China has long been recognised as a major potential market for wood-based products. This view has been fuelled by the scale of the domestic market, rising GDP per capita (albeit from a low base), a demonstrated government commitment to housing reform, reduced timber supplies and, more recently, China's accession to the World Trade Organisation (WTO).
These enormous market changes will have significant implications for forest products exporters. A cursory examination of the literature suggests that while there is considerable information and analysis of past trends, few of these provide comprehensive clues to the real areas of competitive advantage for softwood producers, or provide insights into the demands of future Chinese wood products consumers, who will undisputedly be of a different genre to the past consumer.
This study investigates these potential opportunities via a two-part literature review and the results of a market benchmarking survey of almost 1,000 existing or pending homeowners in Beijing, Nanjing and Shanghai, three cities which have been identified with the largest potential for increased demand for wood products related to housing. The first of the literature reviews focuses on the published demographics of housing demand in China, and serves as a background to the benchmarking survey results. The second review is a paper written by Dr. David Cohen at the University of British Columbia, and investigates the cultural, political and societal changes and its impacts on foreigners doing business in China. The benchmarking survey was intended to record the existing awareness of wood-frame residential buildings, along with positive and negative attributes that they associate with these structures.
Highlights of this study include:
At over 1.2 billion people, exploding urbanization, steady economic growth and a significant housing deficit, the growth in demand for housing materials/systems will be massive over the coming decades. At the same time, government reform has created a housing market where consumer quality demands exceed what was previously offered by the State.
With continued environmental protection policies, self-sufficiency in building materials will continue to decline, relying more and more on imports. (Note: overall imports surged by 63.4% year on year in January of 2003, to US$31billion; exports grew by 37.3% to US$29.8 billion, leaving China with its first monthly trade deficit since December 1996. [The Economist])
Like Japan, China’s population is aging, largely due to their “one child” policy. The number of people aged 60 and over is predicted to double in size by 2020.
Income distribution in China is uneven geographically and the disparity is widening. 2.2% of the population of China, living in such cities as Shanghai and Beijing, had reported annual household incomes between US$10,000 and US$15,000 in 2001 (CPIRC). This is considered a very affluent income level in China, a point that must be kept in mind regarding the population’s ability to pay for B.C./Canadian wood products. In contrast, over 50% of the population in China live in western and inland parts of China and earning less that US$1,800 in 2001.
These income levels were confirmed in the market benchmarking analysis of this study, showing annual household incomes among the respondents of primarily between CDN$4,600 and CDN$8,900 per year (26,000 to 50,000 RMB). It should be noted that the vast majority of these household incomes are earned by two people, meaning the average income per person is half this.
Further, average monthly rents for those that did not yet own their homes was CDN$191 for Beijing, CDN$122 for Nanjing and CDN$143 for Shanghai for those surveyed. Surprisingly though, the average existing/expected home purchase size (primarily apartments) was 97 m2 at a price of CDN$72,000 for Beijing, 125 m2 at a price of CDN$75,000 for Nanjing, and 109 m2 at a price of CDN$83,000 for Shanghai. There are two explanations for this divergence between income levels and willingness to pay for housing. First, savings rate is very high in China as compared to Canada. Second, not unlike Japan, interest rates are very low. It will be interesting to see what the existing levels of bad debts in China’s banking system does to the latter in the coming years.
Although evolving, China’s cultural, political, social and economic realities necessitate that B.C./Canadian exporters understand the environment to succeed. The need for local joint ventures, an assessment of risks/costs/benefits and a clear understanding of the dynamics of this market are critical.
The awareness of North American platform-frame and Japanese post & beam wood building systems was significant in all three cities investigated. For example, 44% of the respondents in Nanjing were aware of Japanese post & beam and 22% aware of North American platform-frame homes. Awareness came primarily from advertisements in China, followed by exposure through television / cinema programming. Awareness of wood-based home systems increased both with the respondent’s level of income and education.
There was an even higher awareness of combined wood / concrete / masonry building systems. This was found as a curious result as evidence of such structures in urban China is not evident. Further investigation revealed that the high awareness comes from the respondents’ previous life in (or knowledge of) rural homes in China where such structures are common. This is a very important issue regarding the Chinese connotations of wood-based homes. The image of these masonry/wood rural homes is not high, but rather associated with subsistence living. This is a much needed area for further market research, as it will not be clear whether or not this influences responses to positive / negative attitudes toward wood-based homes (next two highlights).
Aesthetics of wood-framed homes was the number one positive attribute in the survey in all three cities, followed by its insulative properties and environmental protection. Attributes such as “natural” and comfortable were also common among respondents. It is interesting to see that the performance of wood structures was NOT listed as a positive except for its earthquake resistance (see negative attributes).
