Chinese demand for B.C. lumber is eating up as much of the economy-grade mountain pine beetle wood as the province’s sawmills can produce.

It’s going into everything from concrete forms to furniture, creating a new market for beetle-killed wood and leading the province to a record year in lumber exports to China.

By the end of July, B.C. had shipped more than 850 million board feet of lumber to China – enough lumber to keep three sawmills running year-round, surpassing the 12-month total for 2008. Most of that was made form beetle-killed timber.

The China lumber market is growing exponentially, Forests Minister Pat Bell said Monday at a briefing with reporters in Victoria. He expects it to hit 1.3 billion board feet by year-end, helping ease business lost as a result of the U.S. housing market collapse.

The province’s goal is to transform that market into higher-grade lumber products but in the meantime, the demand for low grades couldn’t come at a better time, according to the Council of Forest Industries.

Higher-grade lumber sales, normally sold to both Japan and the United States, have been sinking for three years. There’s less of it needed and less of it being produced. B.C. lumber production is down to 54 per cent of what it was in 2006.

Further, the mountain pine beetle has made it increasingly difficult for sawmillers get higher-grade wood from their beetle-damaged logs. Mills are producing a higher percentage of lower grades.

All that economy-grade wood has to find a home to keep the mills running and thanks to China, they are selling all the economy-grade they can produce.

“It’s not something you set out to produce in the first instance, but you do have to find a home for it,” said Paul Newman, executive director of market access for the Council of Forest Industries.

“We actually get inquiries from other markets interested in utility-economy lumber and they are finding the supply out of B.C. is very tight.”

At his China briefing, Bell stressed the higher-end uses the province, in conjunction with the industry, is trying to convince the Chinese to buy.

He said volumes of mid-to high-end lumber are increasing as the Chinese warm up to North American-style sloping roofs, manufactured from B.C. wood using B.C. roof truss technology. Using the higher-end construction grade for interior partition walls in Concrete buildings is the next step.

And he noted that China has now surpassed Japan as the province’s No. 2 market for lumber, in terms of volume at least.

But in terms of value, it is still far below Japan.

Total lumber sales to China for the first seven months of the year were $170 million.

The Interior, by far the largest lumber producing region in the province, accounted for $109 million of that total. By comparison, Japan bought $185 million from Interior producers.

The U.S., even in these depressed times, bought $1.12 billion from Interior mills, 10 times the value of the Chinese market.

China lumber purchases amount to less than one per cent of the province’s merchandise exports but according to Jock Finlayson, of the B.C. Business Council, that country’s rapid development makes it an ideal market for B.C.’s forest products industry to focus on.

“The main point here is that we need to continue working to develop markets for B.C. wood products outside of North America,” he said. “Kudos to the government for pressing ahead, but market diversification is going to be a long-term challenge. It's not something that can be accomplished in a few years.”