Wood Industry Quarterly Update – 2020 Q1

BC softwood lumber exports:

Softwood lumber exports from BC have declined in volume quarter on quarter since 19Q2. In 20Q1 the total exports further slipped by 9.7% over 19Q4, reaching 3,979K m3. The export volume of 20Q1 stands at 78.4% of 19Q1.

 

US markets continue to be the main destination for BC softwood lumber. They account for over 70% of all exports in 20Q1 and have shown a 4.4% increase compared with 19Q4.

 

China is the second-largest market, representing 15.1% of all the exports in this quarter. The exports to China have followed a downward trend since 19Q2. Exports to China are down by 2.7% in 20Q1 compared with 19Q4.

 

China imports:

  1. Total imports and inventory

The total logs and lumber imports by China experienced a fall of 19.6% in 20Q1 reporting 18,913K m3. Comparing year on year, the volume is over 10% less than 18Q1 and 19Q1.

 

The total trade volumes for both logs and lumber imported by China in 2019 remained nearly on par with 2018 levels. During that time, softwood lumber imports grew by 11.2% in 2019 over 2018, taking a larger share of total imports.

 

Up to this March, China has imported 11,938K m3 logs and 6,975K m3 lumber. Softwood lumber accounted for 74% of total lumber imports. The proportion of softwood lumber imports is the same as in 2019.

 

  1. Softwood lumber imports

The imports of fir and spruce lumber showed a spike in 19Q2 at 3,391K m3 and then slipped gradually in the following quarters. In 20Q1 China imported around 2,215K m3 fir and spruce lumber, down by 14.9% compared with 19Q4. The volume is also 12.9% less than 19Q1.

 

The imports of radiata pine and douglas-fir is far behind fir and spruce lumber. Radiata pine lumber imports reported 259K m3 in 20Q1, declining by 10.4% over 19Q4. The imports of douglas-fir lumber recorded 43K m3 in this quarter, nearly equivalent to 19Q4.

 

 

The unit price of imported radiata pine lumber and fir & spruce lumber went down gradually in 2019. The radiata pine lumber declined from CIF 237 USD/m2 in Q1 to CIF 203 USD/m2 in Q4, and the fir & spruce lumber fell from CIF 189 USD/m2 in Q1 to CIF 167 USD/m2 in Q4. In 20Q1 the unit price of these two types of lumber kept stable.

 

Douglas-fir lumber has fluctuated in its unit price in the past 3 years. It was the lowest at 145 USD/m2 in 19Q4 and then bounced back to 159 USD/m2 in 20Q1.

 

 

China imports much more softwood lumber from Russia than from Canada. The gap has increased year on year since 2016. In 20Q1 the imports from Canada reported 537K m3, equivalent to 17.7% of that from Russia.

 

In 2019 the total volume of softwood lumber imported by China increased by 11.2%, but the imports from Canada only grew by 5.2% to 4,391K m3. The imports from Europe enjoyed a high increase to 3,494K m3 in 2019 (+43.3% over 2018). Russia’s exports to China also saw a growth of 8.8% in 2019 over the last year.

 

 

 

 

 

 

 

 

Construction Market Overview:

Total investment in Chinese real estate development in 20Q1 was RMB2,196 trillion, a nominal decline of 7.7% year over year. The land area purchased by real estate enterprises was valued at 19.7 million m2 in 20Q1, down 22.6% year on year.

 

The total construction starts in China shrank to 828 million m2 in 20Q1 due to the pandemic, with a 23.8% decrease compared with 19Q1.

 

 

 

 

 

 

 

In tune with the total construction starts, the total construction completes in 20Q1 also slowed down caused by COVID-19. It showed a fall of 27.3% compared with 19Q1, while the total floor space under construction is almost the same as the last 19Q1.

 

Chinese furniture exports totalled RMB68.7 billion in 20Q1, dropping 18.7% compared with the same period of last year. Meanwhile, the sales value of “home centers” nationally was RMB93.5 billion, 53.5% less than 19Q1.

 

In March 2020, China’s manufacturing purchasing managers’ index (PMI) was 52%, an increase of 16.3% from February, indicating an improvement in the status of COVID-19 prevention and control in China, and showing that the resumption of work and production accelerated in March.

