China 'Quake Rebuilding Package': Humanitarian Gesture or Commercialism?

On Friday, June 13th, Premier Gordon Campbell and the Honourable Gary Lunn, Minister of Natural Resources Canada jointly announced an $8 million aid package for China, one predicated on the use of replacement structures made of Canadian wood products.   The announcement was preceded by a frenzy of activity within, and between, the two levels of government.  In addition the Canada Wood Group was very active in lobbying and advising the Premier and Minister Lunn on optimizing this package.

Given the scale of destruction on May 12th and the horrific loss of life, any contribution or gesture towards the reconstruction effort is bound to be scrutinized through critical lens, particularly here in the West.  So how does the fed-prov package score when weighed on moral scales that sway between all-out altruism and crass opportunism…?

I would suggest very well indeed.   Catastrophe should not and cannot be forgotten; but the five million homeless survivors of this tragedy need practical solutions now in time for winter.  And, because they will continue to dwell in a seismically active region, they will require permanent homes, offices, schools and other buildings that can withstand periodic upheaval.  Emphasis will also focus on alignment with central government priorities such as energy efficiency, sustainability and environmental friendliness. 

Canada Wood Delegation visit site of shake table test at Tongji University ShanghaI.

Earthquake simulation shake table test two storey wood frame structure.

Wood construction scores extremely well in all categories.  Past real-life experience in Japan and elsewhere has proven wood’s quake resistant performance.   More recently, shake-table testing of full scale wood structures at Tongji University in Shanghai demonstrated (and surprised!) Chinese researchers by its resilience and strength.  Energy conservation research at top-ranked Tsinghua University in Beijing and the Harbin Institute of Technology in North China has shown that wood structures greatly outperform concrete or steel alternatives.   Collaborative development of China’s fire codes is leading up to a significant relaxation in restrictive requirements and an expansion in the scope and application of wood in building.  Detailed evaluation by Canada’s National Research Council on moisture risk linked to durability problems has enabled the identification of correct assembly details and strategies to ensure wood construction will be long-lasting and problem-free in China. 

So - should we be reticent or shy about putting forward wood construction as a solution?  Absolutely not.  However, it is also incumbent upon us to ensure that wood solutions will indeed provide enhanced levels of comfort, safety, performance and longevity.  Plus, we must provide  tech transfer support critical to the development of needed building industry skills. 

This is in fact the work we have been already doing in China for six years. The tragedy of the earthquake and restoration of the devastated region simply amplify the urgency and significance of our efforts.  On my latest post-quake trip to China, government regulators and building authorities I spoke with recognized the ‘fit’ between our efforts and the needs of Chinese.  However, they were puzzled why we were not stepping up and filling the obvious void.

Thus to our political leaders I say well done!  And to my colleagues in Canada and China: through your efforts and ingenuity we can build a better, safer China. 

Japan Economic Overview Q2 2008: “Declining Affordability Impacting Housing Sector Growth”
With continued resilience in capital spending and exports, Japan’s GDP grew 4% at an annualized rate in the first quarter of 2008. However, by the end of the second quarter a series of indicators pointed towards weakening growth in the second half of 2008.

Due to rising energy and raw materials costs, inflationary pressures continued to mount. Wholesale prices jumped 4.7% in May – the fastest rate of increase in 27 years. Price increases are widespread, from steel I-Beams used in construction up 50% since the beginning of 2008, to consumers paying 30% more for spaghetti and 28% more for cheese products. Despite the buildup of price increases, the Bank of Japan is expected to hold the overnight lending rate at 0.5% until the end of the year in view of averting recession.

Although the Nikkei index returned from recent lows to the mid 14,000 level by early June, falling corporate profits on the back of rising materials costs and a 4% appreciation of the yen versus the US dollar since the beginning of the year suggest the recovery in the equities may prove short lived. Corporate profits were down 17.5% in the first quarter and are prompting reductions in capital investment and employment. Japan’s top 7 chip makers are slashing capital spending 22% for fiscal 2008. Japan’s hot employment sector is also showing signs of cooling, adding 70,000 to the dole line in April and leading the unemployment rate up to 4%. Rising prices, unemployment and stagnant wages are impacting consumer spending with department store sales easing 3.4% lower in April.

