Demand for softwood logs in China remained favorable during the third quarter (Q3) of the year, despite seasonally lower consumption, COVID impacts to construction activity, and other supply chain disruptions. Imports of lumber and logs into China continue to be constrained by global shipping container availability. As a result, sales prices reached historic highs at the beginning of Q3, but these high log prices were offset by higher freight rates. These developments are not necessarily a indication of long-term trends but, rather, could indicate a market correction.<\/p>\n
Decreasing demand, increasing inventory<\/strong><\/p>\n Prior to a Chinese ban on Australian log imports, Australia was supplying approximately 10% of China\u2019s total softwood import volume. Meanwhile, shipments of European spruce salvage logs into China remained limited by higher transportation costs and a lack of container availability. These constraints on the flow of logs into China, when coupled with healthy demand, translated into strong prices for logs. Since reaching record levels, though, there has been a decrease in softwood pricing in recent weeks, as demand for logs has softened in response to higher log inventories in China.<\/p>\n By the end of the quarter, softwood log inventories in China were up to around 6 million cubic meters. While demand is typically weaker during the hot summer months, this year, demand was lower than the historical average at about 65,000 cubic meters per day. That was due to a few factors:<\/p>\n Over recent weeks, demand has increased to about 80,000+ cubic meters per day. During the same time last fall, however, we saw about 100,000 to 120,000 cubic meters per day of demand.<\/p>\n Shifting supply: U.S. Southeast and South America<\/strong><\/p>\n United States (U.S.) domestic wood pricing climbed 14% from Q3 last year, reflecting robust customer demand, combined with tighter supply due to wet weather conditions. This situation contributed to a tight supply of logs for the export market, although Southern Yellow Pine (SYP) log exports have recovered to the 200,000 cubic meters per month achieved prior to tariffs being implemented in 2018.<\/p>\n While the bulk of export shipments are from the Port of Savannah, several other ports are also contributing; in particular, Mobile has doubled its export volume from Q2 to Q3, fueled by the increased capacity of Greenfield\u2019s log yard there.<\/p>\n It is worth mentioning that SYP log exports to China have now exceeded Pacific Northwest (PNW) exports to China on a monthly basis. By the end of the quarter, however, SYP log exports plummeted about 10%, thanks in part to demand constraints in China, as well as new non-tariff regulations imposed by the Chinese central government. We will see the effects for U.S. exporters during Q4 2021.<\/p>\n Ocean freight continues to be a major issue for South American shippers. Freight rates from South America\u2019s East Coast to China have increased by about 30% since Q2, leaving shippers scrambling to find suitable rates to move their cargo. Pine log exports from Argentina, Brazil and Uruguay were just below one million cubic meters in Q3 2021.<\/p>\n Uruguayan log shippers were able to partially offset their loss of shipments to China by redirecting them to India, a market that has now grown by about 40% in volume from Q2 2021 to Q3 2021.<\/p>\n During the third quarter, Chile completed the loading of its first break bulk shipment in over a decade of Radiata pine logs bound for the China market.<\/p>\n Going forward<\/strong><\/p>\n Despite elevated log inventories at Chinese ports, in Q3 2021 we have seen historic high prices across the board for all softwood log species in China. Demand has remained constrained thanks to market seasonality and concerns over the real estate market in China. Demand is expected to remain somewhat stable as construction activity increases seasonally, although it is unlikely that we will see a dynamic construction market until after the Chinese New Year.<\/p>\n For softwood suppliers, exporters, and buyers, this means continued challenges through the beginning of 2022.<\/p>","protected":false},"excerpt":{"rendered":" Demand for softwood logs in China remained favorable during the third quarter (Q3) of the year, despite seasonally lower consumption, COVID impacts to construction activity, and other supply chain disruptions. Imports of lumber and logs into China continue to be … Continue reading \n