Impact of COVID-19 on China’s Wood Import, Construction and Real Estate Industry

FII China recently commissioned RCC, a building information platform, in completing a survey with 45 questions on the impact of COVID-19 on China’s wood import, construction and real estate industry. Thirty-four companies in respective fields have responded to the survey as of February 28, 2020. Based on their answers and further desktop research, FII China developed a report to update Canada Wood’s stakeholders on the current situation and its impact on wood-related businesses. Six impacts of COVID-19 on business operations are heightened below, and the full report can be found here.

An infographic chart can be downloaded from here

1. Work Resumption

 

It is expected to take roughly a month for Chinese wood traders to resume operations, while the construction and real estate industries may have to wait longer before going back to normal. As Hubei is the most severely affected by COVID-19 in China, the province is expected to resume regular operations no early than May.

2.Ports and Logistics

 

According to wood traders surveyed, custom clearance was not affected, and ports have resumed operations on February 28, 2020. However, domestic transportation posed as problems in some cases due to labor shortage, traffic restriction and the closure of downstream companies.

 

Most wood frame manufacturers have not resumed full production, and many projects are being suspended. The downstream subcontractors mostly used local raw materials to mitigate the impact of traffic restriction and logistic bottleneck.

3. Payment Collection

As wood traders strictly apply the delivery upon payment policy, COVID-19 has a limited impact on their cash flow in Q1. It is common for wood frame manufacturers to get paid based on the completion stages of construction. COVID-19 only affected the cash flow of the manufacturers whose construction ended near December 2019. Real estate sales declined, and their Q1 sale receipts will decrease by 20 to 30 percent due to the COVID-19 outbreak.

4.Wood Inventory

Wood inventory has a direct impact on wood frame manufacturers. According to the survey, 46.2% of wood frame manufacturers said most of the downstream companies have not gone back to business due to COVID-19 as of February 28, 2020, but they chose to maintain normal inventory.

 

 

5.Forecast of Wood Import, Construction and Sales

Forecast for Q1

COVID-19 outbreak has a great impact on construction and sales in Q1. Seventy percent of wood traders said that wood imports would decrease by 21 to 50 percent in Q1. Thirty-eight percent of wood frame manufacturers said that their construction and sales would decrease by more than 50% in Q1. Forty-five percent of real estate respondents said that their sales in Q1 would decrease by more than 50%.

Annual Forecast for 2020

Most of the respondents expressed uncertainty about this year’s market trend due to the complexities of the current situation. Some compared it to the year of SARS and considered that the market would only rebound once the COVID-19 is fully controlled.

6.Business Models and Scopes

All ten wood traders said that they would not change their business plans. All 13 wood frame manufacturers said that whether to expand or reduce their business would depend on market opportunities. All 11 real estate companies said that the short-term COVID-19 outbreak would not affect the company’s business scope.

Nail Plate Truss Use Increasing in Post & Beam

In an encouraging trend, we have seen an increase in nail plate truss use in post and beam non-residential construction in Japan. On a recent trip to Hokkaido, Tokyo based staff had the opportunity to visit two post beam buildings with a Japan Wood Truss Council (JWTC) member that uniquely incorporated exposed roof trusses in a church in Sapporo City and vocational school and Chitose City.

 

Catholic Macromania Church (Sapporo, Hokkaido)

The first project, the Catholic Macromania Church with a total floor area for the church of 499 m² was constructed using parallel cord trusses made with SPF dimension lumber divided into two sections for ease of transportation and then joined with bolts and installed on site to design a beautiful cathedral wood roof spanning 11.6 m for its parishioners.

http://www.jwtc.org/examples/case26/index.html

Chitose Aviation Academy (Chitose, Hokkaido)

The second project being the Chitose Aviation Academy, which is a large-scale wooden building with a floor area of 986 m². In order to construct this large vocational school, low pitched mono nail plate trusses were used and revealed to construct the school’s 25.8 m spanning roof – proudly display the warmth and beauty of Canadian wood for students to see.

http://www.jwtc.org/examples/case27/index.html

Both these post and beam buildings were designed and constructed by Arch Vision 21 Inc. Based in Chitose, the company designs and builds residential and commercial buildings in the region. COFI has been working with this company for more than ten years promoting SPF dimension lumber and truss use in post and beam construction, and it is great to see them increasing the number and different types of non-residential buildings in the region.