Focused Policy Coverage : China’s Two Sessions 2020

The Two Sessions refer to the annual meetings of the Chinese People’s Political Consultative Conference (CPPCC) – an advisory body of over 2,000 members – and the National People’s Congress (NPC), China’s top legislative body. They are China’s most important annual political meetings, highlighted by the delivery of the Government Work Report by Premier Li Keqiang, which lays out the government’s agenda, key targets and policy priorities for the following year. 

The key points below are some highlights from the two sessions being held in Beijing on May 21st -28th, 2020.

  • In the Work Report, the government opted not to set a GDP growth target for the year because of the high level of uncertainty caused by COVID-19 and its impact on the global economy. This is the first time the government did not set an annual target since that practice started in 1990. Last year, China had a growth target of 6-6.5 percent, which it ultimately achieved by reaching 6.1 percent growth. Li stated that the government will take strong measures to support employment, but there remains uncertainty over how far they will go to stimulate the economy. It may also be a signal that the government is prepared to accept a low level of growth in 2020. 

 

  • A fiscal stimulus package of almost RMB 3.6 trillion (CAD $688 billion) was focused on issuing bonds to support China’s economic recovery following the COVID-19 disruption. These bonds, as a key source for infrastructure funding, will target investments in “new infrastructure” such as 5G networks and new energy vehicles charging stations. Beyond stimulating growth, government planners are hoping the stimulus will help sustain employment levels and, as a result, social stability. The government is seeking to create nine million new urban jobs in 2020.

 

  • “Employment” is listed as the highest priority and was mentioned 62 times in the Work Report. One measure is to finance skills training to stabilize employment. Over 2020 and 2021, more than 35 million vocational skills training opportunities will be provided, and enrollment in vocational colleges will grow by 2 million. This will help more people improve their skills and secure higher-value jobs.

 

  • Various ministries such as the National Development and Reform Commission (NDRC) and Ministry of Finance have addressed in their reports that Xiongan will fully implement the New Area development plan as region tied closely to Beijing’s municipal development and administration. They will accelerate the construction of major projects, promote the reformation of institutional mechanisms, modernize governance systems, and strive to create an innovative development demonstration zone.

 

  • Despite the economic disruption of COVID-19, Li’s work report reiterated the goal of eliminating rural poverty in 2020. The priorities of the report included accelerating the implementation of regional development strategies, including the Beijing-Tianjin-Hebei region, the Yangzi Delta region, and the Sichuan-Chongqing economic circle. Poverty alleviation, rural development, and improving ecological environmental management also rank highly in the priorities the government will focus on for the year ahead.

 

  • China will begin the renovation of 39,000 old urban residential communities, improve public facilities and develop community services. The total investments of the improvement for the old urban residential community can reach 4 trillion yuan (CAD 800 billion). Approximately 7 million households will benefit from the renovation. 

 

  • The report reaffirmed China’s commitment to further opening up and pledged to take measures to boost foreign trade and foreign direct investment. The extensions of existing tax policies and foreign trade incentives such as lower compliance costs for imports and exports and support the domestic sale of export products provide essential support to foreign companies. The announcement of the shortening of the negative lists for foreign investments and mention of new pilot free trade zone is also likely to garner a more open investing and operating environment. 

China Policy Briefing of May Released

FII China has released a policy briefing to inform Canadian Stakeholders on a variety of updates relating to China’s wood, construction and real estate industries. The report includes information on China’s green building initiatives, plans to renovate old communities, restrictions on the development of Super-tall buildings and how the country is recovering from recent setbacks relating to COVID-19. To download the full report, click here: https://lnkd.in/dwe7pNt

Canada Wood China hosted Shipper’s meeting in Shanghai

On May 14th, Canada Wood China (CW China) hosted a Lumber Shipper’s Meeting in Shanghai to update industry stakeholders on 2020-2021 program priorities, and to discuss recent trends in the lumber industry in China. Eric Wong, Managing Director of CW China emphasized that the strategy for the year ahead is on moving up the value chain by fostering innovation of new building applications, creating new demand for existing applications, and positioning Canadian wood in the manufacturing sector.

