Follow-up Survey: Impact of COVID-19 on China’s Wood Import, Construction and Real Estate Industry
FII China, in collaboration with RCC China, completed a survey report on the impact of COVID-19 on China’s wood trade, construction and real estate industries in March, 2020. A follow-up impact survey was conducted in July to review the second quarter (Q2) results in terms of impact of COVID-19 on business operation, target industries and company countermeasures. Six impacts of COVID-19 on business operations are heightened below, and the full report can be found here.
1.Resumption of Work and Production
Most of the domestic wood traders resumed business operations in early March, while most of the wood frame manufacturers and real estate developers went back into operation in April.
Six percent of companies surveyed reported financial pressures and said that their cash flow could only be sustained for about half a year, as opposed to 2-3 years for other respondents. Logistics and transport returned to normal and there were a sufficient number of freight vehicles.
2. Operating Costs
The operating costs had not increased for wood traders during Q1 since their business operations were shut down when the pandemic was at its peak in China. In Q2, their operating costs increased due to pest elimination costs for logs and warehousing costs.
The wood frame manufacturers and real estate developers surveyed said their operating costs increased due to rent, bank interest, labor, purchase of personal protective equipment (PPE) and nucleic acid testing charges.
3. Wood Inventories
Wood inventory has a direct impact on wood frame manufacturers. In Q2, 42% wood frame manufacturers surveyed maintained sufficient or normal inventory.
4. Price Fluctuations
Due to the pandemic spreading abroad, the wood import volume at Chinese ports decreased remarkably in April and May of 2020, especially for timber from Russia and Canada. This led to undersupply and rising prices for timber products. In mid-May, demands for timber were significantly reduced since several provinces were hit by floods and most of the construction projects were suspended. As of July 7, the prices of logs and construction timbers domestically have fallen back to the price level at the beginning of this year.
The price of wood frame constructions rose in April and May along with the price fluctuations for timber, before falling back to the price levels at the beginning of the year along with the price decline of timber.
The prices of commodity houses declined from January to mid-March, but started to rebound in late March as the markets gradually resumed operations and the demand of home-buyers was unleashed.
Overall, major companies have had an easier time managing the impact of COVID-19, where the challenges have been more significant for small companies.
6. Annual Forecast for 2020
The survey shows COVID-19 pandemic has a great impact on wood imports and WFC in Q2. Seventy-three percent of the wood traders said in Q2 their annual business performance would drop by 10-60%. Seventy-five percent of the wood frame manufacturers interviewed said that their year-round business performance fell by 10-50%.