The province exported 5.4 million cubic metres of softwood lumber during the first nine months of 2012, a drop of 1.5 per cent from a year earlier. But overall Chinese lumber imports declined nearly five per cent.
"So B.C.'s actually taken some share from other exporters," Mark Kennedy of CIBC World Markets said in an interview.
He said the performance is positive despite lower shipments in light of the "almost hard landing" of the Chinese real estate market that started midway through 2011.
The slowdown suggested a 15 to 20 per cent pullback in lumber demand, but the drop in total imports was far more modest.
Canadian lumber is used primarily in China for concrete forms in apartment building construction, furring strips used to attach drywall and flooring, and for trim, door and window frames.
China imported 1.86 million cubic metres of lumber in November, up nearly 15 per cent from the prior month and slightly below volumes shipped a year ago.
Kennedy said the growth of Chinese imports will depend on stimulus programs adopted by the new government and its support for social housing.
"I think the positive news is that we aren't going to see any further declines in their lumber imports, so we've certainly flat-lined or maybe we'll see some modest growth and then that growth could start to accelerate into the back half of 2013."
Growth of 10 to 15 per cent is "reasonable" as North American lumber shipments could expand by 50 per cent to six billion board feet in three to four years, he added. Western lumber producers in B.C.'s interior and coastal regions account for more than 80 per cent of those exports.
Increased Chinese demand, coupled with a recovery in U.S. home construction, should continue to boost lumber prices and eliminate softwood lumber duties as of January. Lumber prices have increased by more than US$100 per thousand board feet over the last year to reach US$360, above the duty threshold.
The leading beneficiaries include West Fraser Timber (TSX:WFT) and Canfor (TSX:CFP), Western-based producers which together paid nearly $100 million in duties last year.
"Canada really finds itself in a unique situation now because you've got both the U.S. market as its housing market recovers asking for lumber, as well as the Asian market."
International Wood Markets expects Canada's lumber production will plateau by about 2015 as it feels the effects of the mountain pine beetle epidemic in the B.C. Interior and Quebec's decision to permanently reduce its timber harvest by at least 30 per cent between 2004 and 2013.
"By the end of the decade, B.C. and Quebec lumber shipments will collectively be lower by some 10 billion board feet as compared to peak shipments in 2004."
The industry group expects that increasing U.S. housing starts will help to propel North American lumber prices to new highs next year and record levels in 2014.
Driving longer term Chinese demand growth is the need for the world's most populated country to build millions of homes to accommodate massive urbanization, Kennedy wrote in a report.
An estimated 10.75 million homes are expected to be built annually in the next 13 years, including 40 per cent in the form of social housing targeted at low income earners.
The total number of housing units is expected to grow by 140 million units to reach 300 million units by 2025.
That translates into building accommodations for up to 25 million people a year, or more than two-thirds the population of Canada.
China's urban population is expected to hit one billion around 2027, prompting five million housing starts annually. Replacements of demolished homes represent another two million homes, plus 3.75 million units to reduce housing shortages.
In addition to lumber, Chinese demand is growing for pulp as the country expands its production of tissue and cardboard packaging.
China imported 1.4 million tonnes of pulp in November, up 2.2 per cent from October, but 7.6 per cent higher than November 2011. In the first 11 months of the year, imports grew 15 per cent to 15.1 million tonnes, putting China on track to import 16.4 million tonnes in 2012.
The country is planning to start up 16 million tonnes of paper capacity through 2014. One company alone, Asia Pulp and Paper, plans to add 42 new tissue machines over the next three years, adding 1.9 million tonnes of capacity.Suggest a correction