Log stocks in China have not increased but there is a lot of volume on boats queuing at Chinese ports. Some industry observers estimate log stocks could be over 7m m3 including all the volume on the water.
Congestion in China has reached the point where at the end of August approximately six percent (599) of the worlds handy size fleet capacity was queueing off the China coast. This has two effects, high demurrage, and reduced shipping capacity.
This congestion has been caused by China authorities reacting to Covid outbreaks by closing ports, delaying berthing, and imposing strict procedures that have reduced ship handling capacity. There has also been strong demand for grain, minerals, and iron ore imports.
There is a concern for the property sector in China as property developer Evergrande faces the risk of default. Evergrande currently has 778 projects underway in 223 cities. The property sector contributes 28% of China’s economy and has been one of the engine rooms for China’s economic development. The Chinese government therefore will most likely intervene in some form. Even if the central government opts to let Evergrande default rather than bail it out directly, authorities are likely to be involved in coordinating the continuation of these projects that employs 163,000 people. There will, however, be short term disruptions.
The Caixin China General Manufacturing PMI fell to 49.2 in August 2021 from 50.3 in July, missing market estimates of 50.2. This was the first contraction in factory activity since April 2020.