Russ Taylor: In 2024, it will definitely be a buyer’s market in China

Although Russia’s share of international sawn timber trade does not exceed 16%, Russian products remain an important part of the global market, despite isolated European markets. For Russian sawmills, the focus of international trade is now on the Chinese market. At the end of 2023, China’s share in export supplies of sawn timber from Russia has already amounted to 67% (14.5 million m³), although in 2021 the share was 53% (15.9 million m³). We talked about the prospects for the development of global sawn timber markets in 2024 with Russ Taylor, President of the international consulting company RUSS TAYLOR GLOBAL.

How is the global lumber market doing in the post-coronavirus years?

From the start of the global pandemic in 2020, the world has changed significantly some four years later. Supply chains were dramatically impacted during COVID, but those have largely been restructured and are working well today excluding the recent Red Sea incidences (referring to Houthi attacks, — WhatWood notes). Geopolitical events have also change global trade flows since 2022 with import/export sanctions against Russian exports. This also caused an energy crisis in Europe. And lots of other minor dynamics here and there occurred as is normal.

During the pandemic, there was a shortage of wood products and that caused prices to spike to all time highs, with significant benefits to producers and exporters. This caused some mills to over produce for markets, which eventually oversupplied markets as supply chains were re established.

A glut of sawn wood products was evident in many major markets by the second half of 2022, causing prices to collapse at times. In 2023, a surplus of production was generally evident, causing sawnwood prices to remain low – these low prices caused higher cost mills in some countries to curtail production and even close.

By November 2023, there were some glimmers of hope as sawnwood prices in the US started rising. This is a normal trend as typically prices rise from November to January before they start to slow down again.

In December, European sawnwood prices saw some upward movement from very low levels prior to that. Chinese prices remain subdued, although saw falling lumber prices did record a small increase in fourth quarter despite very weak demand levels – and despite low inventories.

In summary, the global lumber markets are not doing too well, as there is too much supply chasing weak to stable demand. One glimmer of optimism is that US sawnwood prices are still rising in January and are close to their highest price in all of 2023. The global outlook for 2024 is for flat to perhaps some increase in demand that should allow for a more stable market, as long as supply remains constrained – which will be a wild card in 2024.

Does the situation in the last three years match the expectations you had in 2021?

With lumber prices soaring in 2020 and again in 2021, it was difficult to consider any downside some three years ago. However, with any bubble, they will always burst – and it did in 2022!

I see that I had expected lumber prices to remain strong through 2023, but I was too bullish as the elevated prices only lasted until mid 2022 when too much supply swamped the markets. That is always the lesson with commodity markets: any upside will be followed by an even stronger and faster downward spiral in prices.

I did not anticipate the Russia-Ukraine conflict and the resulting sanctions that disrupted global trade. Nor did I anticipate the resulting global inflation whose origins started with the conflict.

Do you consider that the global inflation of the last years started with the Russia-Ukraine conflict?

Energy costs in Europe (natural gas, gasoline, pellets, etc.) spiked quickly after the conflict started and this then spread around the world, especially gasoline prices, driving up inflation as well as interest rates.

Full interview in Russian Timber Journal 01-2024.