Wood Industry Quarterly Update – 20Q2

By: Travis Joern

Director, Asia Market Communications, Forestry Innovation Investment

September 22, 2020 China Keywords:

1. BC softwood lumber exports:

  • In 20Q2 the total softwood lumber exports from BC rebounded by 8.1% in volume and 10.6% in value compared with 20Q1, nearly to 19Q4’s level reaching 4.3 million m3. Being affected by the global impact of the pandemic, the total export volume of 20Q2 is just 73.1% of 19Q2.
  • US markets, as the main destination for BC softwood lumber exports, showed a slight fall of 5% in 20Q2, down from 2.83 million m3 in 20Q1 to 2.69 million m3 in this quarter.
  • China, the second-largest market for BC softwood lumber exports, reverses the downward trend in this quarter after declining for 4 consecutive quarters. Exports volume to China significantly rises by 56.8% in 20Q2 compared with 20Q1, reaching 0.97 million m3.

China timber imports:

(1) Total imports

  • China’s log imports have slipped by 16.9% in volume in 20H1 versus 19H1. Lumber imports and softwood lumber imports also went down by 11.8% and 11.6% respectively in comparison with 19H1. China has imported 24.25 million m3 logs and 16.60 million m3 lumber up to this June. Softwood lumber accounted for 75% of total lumber imports.
  • The total logs and lumber imports by China show a recovery, up by 16.0% in 20Q2 versus 20Q1, reporting 21.9 million m3, though the volume is still 18.0% less than 19Q2. The recovery is mainly driven by lumber imports which expand by 38% than the previous quarter. Softwood lumber imports enjoyed a similar level of recovery with a growth of 41.8% from 20Q1, recording 7.3 million m3 in 20Q2.

(2)Softwood lumber imports

  • Russia still dominates the softwood lumber exports into China up to 20Q2, accounting for 61.1% of total imports, though with a decrease of 12.0% versus the same period of last year.
  • Canada softwood lumber imported by China in 20H1 reports 1.4 million m3, shrinking by 45.6% versus 19H1.
  • Europe boosts its softwood lumber notably in the 1st half, taking over Canada as the 2nd largest export market into China. Sweden and Germany are the main contributors which have considerably heightened their exports to China, at a rise of 50% and 47.5% respectively. Ukraine also raised its exports by 24.7%. While Finland cut the exports to China by 16.6%.
  • The preceding 6 countries represented around 87.8% of the total 20H1 softwood lumber exports into China.
  • The import volume of fir and spruce lumber in 20Q2 enjoy a firm rebound after slipping for 3 consecutive quarters. In 20Q2 China imported around 3.3 million m3 fir and spruce lumber, almost on par with 19Q2, up by 49.6% compared with 20Q1.
  • The growth of fir and spruce lumber imports in this quarter further enlarges the gap with radiata pine and Douglas-fir imports in volume. Radiata pine lumber imports have dropped since 19Q3, reporting 191.5K m3 in 20Q2, and sliding by 26.1% over 20Q1. The volume is just 58.7% of that in 19Q2. The imports of Douglas-fir lumber record 46.4K m3 in this quarter, up by 8.3% over 20Q1. The volume is around 78.9% of that in 19Q2.

* 

  • The unit price of imported radiata pine lumber and fir & spruce lumber terminates the falling trend, even with a mild rise. The price of the former one raises from CIF 203 USD/m3 in Q1 to CIF 207 USD/m3 in Q2, and the latter one heightens from CIF 167 USD/m3 in Q1 to CIF 175 USD/m3 in Q2 (may be caused by the declining inventory).
  • Douglas-fir lumber continues its fluctuated trend in its unit price. It slips to CIF 155 USD/m3 after an increase in 20Q1 at CIF 159 USD/m3.

* 

2. Construction Market Overview:

  • Total investment in Chinese real estate development in the first half of 2020 was RMB6.3 trillion, a nominal increase of 1.9% year on year.
  • The land area purchased by real estate enterprises was 79.7 million m2 in 20H1, down 0.9% year on year. While the total transaction value of land reached RMB403.6 billion, up 5.9%.
  • The total construction starts in China bounce back to 1,398 million m2 in 20Q2, indicating the resumption from the pandemic, even with 10.6% growth over 19Q2.

* 

  • The total construction completes record 1,245 million m2 up to 20Q2, with 760 million m2 in completed in 20Q2, 1.6 times more than 20Q1. It is still a 12.6% drop from 19H1. While the total accumulated floor space under construction in this half resume to 11.2 million m2, even more than 19H1 by 4.2%.

* 

3. Highlights in the market:

  • In June 2020, China’s manufacturing purchasing managers’ index (PMI) was 50.9%, a drop of 1.1% from March. According to preliminary estimates released by the China National Bureau of Statistics, China’s GDP expanded by 3.2% year-on-year in 20Q2, reversing a decline of 6.8% in 20Q1. China has become the world’s first major economy to show robust recovery from the impact of the pandemic, with The Economist predicting that China is the only G20 nation with a chance for GDP growth this year.
  • China’s total retail sales of consumer goods were RMB 17.2 trillion (US$2.46 trillion) in 2020H1, down a nominal 11.4% year-over-year.
  • Chinese furniture sales totalled RMB 65.7 billion (US$ 9.4 billion) over the period, down 27.2% from the 2019H1. June 2020 furniture sales totalled 15.9 billion (US$2.3 billion), down 13.6% from the previous year.