The ups and downs of last year\u2019s softwood log market in China give us some clues for what to expect in 2022.<\/p>\n
Overall, 2021 was turbulent, with some of the highest log prices ever recorded, but also with sudden changes in consumption that fueled what continues to be a roller coaster of an economic environment.<\/p>\n
During the last quarter of the year, factors such as inflation, property-sector debt, supply chain constraints, and, of course, the COVID-19 pandemic, were key factors in slowing down the softwood log trade.<\/p>\n
Imports of logs and lumber into China continue to be impacted by restricted global shipping container availability and high supply chain costs that have persisted into 2022.<\/p>\n
Pricing, demand and inventory<\/strong><\/p>\n Despite lower-than-expected overall Chinese consumption and elevated log inventories at the ports, demand for logs remained favorable toward the end of Q4 2021.<\/p>\n Compared to the previous two quarters, the pricing for softwood logs weakened during the fourth quarter in response to high log inventories and softer demand. A slowdown in construction activity, adverse weather conditions and power shortages were the main factors that contributed to lower pricing.<\/p>\n Although the average softwood log inventory remained high, by the end of the fourth quarter the inventory in China was down to about 5.3 million cubic meters. December demand was running around 85K per day, which was about 20% more than at the beginning of the quarter.<\/p>\n Exports<\/strong><\/p>\n During Q4, Chinese regulators implemented new rules for imported Southern Yellow Pine (SYP) to address potential\u00a0phytosanitary concerns. As a result, SYP exports to China decreased significantly compared to the third quarter, with export volume plummeting about 50% from the beginning to the end of the quarter.<\/p>\n Quite a few exporters left the market by year end, including about a dozen along the U.S. East Coast. Some exporters refocused their attention to other emerging markets such as India, Pakistan and Vietnam.<\/p>\n South America saw a decrease in pine log exports to China as a result of considerably high freight prices combined with soft demand for logs in China.<\/p>\n During Q4 2021, exports of softwood logs from Uruguay to India surpassed China\u2019s volume for the first time since the start of break bulk softwood exporting in 2016. Export volume to India was just over 200K CBM by the end of the quarter.<\/p>\n Looking ahead<\/strong><\/p>\n In sum, the market experienced a correction that was mainly fueled by a property sector downturn and inflation that loomed over China during late Q3 and early Q4 2021.<\/p>\n The market recovered slightly by the end of the quarter and began to experience the impacts of supply reductions in Russian softwood and European spruce salvage logs, the continued ban of Australian imports in China and the lingering uncertainty over U.S. SYP inventory due to new nematode policies.<\/p>\n Ongoing supply chain and inflationary challenges that continue to impact many parts of the global economy will most likely persist throughout 2022, causing wood exporters to remain cautious in the coming months.<\/p>","protected":false},"excerpt":{"rendered":" The ups and downs of last year\u2019s softwood log market in China give us some clues for what to expect in 2022. Overall, 2021 was turbulent, with some of the highest log prices ever recorded, but also with sudden changes … Continue reading