China softwood log inventory has reduced by about 1m m3 over the last month to be below the 4m m3 mark (3.8-3.9m), with New Zealand radiata accounting for about 3.2m m3 of this volume. Daily port offtake has increased to about 70k-75k m3.<\/p>\n
The reduction of inventory is due to significantly reduced supply. The Chinese Golden Week Holiday to commemorate the founding of the People\u2019s Republic of China in 1949 starts Oct 1st and ends Oct 7th. There will be less people travelling than usual again this year due to Covid-19, so this means the reduction in log demand caused by this disruption to work is likely to be less than previous years.<\/p>\n
There is a wide range of CFR sale prices for radiata logs in China. A grade currently sells between 136 and low 140\u2019s USD per m3 for A grade. The difference in sale price between the better grades and lengths versus the lesser desired grades and lengths has also widened. The weakening of the CNY against the USD means log sales will most likely trend towards the lower end of this range. Uncertainty around future currency movement is also a legitimate concern for Chinese log buyers. In terms of European spruce, the prices range from 168 to 175.<\/p>\n
The August Caixin China Manufacturing PMI decreased to 49.5 from 50.4 in July. Output grew at the softest pace in three months, as delivery times lengthened for the second month in a row due to power cuts and disruption from Coronavirus. Both new orders and buying levels fell for the first time since May. Employment fell for the fifth month running, with 20% of youth in urban China now unemployed.<\/p>\n
The value of residential construction in China made up 63% of the total construction value in China in 2021. This share is forecasted to be about 50% for 2022. Residential construction will continue to be restricted due to ongoing deleveraging reforms on property investors, with no growth predicted in residential property construction in 2023. Market analysts predict an increase of commercial property construction and infrastructure projects for 2023. This assumes fewer and shorter Covid lockdowns.<\/p>\n
Local government special bonds are becoming an important funding source for construction in China. This funding source has risen from funding 25% of construction in 2021 to 39% in 2022. The Ministry of Finance has announced a target of special bond issues of 3.65 trillion CNY. Approximately 95% of this spend is targeted for infrastructure projects.<\/p>\n
If Covid lockdowns ease and temperatures reduce in China, productivity will increase. While log demand won\u2019t return to its previous heights, global log supply is also limited. The actual balance between log supply and demand is still unknown due to Covid and other external influences. Now the strengthening USD will add further uncertainty to this market.<\/p>\n
Covid-19 policies expected to continue<\/strong><\/p>\n Goldman Sachs Group Inc. sees China persisting with its zero-tolerance approach to Covid-19 following a key Communist Party meeting next month, with the bank\u2019s economists playing down expectations of any major policy shifts immediately after the congress.<\/p>\n Stability will be the prevailing narrative in the lead-up to the meeting of China\u2019s top leaders, where President Xi Jinping is expected to secure a precedent-breaking third term. This is why Covid containment measures, especially around the capital, have been intensified in recent days, they said, with areas near to Beijing locked down, rules around virus testing tightened and domestic travel discouraged over the next month.<\/p>","protected":false},"excerpt":{"rendered":" China softwood log inventory has reduced by about 1m m3 over the last month to be below the 4m m3 mark (3.8-3.9m), with New Zealand radiata accounting for about 3.2m m3 of this volume. Daily port offtake has increased to … Continue reading