The total log demand in China has reduced since last year’s real estate and construction crisis in China due to Government crackdown on speculation and a tighter lending environment. Log supply has also reduced dramatically. Due to COVID-19 and Russia’s invasion of Ukraine significantly affecting the supply chain, we are yet to see where the balance between supply and demand truly sits.
Significantly reduced log supply into China has maintained log prices, but if Covid forced lockdowns in China continue, then log demand reductions may put pressure on CFR log prices in China.
The spread of COVID-19 and urban lockdowns have had a huge impact on the global timber supply chain for a long time and have led to soaring freight rates and rising timber prices. Although freight rates have risen the impact on wood supplies has been equally impacted by disruption of transport from the ports and the difficulty faced by overseas raw material suppliers in securing containers.
Shanghai City is under lockdown which has resulted in serious cargo accumulation at the port. Shanghai Port is one of the important container ports in China and 20% of exports pass through the port. Cargo volumes are now exceeding port capacity and trucks with containers are backing up on highways and vessels arriving for cargo are being delayed at sea. If the outbreak in Shanghai continues China could face a logistics crisis.
Global shipping companies and exporters in the eastern provinces of Jiangsu, Zhejiang, Anhui and Shanghai are turning to Ningbo Port in Zhejiang some three hours from Shanghai, to avoid the congestion at Shanghai Port.
China imports of softwood logs in the first Quarter of 2022 was 44% down on Quarter 1 2021. New Zealand’s log supply was 25% down. Log supply will remain constrained. New Zealand is entering its winter months, and price instability has not encouraged a significant increase in harvest levels. Supply from Europe and North America will also remain lower than last year.
New Zealand log vessels currently must wait an average of 10 days in Tauranga port before departing. Not because there are increased log volumes, but most log exporters from New Zealand did not sufficiently prepare for the change in fumigation rules. Many exporters are now queuing while they debark more logs.