Eric Wong, Managing Director for CW China presents on 2020-2021 program priorities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jim Wang and Alex Wu from the Business Development team of CW China updated participants on their work with Industrial Construction (IC) and Wood in Manufacturing (WiM). The team laid out their plans for events to engage new markets across China to promote wood applications, with seminars and events planned for Zhejiang, Chongqing, Fujian, Shandong, Jiangxi, Guangdong, Anhui, Jiangsu, Sichuan, Guizhou and Tianjin.

The CW China team also shared highlights from two recent surveys, with the “Report on Development Trends of Real Estate Enterprises in China” and the “’Try Canadian Wood’ Campaign Feedback Survey Report”.  The real estate report took a broad look at how the market is impacted by macro economic factors and major policies. It analyzed the impact of key policies and regional development trends, with a focus on the recognition and use of wooden structures. The survey is part of the WIM’s sector program to gather feedback on promotional efforts regarding the use of Canadian wood in furniture production and related applications. Feedback was gathered from companies that have completed the product trial to better understand the position of Canadian wood in various aspects from the manufacturers’ perspective.

In addition to presentations given by the team at CW China, Jean-Christian Brillant, Deputy Consul General and Senior Trade Commissioner from the Consulate General of Canada in Shanghai gave an update on bilateral trade relations and Li Yan, GM of Green Garden shared his perspectives on the recent market trends for a local wood company operating in China.

Jean-Christian Brillant and Frank Li speaking on behalf of the Consulate General of Canada in Shanghai

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With ongoing social distancing policies, the event was made available both online and offline. Presentations during the first half of the event were broadcast online, for the information to be shared with partners and contacts outside of Shanghai. Following the presentations, CW China hosted an offline roundtable discussion for participants to share their own experiences and perspectives on the impact of COVID-19 on operations, and business forecasts for the second half of 2020. The event was attended by Canadian wood exporters, Chinese wood industry companies, representatives of the Canada China Business Council and the Canadian Chamber of Commerce in Shanghai, along with federal and provincial government partners from Canada.

 

Participants held a roundtable discussion to share their own feedback and experiences with the CW China team

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If you would like a copy of the reports or presentations from this event, please contact [email protected]

MOU Signing with the China Real Estate Association

On May 15th, 2020, Forestry Innovation Investment (FII) and Canada Wood (CW) signed a three-party MOU with the China Real Estate Association (CREA). The signing was arranged online with representatives of each organization participating from Beijing, Shanghai and Vancouver. Mr. Feng Jun, President of CREA signed the MOU on behalf of their organization. Mr. Feng has had a long career in real estate, having served at the Ministry of Housing and Urban-Rural Development (MOHURD) as Deputy Director General for Real Estate, Director General for Housing Security, and Chief Economist. The Canadian partners were represented by Michael Loseth, President and CEO, FII and Bruce St. John, President, Canada Wood Group. The signing ceremony was arranged as a live broadcast featured on the digital real estate platform Leju.com, receiving over 40,000 views.

CREA is China’s largest real estate association, established in 1985 as a national level industry organization formed by enterprises, institutions, and individuals. Supervised by MOHURD, CREA organizes real estate policy forums, international exchanges, training sessions, and the publication of economic and technical reports. The recent work of CREA has focused on urban renewal, the renovation of old residential communities, and the promotion of prefabrication solutions. For prefabrication, their activity includes educating members on the installation process, developing standards for parts and components, integrating interior decoration, and contributing to the technical standards in China.

 

Under the framework of this new MOU, FII and CW will work with CREA to support the development of sustainable environmental practices and green building in China’s real estate sector. This includes promoting of the application of modern wood frame construction technology and developing modern wood frame structure buildings that meet China’s market conditions. The organizations will work together to bring delegations to Canada for Chinese real estate developers to engage with Canadian research institutes, forest product producers, wood modular production plants and wood frame structure design and construction enterprises.

 

FII, CW and CREA will also work together to organize seminars on technology promotion through CREA’s procurement platform and explore vocational education and training with respect to modern wood frame construction technology. The organizations will develop joint research on areas such as cultural tourism, elderly care facilities, development of small towns and rural areas, and opportunities for the application of modern wood construction technology in China. The three partners are in discussion for the possibility of a delegation to Canada for member companies to learn about Canadian innovations with WFC, senior care facilities and other housing applications, once it is appropriate for international travel.

 

A recording of the MOU signing ceremony can be found at the link below:

https://live.leju.com/cj/bj/6664078605498782413.html