The coronavirus epidemic in China has resulted in sharply reduced importation of forest products in early 2020. During January and February, the import value of logs, lumber, pulp and wood chips totaled 4.6 billion dollars. This was down 26% and 14% respectively, from the same periods in 2018 and 2019.
From 2019 to 2020, the biggest percentage declines were seen in softwood lumber (-26% y-o-y) and softwood logs (-20% y-o-y). The import value for wood pulp fell the most, just over 300 million dollars y-o-y, followed by softwood lumber, which was down 190 million dollars.
Importation of softwood lumber to China by volume, was estimated at 1.2 million m3 in February 2020, the lowest monthly volume in four years(see chart). The two largest lumber suppliers, Russia and Canada, continued to be the major sources for lumber. While Russian volumes were down 16% the first two months of 2020 y-o-y, they increased their market share from 57% in early 2019 to 59% in early 2020. Canada’s share fell substantially, from 24% to 10% during the same period. Another noteworthy change the past two years has been the expanded presence of lumber coming from Europe into the Chinese market, but in volumes and market share. European lumber accounted for about 18% of total imports in early 2020, up from 8% in 2018.
During January and February 2020, China imported 5.1 million m3 of softwood logs, down from almost 5.7 million m3 in the same period in 2019 (the total import value fell from 800 million dollars to 640 million dollars). Record high log inventories (over 7 million m3) at Chinese ports, reduced demand for forest products as a consequence of the coronavirus, and labor shortages at ports and wood processing facilities have resulted in sharp declines in log imports in 2020. All log-supplying countries reduced shipments dramatically with the exception of New Zealand (only down 1% y-o-y) and Central Europe (Germany and the Czech Republic were up 200% and 320 % y-o-y). Total import volumes to China in February 2020 were the lowest since February 2016.
The only major product that showed increases in import volume from early 2019 to early 2020 was hardwood chips, with a gain of 11% y-o-y. This was driven by higher production of predominantly hygiene paper products in January and February, and the expectation that this sector would continue to be strong into the second quarter. Shipments from Vietnam and Chile jumped about 20% y-o-y, while Australia shipped 3% less the first two months of 2020 as compared to the same period in 2019.
The import volume of wood pulp increased by almost 20% y-o-y during the first two months of 2020 with particular noteworthy rises in shipments from Indonesia, Canada, Finland and Sweden. However, the import value fell by 308 million dollars (-14% y-o-y) as a result of substantially lower prices for market pulp in early 2020.
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The February At Wharf Gate (AWG) prices for logs at New Zealand ports were predominantly rolled over for March. During March there have been gradual increases in the CFR sale price for radiata pine logs in China as productivity in China ramped up.
A grade was selling in the 108-111 USD per JASm3 range prior to the news about the NZ COVID-19 lockdown.
The Chinese market reacted immediately to the New Zealand lockdown with wholesalers increasing their selling prices overnight by an average of 150 CNY per m3.
The combination of increased sale prices in China and the NZD weakening against the USD will see a significant increase in AWG prices when harvesting resumes.
Many domestic mills reported near record domestic sales of structural sawn-timber during Quarter 1. Of course, this has all come to a halt with the NZ COVID-19 lockdown.
Due to some lower domestic log prices, the PF Olsen Log Price Index decreased $1 in March to $106, The index is currently $18 below the two-year average, $19 below the three-year average, and $14 lower than the five-year average.
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The $75 billion North American wood products industry faces serious to major impacts from the corona virus outbreak, but surprisingly remains largely optimistic about a recovery.
That’s part of the findings of a new survey of the industry which paints a vivid picture of what woodworking businesses face and how they are dealing with the crisis, including how they are helping health workers cope.
COVID Impact on Woodworking Sector
COVID Impact on Woodworking Sector
Nearly three quarters of respondents say the virus outbreak is already having a serious to major impact on their operations. About one quarter of respondents (23.7 percent) said the outbreak is having only a minor impact on their business.
Some 69 percent of respondents said the outbreak has resulted in disrupted schedules. More than half (55.1 percent) said they already face a loss of business. And nearly half (46.8 percent) said they are dealing with disruptions in their supply chain.
Despite those issues, the industry generally has a positive outlook. Almost two-thirds (62.6 percent) see a significant impact short term, but they expect to recover long term. Fewer than 30 percent (28.5 percent) see major negative. However, 6.8 percent see major, permanent negative impacts, and 2.8 percent said they are actually already considering a permanent business shutdown.
Other findings in the survey include:
- 32 percent already have instituted layoffs.
- More than a third (34.3 percent) have reduced their work hours.
- 47.2 percent report their state has agreed with Homeland Security guidelines and declared them essential, but more than 16 percent said their state has not gone along with that.
- Nearly 17 percent said they contributed excess N95 masks and/or nitrile gloves to supply local healthcare workers. Almost 3 percent are actually re-purposing manufacturing in their businesses to make healthcare products such as masks and face shields.
The survey was conducted online on a sample size of 42, generating 562 completed responses, for a margin of error of 3.447 percent with a 90 percent confidence level.
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Södra Wood is implementing temporary partial furloughs at its production facilities in Mönsterås and Orrefors due to a reduction in demand in the UK and the Republic of Ireland during the ongoing pandemic. Södra Wood Ltd in the UK and the production facility in Hamina, Finland, may also be affected by the decision.
“We have noticed a sharp decline in demand in the UK and the Republic of Ireland in the last week. As a result, we are quickly adapting our production to maintain a healthy balance between supply and demand. The ability to implement temporary furloughs will allow us to quickly increase production again once the demand begins to increase again,” said Jörgen Lindquist, President of the Södra Wood business area.
A partial furlough means a reduction in working hours for Södra employees at the affected facilities. The Swedish government has announced that they will provide financial support to compensate for the reduced hours. Södra Wood’s total production will be temporarily reduced by 25 percent. Considering the rapid changes that we are encountering in our operating environment, the rate of production will be constantly under review.
“We are entering this uncertain situation with stock levels that are currently well balanced. Aside from the UK, demand is steady in our European markets and we are seeing positive signs of a recovering Asian market. At the same time, we are seeing higher than average levels of absences among staff which has impacted our production. These furloughs are being implemented as a result of the situation in the UK. All other facilities that do not deliver to the UK will maintain normal levels of production until further notice,” concluded Lindquist.
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West Fraser Timber Co. Ltd. says it is further cutting production amid the COVID-19 pandemic.
The Vancouver-based company says it will further reduce its SPF lumber production by 30 million to 40 million board feet per week, or 45 to 60 per cent, starting Monday.
West Fraser says in a statement it’ll continue SYP lumber production at the reduced levels announced mid-March.
The company says plywood production at its three manufacturing sites will be further adjusted on an ongoing basis.
Its Cariboo Pulp and Paper joint venture pulp mill will take about four weeks of downtime starting April 20, resulting in a reduction of 30,000 tonnes of NBSK production – half belonging to West Fraser.
The company says it will provide another production outlook update on April 28 when it releases its first-quarter earnings.
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The Swedish timber company announced the cessation of logging.
The decision of the Södra Skog management will be valid until April 19, 2020.
Under these circumstances, harvesting of damaged forest and scrapping of existing stock in the forest continues. Transport to industry takes place according to plan.
“Adaptation of logging is done in order to balance the stocks of timber and pulpwood with respect to industry and create the necessary flexibility for harvesting after storms. This is a preventive measure due to the uncertain situation in the world now, ”explained Sofia Peterssson, manager of Södra Skog.
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