Rising land and materials costs are also leading to sluggishness in the building sector. Land appreciation in Tokyo’s 23 wards is pushing the value of new homes beyond the reach of the average salaryman. The average price of a new condominium in Tokyo is 63.49 million yen (Approx Cdn $616,000) and is 8 times the salary of an average worker. Affordability is deemed reasonable if the price of the new home is under 5 times the average salary. Even in Tokyo’s suburbs, the average price of a new condo is 41.89 million yen or 5.2 times the average income. On the other hand, current average annual wages have remained stagnant since 2003. Declining affordability is cooling new home sales – new condo sales fell by 30% in May. Appreciation in land values now appears to be losing steam as a result. In an MLIT survey of 100 locations across Japan, only 41% showed increasing land prices in the first quarter of 2008, compared with 87% the year prior. It appears that land values will need to fall significantly further before a more robust housing market can return.

(Sources: The Nikkei Weekly, The Nihon Keizai Shimbun, The Japan Times)

Lumber Grading Championship Tour participants tour Canfor’s J.D. Little Forest Centre Nursery located in Prince George, BC.

On May 29th, COFI led Japan’s JAS Lumber Grading Championship Tour participants to Canfor’s J.D. Little Forest Centre Nursery in Prince George to learn about how B.C.’s SPF forests are sustainably regenerated.

Marty Hiemstra, a Registered Professional Forester with Canfor led the JAS tour group through Canfor woodlands and to the JD Little Forest Centre to demonstrate how companies are coping with the challenges brought about by the mountain pine beetle epidemic and the steps taken to plant the next generation of spruce forests.

Established in 1982, the J.D. Little Forest Centre Nursery grows 8 million seedlings annually. The species mix of the seedlings is 80% Spruce, 10% Douglas Fir and 10% Lodgepole Pine. The seedlings are grown between March and October in greenhouses and are then kept refrigerated until the following spring and summer when they are planted. In Canfor’s case, harvested forests are re-planted within 14 months. Between 1,200 to 1,400 seedlings are re-planted per hectare. Two years after the planting is done, the seedlings have a survival rate of 97%. Follow up site visits are conducted to ensure that the seedlings can grow freely on their own.

In the Prince George area, the species mix planted is approximately 66% Pine, 30% spruce and 4% Douglas Fir, however, the species mix varies according to the unique conditions and requirements of each site. In total, Canfor replants 40 million seedlings per year. Depending on the rate of natural reforestation, between 2.75 to 3.5 seedlings are planted for every tree harvested. The seedlings reach full maturity after 80 years.

The visiting JAS tour from Japan was truly impressed by the amount of care and effort Canadian suppliers are taking to ensure the sustainable regeneration of SPF forests.

Korean Economic Update
The South Korean economic growth in the first quarter of 2008 was the slowest since the last quarter of 2004. Bank of Korea’s data showed that Korea grew 0.7% in the first quarter from the previous quarter, decelerating from the previous 1.6% quarterly growth. The major reasons for a slowing economy are: weakening private consumption and corporate investment caused by soaring consumer prices, global downturn, impact of surging oil prices and the prolonged US subprime mortgage crisis.

Korea is the world’s fifth-largest oil importer, spending more than US$ 27 billion on petroleum between January and April this year. Given that Korea’s dependence on crude oil is much higher than that of advanced economies, the domestic inflation and foreign exchange rate are likely to fluctuate more here than in others.

The won declined to 1,043 per 1 US dollar as of the end of May 2008, compared with 938 won at the end of 2007. The won/dollar rate will likely stay above the 1,000 won level in the third quarter of 2008 as the current account deficit continues on high oil prices.

