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.
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.
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.
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.