Chinese lumber update

Chinese lumber update

Thursday 17 Apr 2014

In 2013, China’s total sawn wood imports rose by 16.5% to 24.0 million m3. China’s softwood lumber imports totalled 16.9 million m3, up 18.9% over 2012. Canada was the leading supplier with 6.8 million m3 of exports (+8% over 2012) to China, followed by Russia at 6.4 million m3 (+16%). As we have explained in the past, the bulk of Russian softwood lumber exports are from Chinese mills that moved their equipment into Russia to bypass the prohibitive Russian log export tax.

Other leading softwood lumber suppliers to China in 2013 include the following:

- The U.S., whose exports reached 876,000 m3 in 2013 — a 32% increase over 2012;

- Chile, at 819,000 m3 — up 65%;

- New Zealand, at 498,000 m3 — +4%;

- Finland, at 401,000 m3 — up 159%;

- Sweden, at 356,000 m3 — up 215%;

- Argentina, at 88,000 m3 — up 57%; and

- Brazil, at 71,000 m3 — up 69%.

More lumber from Europe and other countries — especially Sweden, Finland, Germany and Romania — has been showing up in the Chinese market, where it is filling a number of softwood niches. Finland, Sweden and Romania made China’s top 10 import list by volume in 2013. Softwood lumber from Europe is mostly used in the furniture market and some specialty applications due to its higher and consistent quality, small live knots, and metric sizes. This has resulted in softwood lumber prices that have remained steady at high levels in 2013 and so far into 2014. European lumber does not compete with SPF, hemlock and Douglas fir in the concrete forming markets, as prices and grades are too low for Europeans to consider. The Swedish Wood Association estimates that its lumber exports to China could potentially triple in 2014 to approach one million m3 — a sign that European wood is being discovered by the Chinese.

As well, more Southern Hemisphere softwood lumber is destined for China for similar reasons as European wood: niche applications, higher quality, and metric sizes. Radiata pine from New Zealand and Chile tends to move into the furniture, remanufacturing and industrial sectors, while southern yellow pine seems to be more focused on the outdoor and treated market, and not in concrete forming applications.

Chinese lumber price trends continue to be influenced by U.S. market price trends, and with the U.S. market looking weak due to ongoing winter storms (resulting in a slowdown in housing construction) and given rising lumber inventories (especially at eastern mills), the potential for a price correction in Q2/2014 in both China and the U.S. appears to be building. We are forecasting a modest correction, but this could be exacerbated by many other factors until the supply chain reaches better balance in both markets.

Source: International Wood Markets Group, www.woodmarkets.com

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