China’s Belt and Road’s impact on lumber trade
Friday 3 May 2019
However, Russian softwood lumber exports to China were a whopping 15.65 million cubic metres in 2018, an increase of 10 percent compared with 2017. This is more than double the exports in 2014 and now represents a 63% share of the China market. Clearly, China’s “Belt & Road Initiative” (BRI) was partly responsible for the increase in softwood lumber volumes from Russia to China.
The Belt & Road Initiative is a massive program that includes many large-scale infrastructure projects with other countries. Proposed by Chinese President Xi Jinping in 2013, the main purpose was to shift overproduction to inland regions, taking advantage of China’s lower labour costs and capacity. At the same time, it’s designed to improve the supply chains of key suppliers and to crucial export markets, improving the competitiveness of Chinese goods and raw materials.
In 2018, the number of operational China-Europe block trains (a rail cargo shipping method whereby all the storage cars are shipped from the same point and arrive at the same destination) had exceeded 6,363 (vs. 3,678 in 2017), running between 56 Chinese cities and 49 cities in 15 different European countries. Among these, 2,690 were return trains that shipped from Europe to China, a significant increase of 111% from 2017.
Currently, about 50 to 60 percent of total container transportation costs of China-Europe block trains are being paid through local government subsidies since the regular cost is still very high. This is partly due to the lower number of “return-block trains” (from Europe to China) versus “go-block trains” (from China to Europe). Therefore, the development of the return train is one of the key factors that will determine whether China-Europe block trains can finally operate without government subsidies. Russian lumber has been one of the most important products shipped on the return-block trains. From the central government’s plan, the subsidy mechanism is expected to be cancelled in 2020.
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