Canada Wood Today | The Canada Wood Group

China’s Softwood Lumber Inventory Update

Wayne Iversen

By Wayne Iversen

Blogmaster

December 8, 2016

Jane Guo, Research Consultant, International WOOD MARKETS Group, China

Jane Guo, Research Consultant, International WOOD MARKETS Group, China

Author: Jane Guo, Research Consultant, International WOOD MARKETS Group, China

China softwood lumber inventories at Taicang port and the surrounding area were reported to be 549,000 m3 on November 18, a large decrease of 11.5% compared with the previous month. Of total lumber inventory, SPF volumes were 170,000 m3, an increase of 6% from the last month. In the meantime, the southern yellow pine lumber inventory levels were around 14,000 m3 (vs. 17,000 m3 in last month). Other species are mainly spruce and red pine lumber from Russian and North Europe.

SPF lumber inventories increased slightly for the first time in the last seven months (since we started tracking this inventory level). In November, SPF inventory represented 31% of all softwood lumber inventories at Taicang area – it has dropped from a market share 41% in mid-June, but is higher than 26% in mid- October.

The offer price (CNF) and Chinese wholesale price of spruce and red pine lumber from North Europe & Russian has remained stable and this has accelerated the erosion of inventory during the last two months.

In general, the inventory level of softwood lumber and logs were both relatively low this year compared with the previous year. This was partly due to the favourable construction activities this year, and also because sawmills decided to stock more logs or lumber in their yard inventories as they expected the delivered costs to slowly rise from various sources, including the devaluation of the RMB against the USD, domestic and ocean transportation costs, etc. The RMB to USD exchange rates have increased from 6.49 in January 2016 to 6.91 in late November, which has made some significant impacts on the importers’ costs and margins.

Normally, international suppliers will offer discounts in the fourth quarter each year, but, not this year. It seems that international suppliers are positive on the Chinese market; however, Chinese importers do not feel the same as international suppliers. With the slower construction investment in China, increasing CIF costs, and further RMB devaluation, end users won’t be able to cover all of these increasing costs from Chinese importers, that is, Chinese importers have to cut their profits, or even lose money in this current cycle. It normally requires some 3-6 months (and sometimes longer) before end users in China will accept any prices increases. Under this tough market situation, Chinese importers are now quite hesitant to place new orders.

The low level of lumber inventories this year (compared with the previous year) and the low import volumes expected in coming months will have positive signs to keep the price at least stable or even increase after the Chinese Spring Festival Holiday.

The lumber inventory levels are supplied from a source of WOOD MARKETS. Further details, including monthly inventory trends starting from August 2015, are available to subscribers in WOOD MARKETS’ China Bulletin https://www.woodmarkets.com/publication/china-bulletin/