COFI Japan Renews JAS ROCB Status

Dated March 2nd, 2020, Canada Wood/COFI(Council of Forest Industries) Japan renewed our status as a Registered Overseas Certifying Body (ROCB) under the Japanese Agricultural Standard (JAS) accreditation system supervised by the Ministry of Agriculture, Forestry and Fisheries (MAFF).  This gives COFI QC Division the ability to certify sawmills under the JAS system.  The current JAS system adopts ISO 17065 accreditation scheme, which requires voluminous paperwork.

 

 

Dating back to 1987, COFI has been recognized by the Japanese government as the first foreign testing organization (FTO) permitted to grade lumber outside of Japan to the JAS grade.  This provided a competitive advantage for Canadian industry.  Over time – in 1996, the NLGA system was granted mutual recognition by the Japanese government as a direct equivalent to the JAS grading system.  We could, therefore, ship NLGA marked lumber to Japan without stamping it with the JAS mark. However, it remained essential for us to retain access to the various standards committees that controlled and dictated the rules writing for wood products in Japan and as such JAS ROCB accreditation remains a vital credential allowing us to defend against market access challenges. To maintain this influence, we decided to retain our JAS certification accreditation.

Every four years, we need to reapply to keep our JAS certification active. Since this JAS certification in effect allows Canada Wood/COFI to conduct activities that are the responsibility of the Japanese government under licence they want to do their due diligence.

Corona Virus Japan Update

As of late March, Japan had a total of 1,905 cases of the Corona Virus – including 712 cases from the Diamond Princess cruise liner. The nation recorded 53 related deaths thus far. Currently, there are 15 clusters of patients nationwide: with concentrations in Osaka, Hokkaido, Aichi and Tokyo. While new cases appear daily, cases have not reportedly surged thanks to widespread adherence to social distancing and the use of precautionary measures. Prime Minister Abe has not yet called for a State of Emergency with containment measures appearing to be effective. Japan’s schools remain closed, as do major sporting and entertainment venues. Employers nationwide have widely employed telework and flex time measures since early March.

 

The economic impacts are only starting to be felt, but they are expected to be severe. In February, imports from China plunged 47% as factory shipments dried up. By Mid March, the Nikkei 225 Stock Index fell 30% from 24,000 to the 17,000 level since the beginning of the year. Excluding toilet paper, consumer confidence has plunged as has tourism. Japan is now thought to be in a recession. Supplementary budgets are being tapped to provide emergency medical services, and the government is preparing a new spending package to mitigate the expected downturn. Elements being considered include a reduction in the consumption tax, tax relief for at-risk families and financial assistance to pay utility bills. The Bank of Japan has also taken steps to increase liquidity and boost asset purchases; however, with a negative 0.1% lending rate, the BOJ effectively has no further room to lower interest rates without impairing the profitability of the financial sector. The Japan Seatbelt Manufacturers Association has issued an advisory to “strap on your seatbelts as this wild ride is just getting started”!

Canada Wood Taking Korean Construction Professionals to Canada to Learn Net-zero Building Design

As a part of the Advanced Technology Construction Training Program (ATCT), a group of Korean builders, architects, engineers and inspectors travelled to British Columbia from February 12 to 21 to learn about the best practice of net-zero building construction.

 

The 10-day training covered a variety of activities, including a 2-day workshop session at BCIT’s High Performance Building Lab and site visits of multi-story wood-frame apartment building projects across the lower mainland. The group also spent a half day at BC’s first house certified by LIVING BUILDING CHALLENGE, the world’s most rigorous performance building standard. Our training survey shows participants are much satisfied with the program result, and hopefully, they will bring back and apply what they learned back to their projects in Korea.

 

The main opportunity for Canadian wood product exports to South Korea is the use of softwood lumber in construction, especially the energy-efficient residential construction segment. ATCT is one of the critical programs to expand the Korean building industry’s capacity for building high-performance buildings.