World Forest Sector during the Pandemic: China

According to the figures provided by the National Bureau of Statistics of China (NBS), the Purchasing Managers’ Index (PMI) in the manufacturing sector of China rose from a record low of 35.7 in February to 52 in March. The PMI of the service sector also has risen from 29.6 in February to 52.3 points now. Experts of the NBS note that the economic recovery can only be confirmed when the PMI index has been growing for at least three consecutive months.

The interruption of the supply chain from China to Europe and Russia led to a lack of containers in the ports of the Baltic basin and Northern Europe. Russian sawn timber producers in the Northwest have also faced container shortages and rising freight rates for transportation from the ports of St. Petersburg to Shanghai. Higher transportation costs became one of the factors that conditioned higher prices in the negotiating position with Chinese traders. Chinese buyers realize that as soon as the industry returns to its normal state and recovers after COVID-19, containers will return from China to Europe and the problem of their shortage will be resolved. The balance of supply and demand will return to the market equilibrium. This will be among the reasons to slow down the rise in prices. Therefore, it is reasonable to suppose that prices for sawn softwood in Chinese ports can start switching to a downtrend in June-July. The spruce sawn timber price in the North-West of Russia has already risen from $205-210 per m3 in mid-January 2020 to $235-245 per m3 in April 2020 (CFR Shanghai, #1-4SF).