Source: The Canadian Press

The forestry industry will return to profitability this year due to a mini-boom in the Canadian housing market, a slight improvement in U.S. demand, and growing exports to China, a report by the Conference Board of Canada says.

“After three years of losses, a surge in prices and demand lined up favourably early this year for the industry,” said Jacqueline Palladini, an economist at the Conference Board.

Canadian production likely grew by 10.6% in 2010, according to the Conference Board’s latest review of the industry.

Revenues are increasing this year for the first time since 2004. Despite rising costs, the industry is expected to post a profit of $476 million in 2010.

The forestry sector was particularly hard hit during the recent recession due to slower demand for lumber for construction that compounded problems caused by a decline in demand for paper and newsprint.

The Conference Board predicts the industry’s rebound will continue in 2011, but the pace of growth will slow.

A slowdown in the Canadian housing market next year will reduce the number of new homes being built could hurt demand while uncertainty in the U.S. housing market remains a key concern.

The U.S. housing market improved slightly in 2010, but demand remained in flux due to a weak economic recovery.

However, Canadian producers attempts to diversify away from the U.S. market and break into China appear to have paid off, the board says.

“Between 2000 and 2010, Canadian exports to China have increased by 3,300%. In fact, Canada surpassed Russia this year as the biggest exporter of softwood lumber to China,” the board said.

Canadian wood products exports are expected to grow by 2.4% in 2010 and will accelerate in late 2011 and 2012.