Global Trends Review, September 08-21, 2014: Japan feels oversupply of lumber, China to develop wooden housing

With continuing demand slump in Japan, port inventories of imported Russian lumber like red pine 30×40 mm remain high and the arrivals have not declined yet so supply glut feeling is heavy in the market, ITTO reported. The market prices continue declining little by little without any bottom in sight so the buyers minimize the purchase volume.

Median offer price of red pine lumber by the suppliers is about $500/m3 CIF but there are variety of prices offered by the suppliers, so arrived cost varies. Imported cost of standard items is about 60,000-62,000 yen/m3 FOB truck port yard, quality lumber import cost amounts to 68,000 yen/m3, which is slightly above average market prices. Domestic sawmills reduce the production of red pine 30×40 mm to avoid head-on competition with imported Russian red pine lumber, ITTO concludes.

CEO of Canadian consulting company International Wood Markets, Russ Taylor, in an interview with Holzkurier editor Hannes Plackner expressed his outlook on the timber markets of Asian countries. He said the Japanese imports will be stable in the future, even though presently they are hit by a higher consumption tax.

“I simply do not trust what Western economists predict about China. Most of them even fail to make solid forecasts about the US construction market. How are they to assess China correctly? As a centralised economy, the country can act quite differently. Beijing cannot afford to see its construction industry collapse and they will not allow it to happen in the short and medium term”, Taylor said. Earlier WhatWood already published an opinion that the Chinese housing market risks are overblown. While the construction market is weakening slightly, overall demand for wood products is still growing, Taylor added.

Lumber production costs are still unbeatable in China, according to Taylor. The costs for conversion into lumber are just around $15/m3 for green lumber. “With about 70%, the yield is also higher, because all the wood is ripped, nothing is being chipped. Secondly, local sawmills can afford to keep lower inventories and are flexible and quick enough to deliver all lumber dimensions needed,” Taylor concluded.

Korean market is similar to Japan, Taylor said: the country acquires stable volumes of high-quality products, while India resembles China ten years ago, with the fast-growing middle class. As Myanmar has terminated its timber exports completely, India could shift from teak logs to softwoods, but this requires marketing effort, as in India softwood is regarded as inferior and less durable, Wood Markets CEO concluded.

Meanwhile, Canada has signed a Letter of Intent with China to help establish sustainable wooden housing, Fordaq reported. In the northern Chinese port city of Tianjin, a timber construction cluster is about to be created which will become model for other Chinese cities. Just recently, a deep-water port was built including a major roundwood import fumigation facility in Tianjin.

Yamasa Mokuzai company, Japan, has acquired JAS certificate on CLT timber and is going to produce 4,000 m3 of this new material at its capacity. Yamasa Mokuzai is one of establishing members of Japan CLT Association and it has been promoting use of structural laminated lumber in making floors, walls and ceilings.

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Forest companies in Northern Europe have announced plans to invest $3 billion in 2014 in attempt to move beyond producing newsprint and commodity packaging grades. The idea is to diversify their product lines to include new bio-products from wood fibre and to generate bioenergy to reduce the region’s dependence on fossil fuels, reported Wood Resource Quarterly. All this is a sign that the forest industry in this part of the world sees the future in a much brighter light than just a few years ago, WRQ says. Some of the factors that have placed softwood fibre in a new positive light are: limited investments in the establishments of softwood plantations worldwide, favourable global supply/demand balance for softwood pulp over hardwood pulp, increased demand for packaging materials requiring wood fibre with high strength, and a rise in research in new products made from trees, sometimes as substitutes to non-renewable materials such as plastic and metal.

In September, the start of the heating season moved pellet prices upwards in Germany. According to DEPV association, the average price for a tonne of wood pellets is €248.93 in September, which is 1% higher than in August, but 10% less than a year ago.

After a reduction of 6% in the first quarter, German hardwood plywood imports recovered again in the second quarter, EUWID reported quoting official German statistics. Overall first half-year imports amounted to 327,600 m3 (+6%). The main reason for the marked improvement against the first quarter is the growth in imports from Russia as the number one supplier country. At the end of June these imports were 17% above last year’s level at 102,000 m3. Similar development is apparent in imports from Finland as the second-most important supplier country, rising 15% against last year to 60,400 m3.

WhatWood’s reviews are prepared using corporate press releases, Holzkurier, Timber Trades Journal, Fordaq, EUWID Wood Products, ITTO, ForestTalk, and EUWID Paper.