Surging oil prices translated into high consumer prices in the domestic market - reducing consumer purchasing power. Domestic consumer prices rose at the fastest rate in seven years in May 2008 to 4.9 % from a year earlier, far exceeding the BOK’s inflation target between 2.5 to 3.5% for three years to 2009 for six straight months.

Rising oil prices have caused imports to rise faster than exports, and for the first five months of 2008, the country has recorded a trade deficit of US$ 5.28 billion. Export of goods, which accounts for about 40% of the GDP, continued to be brisk, expanding 12% in the first quarter of 2008 from a year earlier, although the quarterly growth fell 1.8%.

In reflection of the domestic slowdown, the government is likely to lower its employment projection for 2008. During the first five months of 2008, the number of employed people increased by less than 250,000 each month with its low point of 181,000 in May 2008. The jobless rate hit 3.0% in May 2008, a 0.2% decrease from the same month in 2007.

Korean Wood Market Update:
Korean imports of logs for the first four months of 2008, compared with the same period of 2007, decreased 3.6% to US$ 289,821,000. Of this total, Canadian log imports decreased to 9.6% to US$ 22,571,000 - accounting for a 7.8% share in the total Korean log import market. New Zealand log imports marginally increased to 2.9% to US$ 127,274,000 - accounting for a 43.9% share followed by United States and Russia. United States log imports gradually increased to 11.1% to US$ 52,325,000 - accounting for an 18.1% share - due to the bearish trend in in-market production prices of Hemlock and Douglas-Fir caused by the sluggish housing market driven by the prolonged US subprime mortgage problem. In contrast to weakened US log prices, Russian logs continued to rise sharply, mainly because the logging and shipping costs increase caused by surging oil prices and the rising value of the Russian ruble against the US dollar. Consequently, Russian log imports considerably decreased to 25.5% to US$ 43,560,000 accounting for a 15% share in the total Korean log import market.

Korean lumber imports for the first four months of 2008, compared with the same period of 2007, marginally rose 2.5% to US$ 93,864,000. Despite slow progress in overall Korean lumber imports, Canadian lumber imports for the first four months of 2008 dramatically rose 23.4% to US$ 15,859,000, compared with the same period in 2007. Canada continued to lead as the number one import country, albeit the unstable supply of Canadian lumber imports caused by prolonged mill shutdowns and price weakness of Canadian lumber with the high Canadian loonie.

While building starts for WFC in the first four months of 2008 rose to 8.8% compared with the same period of 2007, Canadian softwood lumber imports for the same first four months of 2008, remarkably increased to 33.7% to US$ 15,467,000, accounting for a 28.5% share in the total Korean softwood lumber import market.
(Source: Korea Customs Service)

Korean Housing Market Update:
The Korean construction industry is being weighed down by soaring building material prices such as rebar and concrete. The rebar prices have increased 104% since January 2007, while raw scrap iron import prices have increased by more than 230% in less than 18 months. To make things worse, widespread delays at construction sites and material shortages for construction firms are expected across the country from the third quarter of 2008 onwards. The Korea Federation of Construction Industry Labor Union began strike action in June 2008 to protest being left out of the government’s fuel subsidy measures in conjunction with the Korea Cargo Transport Workers Union’s strike staged by angry truckers suffering from record-high oil prices.

The strikes may cause a major slowdown from the third quarter onwards, in a housing industry already burdened by the rising number of unsold homes and high commodity prices.

Building permits and housing starts for the first four months of 2008 marginally increased to 9% and 6.9% respectively to 24,596 buildings and 20,256 buildings. Slowdowns in the housing sector and a rise in raw-material prices, weakened construction investment by 0.7% in the first quarter of 2008, compared to a year earlier.

In an effort to stimulate construction and revive a depressed housing construction sector, the Korean government is urging state-run companies to execute infrastructure projects ahead of schedule. The Korean government is also taking measures to ease regulations on the preservation of military facilities and zones that have impeded the construction of homes and factories on large areas of desirable real estate for commercial and residential development.

