China Economic Update
China to Reduce Wood Import Tariffs November 1
2018 Q3 highlights:
- China’s GDP hit the lowest growth in September (6.5%) since the first quarter of 2009 during the global financial crisis and missed market consensus of 6.6%.i
- China Economic growth slowed down in the third quarter due to:
- to a decrease in infrastructure investment
- a negative spillover from financial deleveraging
- the impact of previous economic reforms
- a cooling housing market.
- However, export growth continued to grow strongly in Q3 in spite of trade tension with the U.S.ii
- A recent government announcement effective November 1st, 2018 states that China will cut import tariffs on more than 1,500 products to lower the average import tariff to around 7.8%. Import tariffs on wood and paper products will be decreased to 5.4% from 6.6% which will help wood-based panels and other related imports to grow in China.iii
PMI (Caixin) index in September (50.0) dropped to a 16-month low and missed market consensus of 50.5 which was also the lowest point of the continuously descending trend started from May (51.1).iv China Exports achieved a 14.5% gain year-on-year to USD 226.7 million in September which was the fastest growth in outbound shipments since this February and also beat market consensus of 8.9%.v
China Consumer Price Index (CPI) started to go up from May (101.8) to September (102.5) which achieved the second highest month only after February (102.9).vi Similar to Q2, USD/CNY had also been on the rise in Q3, increased from 6.62 (July 1st) to 6.81 (August 1st) to 6.83 on September 1st;vii CAD/CNY kept the similar upward trend, went from 5.04 (July 1st) to 5.23 (August 1st) and hit 5.24 on September 1st.viii
Building material prices
Cement price increased slightly from RMB 435.67 to RMB 456.00 per metric ton (up 4.67%) over September 2018.ix Rebar steel price also went up slightly by 2.63% from RMB 4,415.38 per metric ton on September 1st 2018 to RMB 4,531.54 per metric ton on September 30th 2018.x The log price index in September 2018 was 1,096.96 points which decreased 0.26% less than August 2019 and reduced 0.84% compared to the same period year-on-year; the lumber price index in September 2018 was 771.05 points which went up slightly by 0.02% month-on-month and increased 0.36% year-on-year.xi
China-US Trade Dispute Updatexii
The trade dispute between China and US continued to impact market dynamics of the log and lumber trading between the two largest trading partners. In the first half of 2018, 13% and 2% of China’s softwood log and lumber imports respectively were from US, while hardwood log and lumber imports were 7% and 21%. From US’s perspective, China is the single biggest destination for its logs and lumber. 54% and 38% of US’s log and lumber exports went to China in 2017. The Chinese wood industry is conservative about the resolution of the trade dispute which has created uncertainties in supply and price trend.
China Wood Importsxiii
Russian softwood lumber imports have been rising steadily since this February when imports hit the highest in May (1,590,000 m3) and maintained at the level of 1,500,000 m3 in August; Canadian softwood lumber imports on the other hand maintained 350,000 m3 each month from June to August but decreased 29% in August to (327,000 m3) compared to the same month last year.
Logs and lumber inventory at Taicang, Wanfang and Meijing ports hit a new low in August (802,000 m3) which decreased consistently since this March, but winter and Chinese New Year inventory volume at all ports will be on the rise based on previous trends. Import volumes of total logs and lumber fluctuated at reasonable curves and achieved 8,814,000 m3 in August, the second highest month so far in 2018.
iTrading Economics (October 20th, 2018). China GDP Annual Growth Rate
iiFocus Economics (October 16th, 2018). China Economic Outlook
iiiWood Markets/FEA (October 2018). China Bulletin
ivTrading Economics (October 20th, 2018). China Caixin Manufacturing PMI
vTrading Economics (October 20th, 2018). China Exports
viTrading Economics (October 20th, 2018). China Consumer Price Index (CPI)
viiXE Currency Charts: USD to CNY
viiiXE Currency Charts: CAD to CNY
ixSunsirs (October 2018). Spot Price for Cement
xSunsirs (October 2018). Spot Price for Rebar Steel
xiBOABC (October 2018). China Wood and Its Products Market Monthly Report
xiiWood Markets/FEA (October 2018). China Bulletin
xiiiWood Markets/FEA (October 2018). China Bulletin