 3020 and NLGA grading rules. The resultant data will be shared with Korean code authorities with a view to amendments being made to the KBC relating to the seismic performance of wood frame structures.

Canada Wood has been maintaining close collaborative relations with KFRI and other Korean government agencies for many years and is working very closely with them for the development of code and standards for wood frame construction. Last year (Oct. 30 ~ Nov.2, 2006), Canada Wood hosted KFRI scientists and MOCT code officials to Tongji University in Shanghai to participate in the shake table test of wood frame structures and provided them an opportunity to experience a solid evidence of structural safety and superiority of wood frame construction against earthquakes.

*KFRI: Korea Forest Research Institute of Korea Forest Service
*KBC: Korea Building Code
*NLGA: National Lumber Grades Authority

Korean Architects Not Afraid to Get Hands Dirty

50 volunteers from 16 universities around Korea day and night constructing wood frame buildings worked round the clock.

Canada Wood has sponsored the Wood Frame Construction Training Workshop, an annual event held by the Korea Wood Construction Association (KWCA) since 1996.

For the first time, KWCA's workshop was held in conjunction with the Rural Home Building Program, which has been organized by Research Institute Culture City (RICC), an NGO formed by a group of architects. The program was designed to give architectural students an opportunity to renovate old rural homes as volunteers for the underprivileged.

However, the joint effort between KWCA and RICC enabled the future architects to build 3 new wood frame buildings this year in Yanggu, Kangwon Province; 2 art studios and 1 exhibition hall, the total floor area of 250 m2. After the completion, two studios will be leased to young artists free of rent and, in return, they will provide art lessons to local school children for free.

WFC was chosen because of the construction flexibility and design versatility that suit best with volunteer architectural students.

Everyday some 50 volunteers from 16 universities around Korea toiled for the construction of the wood frame buildings. In spite of the heavy monsoon rain and temperature reaching 33 degrees and 90% humidity, these future architects have put in some 2,500 man-days from 27 June till 13 August to complete the buildings from foundation to roof. 69 students who participated more than 3 weeks were awarded with the certificate for the completion of wood frame construction workshop.

And, in addition to the 69 students, 26 trainees recruited by KWCA joined the workshop for 2 weeks, from July 9 to 21, to learn the basics of framing and finish carpentry also earned the certificate of completion.

Canada Wood has provided SPF dimension lumber and OSB structural panels for the project and also provided technical consultation and lectures. The support of Canada Wood for the project has been publicized in various magazines and newspapers and generated more than CAD $65,000 worth of advertising value.

2,500 man-days were clocked from 27 June till 13 August to complete the wooden buildings from foundation to roof.	From all the publicity covering the workshop, it’s estimated Canada Wood generated more than CAD $65,000 worth of advertising value from the newspaper and magazine publicity.

September 2, 2007
Executives from Sam Jung Construction and Best House Korea (BHK) spent a week in BC to investigate opportunities related to importing wood construction materials. Their week long mission included visits to:

• Prefab home manufacturer
• Show homes and construction sites of single family, row and 4 storey condos
• SPF Mill in PG
• Port Moody City Hall
• Forintek / UBC
• Construction wholesalers
• Value added manufacturers
• Bear Mountain, Victoria

Berwick elderly care home. The group was extremely impressed with the elaborate design on this high-end care facility located 20 minutes from Victoria. Because of the many shops and services built into it, the owner describes his project as a ‘cruise ship on land’

Sam Jung Construction is currently developing 159 high-end luxurious 2X4 homes while BHK is constructing 22 2X4 homes with plans to build more than 200 2X4 homes in 2008. While in BC, the group of 10 was very encouraged by the opportunity to import Canadian construction materials into Korea. The group was pleasantly surprised by the interior design and layout in the show homes they visited. They observed that in Canada, builders tend to use less expensive construction materials, however, the end result is often nicer than many higher end Korean homes because of the very comfortable layout and peaceful color schemes.

A recent survey of buyers and the supply chain show that the wood frame construction market is viewed positively, and that this market is expected to grow. More and more developers arein the process of trying out WFC and are building demonstration homes within large developments. Larger "chaebol" firms such as Samsung construction are considering 2x4 construction. In an FII funded survey, 60% of the design/construction companies surveyed said they are considering construction of wood-frame buildings and are monitoring trends in the wood housing market.

Mr. Lee of Sam Jung construction believes there is a tremendous opportunity SPF in Korea for exterior non-load bearing walls in reinforced concrete high-rise condos. He believes that 2X4 exterior walls posses several design advantages where exterior walls are designed with large openings for windows. COFI is currently following up on this potential opportunity by investigating Korean building and fire codes regulations related to non-load bearing exterior walls.

Currently Korea builds 7,000 2X4 starts annually and that number is expected to climb to 10,000 2X4 starts by 2009. Already by July of this year, SPF Shipments to Korea have reached close to 30,000 MFBM. Last year, SPF totals for the whole year was 31,000 MFBM.

Delegates eye engineered wood samples at Forintek’s lab.	Group enjoys a quick lesson on MSR lumber by Canfor’s QC Supervisor Nick Gierc (right)

Softwood trading activity has been quiet for many within the trade during August, and there have been few signs of increased activity in September. The market outlook for the remainder of 2007 remains uncertain, and the prospect of higher borrowing costs and the looming consequences for the market have resulted in a mood of caution. Some expect that demand for carcassing will remain flat during the second half of 2007. Lower grades of softwood are likely to remain difficult to sell.

Supplies from the Baltic countries and Finland remain tight, where mills continue to struggle with circumstances of reduced log availability from Russia. Scandinavian and German mills are supplying the UK with a large part of its needs. We are led to believe that increasing numbers of new entrants to the market from Germany are looking to take advantage of CE marking regulations to sell to the UK, a move that could result in the supply of timber in qualities that are not familiar or suited to buyers.

Prices are expected to remain stable or rise gently in these conditions of flat demand and modest pressures on supply. While landed stocks are quite high, suppliers are unlikely to be tempted to reduce prices, because German log prices are increasing and are expected to feed through to lumber prices in spring 2008, and raised freight costs will make it difficult for Canadian suppliers to undercut prices. One might expect Canadian carcassing prices of GBP150-155/m3 (KD CIF) to continue for the foreseeable future, and Swedish production to continue to receive premium prices of GBP160-165/m3 in appreciation of better length specifications.

The trade relationship between Canada and the UK in commodity materials is dictated in part by exchange rates. In the first quarter of 2007 the Pound Sterling reached a high of CND2.35, but experienced a steep fall in value during the second quarter, roughly stabilizing with the Canadian Dollar in the summer months at a level of approximately CND2.13.

Canada's trade with the UK, at current prices, exchange and freight rates appears to be viable, and conditions are not expected to change dramatically for the remainder of 2007. During the forthcoming period, it is important for Canadian producers to act on clear marketing objectives with regard to the UK structural wood market, and develop sound relationships with suitable partners. Only in this way will sustainable trade develop, and full advantage be taken of current trade circumstances. To reiterate a point made in our previous UK market report, in the intervening years since Canadian players were major suppliers to the UK market, the perception of construction timber within the expectations of the construction industry has been raised by higher appearance products being produced in Scandinavia, the Baltic countries and Germany. Construction timber supplied to meet strength class requirements based on permitted grade allowances alone is no longer acceptable to many buyers. And finally one pointed comment received from within the trade is that UK buyers will quickly identify those players who are purely opportunistic, have no interest in building and maintaining a reputation, and no clear regard for customer satisfaction.