During the first four months of 2008, both building permits and starts for WFC marginally rose to 5.2% and 8.8% respectively to 2,940 buildings and 2,340 buildings, compared with the same period of 2007, reflecting the current economic difficulty.

In contrast to the current slump in the housing market, the popularity of WFC in single family and low rise housing sectors is continuing to increase. Many factors such as health-conscious lifestyles, design flexibility and beauty of WFC, and the relative competitive price of wood over concrete and steel have accounted for this increase. Also, a series of new deregulation policies from the government has helped to boost single family housing and pension development projects. These initiatives present an important opportunity for the WFC industry. Canada Wood Group Korea is working hard to ensure WFC code and standards are developed to allow wood use for low rise apartments.

The new construction ministry, MLTM (Ministry of Land, Transport and Maritime Affairs) announced the revised deregulation policy on single family housing projects providing (1) easy authorization as reconstruction improvement districts for lot size bigger than 5,000 m² of area from the current 10,000 m² of area or 200 units and (2) simplification on permit process for re-development/reconstruction projects. The new deregulation policy on single residential development projects will be enacted from October 2008 and, consequently, the construction industry foresees that demand for single family and low rise residential projects will be increased from the third quarter of 2008.

Pension projects seem to be growing again, due to the recent deregulation policy driven by the new agricultural ministry, MFAFF (Ministry for Food, Agriculture, Forestry and Fisheries). The pension market was once the most important market sector for WFC in Korea but it decreased, due to the tax burden imposed on pension projects larger than 150 m² of architectural area. Pension projects larger than 150 m² had to register and the government imposed heavy income taxes on logging businesses. The new policy lowers this tax burden to larger than 230 m² of pension projects. This new deregulation policy will lead to more starts, for larger, better built pension facilities utilizing WFC.
(Source: Ministry of Land, Transport and Maritime Affairs)

B.C. Premier Gordon Campbell made an official visit to Korea from May 18 to 21, 2008 and was the keynote speaker to the Korea International Trade Association (KITA).

Korea is the fourth largest trading partner of British Columbia with increasing trade volume. Abreast of Minister Lunn’s visit to Korea, B.C. Premier Gordon Campbell made an official visit to Korea from May 18 to 21, 2008 to promote B.C.'s expertise in clean technology and green buildings; pursue opportunities in trade, education and investment; and officially open the B.C. Trade and Investment Office in Seoul.

The main programs included the opening of a B.C. Trade and Investment Office in Seoul, the grand opening of the Vancouver Film School’s Korea recruitment office, and highlighting B.C.’s clean technology and green design expertise in a keynote speech to the Korea International Trade Association (KITA) during the Korea-Canada British Columbia Green Building Exchange Seminar held for two days.

The Korea-Canada Green Seminar provided an opportunity for experts in green building design in Canada and Korea to develop partnership in sustainable design and share expertise in this critical area. Buildings emit more than 30% of the world’s greenhouse gases and this seminar has discussed how sustainable design can efficiently and economically reduce pollution, energy costs, waste and water consumption.

In his keynote addresses at Luncheon with KITA, Campbell made it clear that sustainability means more than power. “As we think of designing a lighter carbon footprint, as we think of designing more sustainable cities and more sustainable homes it is important for us to recognize we have to go in a new direction” he said. “It is our architects and our engineers, our designers and our builders, our developers and our product manufacturers who help us accomplish our goals and objectives.”*

During his visit, Premier Campbell established a sister-province relationship with the South Korean province, Gyeonggi Province, which will facilitate stronger social and trade relationships between the two provinces.

His visit was complete after meeting with the Prime Minister of Korea, Han Seung-Soo, to discuss trade between B.C. and South Korea, highlight B.C. technology and promote B.C.’s natural resource sector.
* quoted from the article in the Vancouver Sun - Tuesday, May 20th, 2008 issue

Tae Ik Hwang joined Canada Wood Group Korea as a consultant in December 2006 for the task of coordinating two market researches commissioned by FII and supporting logistics of the first FII - Canada Wood tradeshow in Korea, featuring wood product showcase house, COFI Terrace and BC Wood member booths.

