The demand for imported wood in China’s wood products industry has gradually recovered. However, on the one hand, overseas coronavirus crisis which occurred in many countries and spread rapidly determined the governments of various countries to adopt anti-epidemic measures such as home working and border closure, which affected timber harvesting and transportation.
On the other hand, Chinese domestic timber processing factories are currently in panic due the shortage of imported timber caused by the pandemic. When the price of imported timber bottomed out in 2019, the factory actively stocked, causing prices to rise, ranging from 100-200 yuan per cubic meter (14-28 US$/per cubic meter). This article will discuss the following points regarding the sufficient supply of imported timber:
Imported timber inventory can support at least two months of consumption
According to industry insiders, from the second half of 2019 to the end of the year, stocks of imported timber in China remained high and prices had bottomed. The imported timber from January to February this year has still arrived normally. In early March, most ports have reached full warehouse capacity. Even after a month of consumption, as far as the softwood materials are concerned, the inventory of Taicang still has more than 3.6 million cubic meters as of the time of publication, Guangdong 300-400,000 and an additional 1.23 million cubic meters at other timber markets. These inventories can support normal consumption for more than 2 months.
In addition, the extension of coronavirus to other countries has become more serious, demand has fallen, and foreign trade orders have been severely reduced. Imported wood that China originally planned to process and then export will be converted to domestic sales or cancelled. In China’s wood consumption structure, exports account for 20% of total consumption. Based on this ratio, China’s demand for imported wood due to reduced exports will be reduced by about 10% -20%.
Except for New Zealand, the main timber-producing countries are still in normal supply
North America production area: although the United States and Canada have taken measures such as home working and border closure, they have listed the timber industry as “critical infrastructure force (United States)” and “essential industry (Canada)”, and can still ship normally. However, due to the reduction in domestic demand in the United States and Canada, for example, the United States expects domestic demand to decline by 20-25% from April to May, leading to the closure of some factories in the United States and Canada or partial reduction of production. In addition, ports in the northeastern United States are closed, but states such as North Carolina in the southeast can still export timber normally.
Europe: According to industry insiders contacted by GWMI, timber harvesting and export in Germany, Finland, Sweden and Belarus are still ongoing.
Australia: Due to the New Zealand’s four-week policy of home ownership and national lock-up began on March 25, the timber industry was also unable to function properly. New Zealand adopted this measure to prevent large-scale infections. When the measures were taken on March 24, only about 200 cases were confirmed. As of April 9, the number of confirmed cases rose to 1,239. By the end of April, if the epidemic can be effectively controlled, it is believed that the whole country will be able to operate normally and timber will be supplied normally.
Russia: Although the border was closed on March 30, the cross-border transportation of goods is still allowed. After the Suifenhe Port was closed, the freight still keeps running.
In summary, although the output of various wood-producing areas has declined, domestic demand in various countries has slowed down. Only China’s demand is gradually picking up.
Imported timber freight rates rise
During January-February, and during the Chinese New Year holiday due to the fight against the epidemic, there were fewer exports, and the number of containers to Europe and the United States also decreased accordingly. There is no empty container to transport timber back and forth. In addition, in order to reduce losses, shipping companies cancelled some transports, resulting in high freight rates, and even some routes increased freight rates by 2-3 times.
Domestic demand still needs some time to return to normal levels
With the resumption of production in China, most construction projects have been resumed, and softwood materials have also been shipped faster. These timbers have been circulated to the second and third-tier distributors, and are best prepared for the rebound in demand for construction materials. However, home furnishing stores in China are relatively empty. Furniture factories generally report that orders have been reduced, and demand for hardwood timber has been slow to recover. According to industry insiders, the stock of Zhangjiagang and Jingjiang is usually 1/3 to 1/4, and the inventory is about 2 million.
As can be seen from the above four points, the recent rebound in the price of imported timber is caused by the active preparation of timber processing plants and the hype of some companies. The timber has not yet been transferred to end users such as furniture factories. In the next two months, China will have sufficient supplies of imported wood; in the long run, the increase in wood imports will depend not only on China’s demand but on the global economic development and effective control of the pandemic.
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