Analysts on China’s imported wood future | 21 Feb 2018

Imports of logs, lumber and woodchips have been growing at such a rapid rate, and to such lofty heights, that it’s been close to unbelievable at times.

Between 2012 and 2017 (estimated), Chinese imports of logs (softwood and hardwood) have increased by 42 percent, hardwood chip imports have jumped 59 percent and lumber imports (again both hardwood and softwood) have soared 81 percent.

Over the past 15-20 years, the excessive and often very wasteful surge in construction activity in China was made possible by lax lending standards, including the rise of the “shadow banking” sector, corruption between banks and local authorities, a lack of concern for environmental impacts or maintaining land for agricultural production, and a rapidly growing mountain of debt. President Xi has been promoting policies to address these issues for several years, but RISI believes that the 19th National Congress sets the stage for him to make major reforms in the years ahead. This means that the out-of-control construction binge seen in China for the last decade is going to quickly come to an end.

RISI’s new forecast of Chinese timber demand projects a decline of about 18 percent in softwood log imports and 10 percent in hardwood log imports over the next decade, relative to estimated 2017 levels. Of course, it isn’t just changes in Chinese demand that will drive this decline, but also RISI’s expectations on what is happening in the supplying countries and competition from other markets, such as the decline in availability of tropical hardwood logs and an increase in demand for softwood log imports in India.

And demand in China is not driven only by construction activity. A significant share of logs and lumber are imported to make value-added products for export. And it has seemed like China’s exports of furniture, plywood, flooring, etc. have been doing nothing but increasing for more than a decade. But recently this picture has also changed. And the trend in exports hasn’t just slowed, it’s actually gone negative in a number of cases. Export values of plywood and flooring began shrinking in 2015, continued on their downward trend last year, when they were joined in retreat by wooden furniture and door and window exports.

Even China’s exports of paper and paperboard, which had been growing at a 19 percent CAGR from 2000-2015, have had zero growth over the past two years. Increasing labor rates in China, as well as various trade restrictions by importing countries, have largely been to blame, but the point is that the period of never-ending growth in forest products exports looks to be over.