In 2007-2008, his work has extended to various market access and market development projects for the Korean market, which included coordinating fire tests of wood frame wall assemblies for fire resistance accreditation, designing and coordinating training programs and missions.

He finds his job very rewarding because he understands the importance of CWG’s projects for the development and expansion of the Korean wood frame construction market. At the same time, he also finds it very challenging because of the wide spectrum of work involved - but, with the help and guidance from his colleagues in and out of Korea, he is learning new things and expanding his horizons.

Tae Ik Hwang, Technical Consultant, Canada Wood Korea finds his job very rewarding because he understands the importance of COFI's projects for the development and expansion of the Korean wood frame construction market.

This year, Tae has become the 3rd member of CWG Korea’s staff. He regards this appointment as recognition for his hard work, as well as acknowledgement of the great potential that the Korean market has for Canadian wood products by his colleagues and stakeholders. He is especially looking forward to working on more fire and sound insulation tests planned this year for the development of the wood frame multi-family construction market.

Tae has been with CWG just over one and a half years, however, his affiliation with Canadian wood frame construction and products goes back much further. His knowledge in wood and wood frame construction owes a great deal to such books as: "Wood Reference Handbook", "Introduction to Wood Building Technology", and "Span Book" published by the Canadian Wood Council.  Gaining technical information from those books, allowed Tae to become one of the early adopters of S-P-F dimension lumber in the Korean market for wood frame construction.

Tae Ik Hwang studied architectural engineering in Yonsei University in Seoul and has been involved in wood frame construction since the early 1990’s when WFC was first introduced in Korea. He has worked on various residential and commercial building projects including: custom homes to a gated community of 90 units, the first 3 storey Dagagu (multi-household housing) complex in Korea, as well as various resort lodgings and post and beam structures.

The Honourable Gary Lunn, Minister of Natural Resources, visited Korea from May 18-19, 2008 in order to encourage greater cooperation and to exchange opinions with Korean wood frame construction industry representatives.

Honourable Gary Lunn, Minister of Natural Resources Canada faces Korean news media.

CWG delegation reviews SK Apelbaum Model House.

The Honourable Gary Lunn, Minister of Natural Resources, visited Korea from May 18-19, 2008 in order to encourage greater cooperation and to exchange opinions and feedback with Korean wood frame construction industry representatives.

Upon arrival to Korea, Minister Lunn had a roundtable discussion on the success of the Canada Wood Group program in Korea with Canada Wood Group representatives, Rick Jeffery, Paul Newman, Brian Hawrysh and Wayne Iversen and CEO of FII, Ken Baker.

On May 19th, 2008, Minister Lunn held a lively breakfast meeting with Korean representatives of various sectors of the Korean wood frame construction industry. Attendees gained a greater understanding on the potential for wood and wood frame construction in Korea - fostering enhanced cooperation for the future.

Minister Lunn has pledged support to the Korean wood frame construction industry for the development of the wood frame construction market, and demonstrated the firm commitment of Canada’s government to better position the Canadian wood products industry to develop the market for its products in Korea.

The Maeil Business Newspaper, the most influential business newspaper in Korea with more than 2 million circulation, carried an article on Minister Lunn’s visit, causing the Canada Wood Korea office to become flooded with telephone inquires about the construction of wood frame structures - especially the construction of low rise multi-family buildings.

It’s very clear that the interest of wood frame construction among consumers as well as builders and developers are growing even faster, due to the rising cost of steel and concrete products, high energy costs, and concerns for the environment.

In addition, the CWG delegation visited the Dongbaek Apelbaum site and the Dongyeonjae site to see first-hand wood frame construction activities in Seoul and in it's vicinity.