So, what caused the current timber import price drop in China and how long\u2019s it going to last for? The drop can be attributed to a number of reasons. The Chinese market is very sentiment driven so any negative sentiment generally leads to reductions in price. It appears demand has significantly reduced in a period where seasonal demand is usually starting to ramp up.<\/p>\n
Trying to get any meaningful information around demand is very difficult as everyone has differing opinions and data sources, however, the general consensus is a vastly reduced offtake from most Chinese ports. Inventory across all Chinese ports have moved through the yardstick of 5Mm3 and is the highest inventory position coming into China\u2019s construction season in memory.<\/p>\n
Freight costs are around double that of the same time last year. While actual sales prices in China are still around $US20\/m3 higher than the three-year average, freight has chewed up all of that and some. Much of this cost is in demurrage as Chinese ports have been struggling to handle freight resulting in wait times for a berth of up to 3 weeks.<\/p>\n
Even if the demand was there from the construction sector, continued power supply issues in China from import restrictions on coal (veiled as an intention to reduce carbon emissions) have stopped many factories operating, including sawmills.<\/p>\n
Some that have diesel backup generators have switched them on which has put pressure on diesel supplies further complicating transportation and uplift issues. Let\u2019s not forget about Covid, with China continuing with the elimination strategy there have been a reasonable number of sawmills closed in Shandong with outbreaks popping up all over the place.<\/p>\n
The year ended September 2021, New Zealand delivered around 19.3Mm3 to China, up from 15Mm3 in 2020. Total China softwood imports rose around 7.5Mm3 to 50Mm3 in 2021 with NZ and Europe being the biggest suppliers by a country mile.<\/p>\n
During the same period, lumber imports dropped by just under 6Mm3 and, when the conversion factor from log to lumber is taken into account, the real lumber useage in China dropped by a magnitude of around 2Mm3 (3.8Mm3 log equivalent) for the 2021 year. These figures may suggest a slowing in real construction activity has been occurring over the past 12 months and there\u2019s more than likely more to come. It\u2019s old news that investors in China have been going pretty hard on speculative housing investment which has created a reasonable oversupply which is now coming to the fore with liquidity issues for Evergrande and a number of other aptly named development companies.<\/p>\n
So, in summary, it\u2019s ugly, it\u2019s probably going to be ugly until February next year, at least. There\u2019s a number of influencing factors that we haven\u2019t seen before in the Chinese economy and it\u2019s hard to foresee how these will affect log demand.<\/p>","protected":false},"excerpt":{"rendered":"
So, what caused the current timber import price drop in China and how long\u2019s it going to last for? The drop can be attributed to a number of reasons. The Chinese market is very sentiment driven so any negative sentiment … Continue reading