Softwood log market in China remained strong throughout the first quarter of 2021 with exporters paying king’s ransom for shipping as freight cost skyrocketed.
Since the beginning of the year, insufficient supply and rising prices have brought uncertainty and anxiety among Chinese manufacturers that were faced with high operating costs.
Below is short summary for some of the market forces fueling the current imbalance in the Chinese softwood log market:
- Rising ocean freight costs and container shortages have put a burden on log imports. Shippers around the world specially from Europe, North and South America are facing headwinds to fulfill their contracts on time. During the first quarter of 2021, spruce log exports from Europe dropped by about 30%. Moreover, exports of pine logs from South America dropped by about 40% from last quarter of 2020 vs first quarter of 2021.
- Strong domestic demand from major supplier countries; with the gradual recovery of the economy, the demand for construction materials in countries such as United States, Canada and some European countries increased slowing the flow of wood to China.
- Imbalance between supply and demand. in 2020 China’s softwood log and lumber imports amounted to about 70 million cubic meters; a 2% year-on-year decrease. Stocks for softwood logs and lumber in major ports have been greatly reduced, resulting in a temporary imbalance in timber supply and demand that remained during first quarter of 2021.
- The Central Government is set to continue with their stimulus plans for the economy that is set to grow 8.2% in 2021. China’s real estate market rebounded after the COVID-19 and with the mentioned stimulus plan in place it is expected that demand for building materials, including wood, is set to continue.
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