On the negative attributes side, concerns over fire ranked number one in all three cities. The other negative attributes noted were virtually all performance related, including lack of insect resistance, moisture resistance, or even seismic concerns (conflicting with the positive mention above). Dealing with the concern over these negatives will be key in any promotion activity in China.
The results of this study suggest that there is a strong potential demand B.C./Canadian wood products/systems. In addition to continuing exposure through the existing promotion of high-end single-family homes, it is recommended that the greatest potential lie in the recognition of the cultural, social, political and economic realities that exist for housing in China. These largely point toward increased wood-use in their common low-rise multi-family structures. This must include dealing with the existing negative performance connotations of wood by the Chinese.
Promotional efforts by our government and industry need to incorporate the knowledge gained by the market intelligence generated in this and ongoing market research studies.
For several years, Decision Aids has been addressing knowledge and technology transfer gaps in the design and construction sector that have had negative consequences for the image of wood. Since June 2000 we have been operating a public web site, together with the Canadian Wood Council, as a primary mechanism for conveying information to the building industry on wood durability. The web site’s popularity is growing, with October 2002 a record month for visits (3,748). In 2002/2003, we added substantial new material to the site, we brought the French side fully up-to-date, and we reconfigured the site’s appearance and structure. In 2002/2003, we also continued to develop our participation in building science academic development at UBC and BCIT. This kind of involvement with the universities that are teaching tomorrow’s building designers and consultants has become the preferred route for Decision Aids to meet its mandate for filling current knowledge gaps in durability. In particular, we have stayed closely aligned with BCIT in its pursuit of funding for the development of an outdoor test facility for building envelope assemblies. Such a facility will be an important tool for filling information gaps regarding best practice design with wood in rainy climates.
Work at the Eastern Forest Products Laboratory of Forintek Canada Corp. in fundamental and applied research is highly varied. The laboratory's facilities and equipment reflect this need for specia- lization. Its equipment is as basic to lumber production as saws, cutters, and dry kilns, or as complex as a steam press or fluidized -bed gasifier. These facilities allow researchers to carry out chemical, physical, and biological analyses of wood. Similarly, evaluation of wood products, and the processes by which they are made, is aided by laboratory and commercial-scale testing equipme- nt. In each area of research, the EFPL facilities assist research- ers in developing new, innovative systems and products. The indus- tries and governments that Forintek serves are the direct benefici- aries of this valuable resource. The following pages outline the key facilities and expertise available at Forintek's Eastern Forest Products Laboratory.
The wood products industry wants to expand its market share in non-residential buildings. This is a challenging goal because building codes exhibit a bias against the use of wood products, particularly in the construction of non-residential buildings. The move towards adoption of performance-based building codes offers the promise of eliminating such biases. However, in order to be prepared for the introduction of performance-based codes, architects, engineers and building code officials have pointed out the need for engineering tools to assess the fire performance of buildings.
This five-year project was initiated to develop fire-safety design tools for non-residential wood-frame buildings, and to foster development and delivery of educational programs to train students and practitioners in performance-based fire-safety design. In order to achieve these goals an NSERC Industrial Research Chair in Fire Safety Engineering was established at Carleton University in March of 2001. This report summarises the progress towards these goals made by the Chair in the first two years of his tenure.
China has become the focus of much interest by the Canadian forest sector for its potential as a growth market for Canadian wood products. Such interest spans the full range of products (softwood and hardwood lumber, wood-based panels and other further processed wood products) and end-use applications (residential and non-residential construction, doors, windows, interior finish, furniture, and industrial end-uses).
This preliminary competitor analysis is the first step towards actively positioning British Columbia as a supplier to the Chinese market for the purpose of increasing market share. The two key objectives of the analysis are to do a thorough review of existing information on China’s wood products market and industry and to identify gaps in information. The results will provide Forestry Innovation Investment with a basis for prioritising future research, product development and promotional activities for China’s market.
When analysing information on China’s market and industry it is important to keep in mind that much of the officially reported data is not reliable. Comprehensive and reliable statistical collection systems have yet to be established in China. This report is primarily based on adjusted official figures and published primary research reports.
The key conclusions from this analysis are:
· China’s raw material supply from plantations and imports is increasing.
· Russia and Southern Hemisphere countries will remain B.C.’s main competitors for softwoods.
· China’s domestic sawmilling industry is uncompetitive.
· Panel demand is rapidly growing while lumber demand is steady; at the same time lumber imports are rising.
· Substitution with reconstituted wood-based panels and non-wood materials affects lumber demand.
