Rebound in China’s demand for logs and lumber fuels a mini-recovery

Rebound in China’s demand for logs and lumber fuels a mini-recovery The February issue of WOOD MARKETS’ China Bulletin – released today – summarizes China’s rebounding growth in log and lumber imports during the second half of 2012, and especially since the start of the fourth quarter.

Despite the slowdown throughout most of 2012 in the housing market, China’s total forest products import and export trade value still increased in 2012, reaching US$120 billion, up 3% from 2011. In softwood lumber, there were winners and losers when comparing the first half of 2012 with the second half, as China’s total imports increased by 3.9%:

  • Canada’s softwood lumber exports increased in the second half of 2012 to post a small gain of 1%.
  • Increases were also recorded by Russia (+9.7%), Chile (+23.0%) and New Zealand (+35.5%).
  • The greatest volume decrease was registered by U.S. lumber exporters (-40%) as higher returns were available in the red hot U.S. market.

Canada remained the largest lumber supplier to China (the total of softwood and hardwood) in 2012 and holds a 31% import market share. The major lumber suppliers to China in 2012 were:

  • Canada 6.4 million m3
  • Russia 6.2 million m3
  • USA 2.2 million m3
  • Thailand 1.5 million m3
  • Indonesia 744,000 m3
  • Chile 501,000 m3, and
  • New Zealand 486,000 m3

In the softwood log trade, there were also winners and losers when comparing the first half of 2012 with the second half, where China’s total log imports increased by 9.3%:

  • Canada posted a gain of 5.9% in H2/2012 as compared with H1.
  • USA exports rebounded in H2 vs. H1 with a 19.8% increase, assisted by rising Chinese log prices.
  • New Zealand was a big winner (+29.9%) and almost equaled Russian softwood log exports in H2 (just 90,000 m3 short).
  • Russia was the big loser in softwood log exports (-8.8% in H2 vs. H1 volumes) due to higher costs and confusion over changes to log export tax rates and from the launch of a new quota system.

With decreasing total softwood log imports in 2012, average annual CIF log prices also showed decreases compared to 2011. Imported radiata pine, Douglas-fir and hemlock log prices held at low levels during most months in 2012. However, rising prices caused a surge in export volumes to China in the fourth quarter of 2012 as prices in the U.S. market started to heat up.

Some of the highlights of China’s log and lumber imports from the February issue of WOOD MARKETS China Bulletin include the following:

  • In 2012, total log imports declined by 10.5% in volume and 12% in value as compared to 2011.
  • Softwood log imports declined by 15% in volume and even more in value.
  • Hardwood log imports grew by 3% in volume and even more in value.
  • Russia’s total log exports to China declined by a whopping 2.9 million m3 in 2012 as compared to 2011 (-20.5%), its lowest export level to China since 2001.
  • Of softwood log exporters, New Zealand recorded the only year-over-year increase in 2012 with a gain of 4.6% (+380,000 m3) as compared with 2011.
  • Canada’s total log exports to China were sideways (-0.7%) in 2012.
  • USA total log exports recorded a decline of over 25%.
  • In 2012, China imported 20.6 million m³ of softwood and hardwood lumber valued at USD 5.5 billion, a decrease of 4.4% in volume and 3.7% in value as compared with 2011.
  • Compared with 2011, China’s total lumber imports from Canada and USA decreased 6% and 17%, respectively, by volume in 2012.
  • Total lumber imports from Chile and New Zealand increased by 17% and 19%, respectively (although at much lower volumes).

The price for SPF lumber in China soared in Q4/2012 and into early January 2013 before correcting in the second half of January in tandem with U.S. commodity lumber prices. For example, SPF Economy grade lumber increased from USD 110/m3 (C&F, China) in December 2011 to USD 230 /m3 in December 2012.

In the meantime, the prices for other North American softwood lumber, including Douglas fir and hemlock, have all seen price increases since the second half of 2012. Lumber used in the furniture market, such as radiata pine and European spruce, have remained relatively flat.

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