Australia’s woodchip industry hit by US-China trade war

Australia’s woodchip industry hit by US-China trade war

Australia's $1.4-billion plantation woodchip industry has been dragged into the US-China trade war, with a number of shipments to the Asian economic powerhouse cancelled in the fallout from the dispute.

Since July, at least three ships that were supposed to take Australian woodchips to China have been cancelled or deferred, and there are fears further consignments could be affected.

While shipments from Albany on Western Australia's south coast have been hit hardest, it's believed other woodchip export hubs in South Australia and Victoria have also been disrupted.

The setbacks have put the brakes on an industry that had been enjoying sustained growth since a wave of turmoil brought on by the failure of the managed investment scheme scene a decade ago.

Soaring demand halted

Earlier this year, prices for bluegum woodchips reached a record high of more than $US180 ($265) a tonne, fuelled by soaring demand from Chinese paper mills, which have overtaken their Japanese counterparts as the biggest buyers of the commodity.

Australian Forest Industries Federation of WA president Ian Telfer said the decision by the US to slap tariffs on Chinese paper products was hurting the profitability of mills, which was crimping demand for Australian woodchips.

Making matters worse, he said, was anticompetitive trade conduct by South American countries, which were dumping big volumes of cheap pulp on to Asian markets including China's in a bid to clear a supply glut.

"There's a short-term impact affected by sales into China that's affecting supply of wood fibre and that's impacting all exporters around Australia," Mr Telfer said.

"China is obviously affected by the ongoing discussions, that's affected packaging.

"A lot of our fibre goes into a range of paper-based products but particularly packaging as well, so as exports out of China decrease so does demand. "That coupled with an influx of pulp into China from South America drove the pulp price down and that's affected the profitability of some of their mills. "There's a short-term blip, if you like, as a commodity exporter, but one that we'll trade through and will restate itself in time."

Hope it will be a short-term problem

Giant plantation forestry owner New Forests, which manages a global portfolio worth about $6 billion, confirmed some of its shipments had been deferred because of the trade tensions.

However, the firm's timber products marketing director, David Evans, said he didn't expect the problems to last long.

"Some shipments to our North Asian clients have been delayed due to a combination of sudden changes in the market conditions in China and the overall economic tensions between China and the US," Mr Evans said.

"New Forests understands the conditions will gradually improve and fully expects our business to return to normal over the course of the next few months.

"The pulp and paper markets in North Asia go through cycles, however the fundamental bottom line is there is a fibre deficit in this industry and New Forests' certified plantations remain in a key position to service those markets."

As demand from Chinese buyers slows, Mr Telfer said contractors involved in the timber industry had opted to bring forward scheduled maintenance work, send staff on leave and reduce hours to minimise any damage.



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