· Furniture and interior finish are the main drivers of wood demand in China; softwood lumber consumption depends largely on civil construction activity.
· There is a mismatch between the main wood products currently supplied by B.C. and market demands in China. China demands hardwood for interior finish and furniture and softwood logs for processing in China to compensate for the decline in domestic harvests. B.C., on the other hand, supplies structural softwood lumber that has limited existing applications in China. In China demand for non-structural reconstituted panels is growing fastest while B.C. produces mainly structural panels.
· Any opportunities for B.C. producers to capture a significant market volume in China therefore require either developing a new market for existing B.C. products or developing new products for existing markets.
Published market research on the building materials used in repair and remodelling is dominated by studies of do-it-yourself (DIY) consumer preferences. However, the professional repair and remodelling sector has quietly grown in the past decade from approximately one half of repair and remodelling purchases to closer to two-thirds of purchases.
The goal of this project was to create a profile of the professional repair and remodelling sector. Specifically, we were interested in the types of projects completed and the products consumed. The study consisted of a literature review followed by a telephone survey.
Kitchen and bathroom remodels are the most common and among the most expensive projects. These projects provide a healthy market for wood-based cabinets.
In the current trend to wood floors, the professional repair and remodeller is more often called upon to install solid wood flooring than laminate floors. The cost of professional installation indicates consumers place additional value on a solid floor.
The incidence rate of projects related to rebuilding after disasters is high among professionals. These are the most expensive project types and the most likely to use softwood lumber and structural panels.
Local lumberyards are the most common source of purchases, as compared to box stores or buying direct.
Local suppliers as well as promotional and instructional literature are the most important sources of new product information for professionals.
Quality, appearance, value, and ease of installation are the most important product attributes.
For visual products such as flooring and cabinets, brand and appearance are of increased importance relative to structural products.
The profile of the typical professional repair and remodelling client:
o Average to large single-family home,
o 35-49 years of age
In summary, professionals play a large and increasing role in the repair and remodelling sector. They purchase a significant value of wood products, particularly finished wood products such as cabinets, flooring, windows and doors. Their preferred source of supply are lumberyards, which they also rely on for new product information. Any marketing strategy aimed at the professional repair and remodeller should be focussed on this distribution channel rather than the DIY-oriented box store.
Combined with market studies that Forintek has completed on the North American DIY and new housing construction sectors, there now exists an extensive database for cross-sector comparisons. It is recommended that a follow-up summary report of these studies be produced.
The air quality in human dwellings, educational and work places has become a high profile issue over the last decade especially in regarding to mould. Mould spores are present everywhere. Moulds grow on a wide variety of organic substrates including wood and are easy to find in all buildings especially those that have moisture available for microbial growth. The wood industry is facing a potential problem as stain fungi (which may often be mistaken for mould) and moulds can be found growing abundantly on green timber and lumber and the public could perceive wood used in building envelopes as a major substrate and source of mould. To ensure that wood is treated fairly among other building materials Forintek has initiated several projects regarding mould and one of them is to review the existing body of literature on moulds and to develop an organized database of information in a searchable form that could be continuously updated. Thus, to update Forintek’s knowledge in this area, to maintain awareness of the latest developments and trends and to establish new contacts Adnan attended the 9th Indoor Air Conference in July 2002 which is considered to be among the most prestigious in the field.
As expected, the conference and associated interactions yielded a substantial amount of information directly or indirectly related to current and future projects at Forintek in regard to moulds, substrates for their growth and potential health effects. Overall there was a general understanding that microbial ecology and health-related issues in association with a moisture-damaged site are complex phenomena and require further and thorough research. Modern building technology that uses a plethora of building materials in more or less successful building designs and in association with failures in moisture control provide specific, and in some cases, new ecological niches for microbes.
Wood was not singled out or exempted as a source or important substrate for mould growth. The water damage and available moisture is the major factor in supporting microbial growth. Apart from mould there are other equally or more important elements associated with reported ill health and these may include bacteria, tobacco pollution, diesel particles, material and microbial volatile organic compounds, mites and other allergens of animal origin. This report summarizes major findings and developments in indoor air quality issues with special emphasis on mould, health issues and water-damaged human habitats. Parts of it are judged as potentially useful to Forintek members.
In order to maintain the competitive advantage in existing and new markets situated in seismic and high wind zones such as the Pacific Rim and the southeastern U.S., it is proposed to study deflections in walls, floor and roof assemblies. The proposed project will also be very useful in: a) setting deflection criteria as will be demanded by performance-based codes, and b) responding to the inevitable transition to displacement-based seismic design.