Continued growth seen in Chinese wood consumption
In 2016, China’s total wood consumption (on a round wood equivalent basis) was 570 million m3, as follows:
• 420 million m3 used in industrial end uses and construction (including paper);
• 100 million m3 converted to wood-based products (such as furniture) and exported;
• 50 million m3 used for “other purposes”;
• 270 million m3 (RWE) imported — about half of China’s consumption (see figure 4 for the end-use mix of wood consumption).
By 2020, it is estimated that China’s wood consumption will grow to at least 700 million m3 (RWE) — possibly even 800 million m3 — a total expansion of 40–60 million m3 per year.
China has grown its domestic plantations dramatically in an attempt to help offset its wood fibre deficit. Most of these plantations are hardwood (eucalyptus and poplar for use in veneer or pulp). There will be an even greater demand for imported softwoods going forward for use in the furniture sector, as well as for construction and industrial purposes.
The One Belt/One Road initiative will speed up China’s investments into overseas forestry and wood processing. The objective of spending on massive infrastructure projects is to make investment projects more strategic and improve trade to China through lower logistics costs. Today, total overseas investments in Chinese forests amounts to 54 million hectares of leasehold forest land in 150 medium- to large-sized projects (value of US$3 billion).
China will be looking to increase its investments by many means, among them purchases, leases, mergers, joint ventures, strategic alliances, equity replacement, etc. This will encompass a number of overseas industrial parks similar to those already being developed within China. The most notable industrial park outside China is located in the Tomsk region of Russia, and was spurred by synergies created by Chinese and Russian government cooperation.
In 2016, total trade in forest products between China and Russia amounted to US$5.7 billion. The synergistic improvements taking place should only continue to encourage Chinese processing investments in neighbouring Russia. In addition, there will be a focus on infrastructure projects within China to link with the One Belt/One Road projects.
The Chinese government has a number of new projects underway that should raise the country’s wood products consumption. Some of these will be green energy-related projects that utilize wood. The government is beginning to promote prefabricated construction; wood construction is one of the three types of prefabricated construction models, with the target being up to 15% wood use in new buildings by 2020. The wood products used would include cross-laminated timber, although this is likely to be just a small part of the growth.
With China’s environmental standards now starting to be enforced, many curtailments and closures of plywood mills and sawmills are occurring, and this could mean a slower rate of log consumption moving forward. The focus is likely to be put more squarely on imported products over time — at least until Chinese factories receive the necessary environmental upgrades.
China’s harvesting ban on natural forests (begun in 2014 and now purported to be fully implemented) involves up to 50 million m3 of timber per year. The restrictions will further increase China’s demand for imported logs and lumber, with the offsetting factor being the country’s vast area of plantation land (the largest in the world at 69 million hectares).
During 2012–2016, China’s imports of Japanese logs have increased from a level of 15,000 m3 to 491,000 m3, with year-over-year growth of 40% for the period January–June 2017. In addition, log exports from Russia to China are being replaced by sawn wood exports. The four main driving forces that should further expand Chinese consumption and its need for log and lumber imports include the following:
1) Green building requirements, including greater use of wood and wood systems;
2) Increasing urbanization, i.e., China still has 170 million migrant workers who will become more urbanized over time (requiring housing, furniture and decor products);
3) A growing middle class with enhanced purchasing power; and
4) Generally robust economic growth.
Source: International Wood Markets Group
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