B.C. softwood lumber and panel exports to China

(Softwood lumber, plywood, OSB, MDF and particleboard)

B.C. Position

  • 36% of all commodity wood product (lumber and panels imports by volume)
  • 38% of softwood lumber imports by volume
  • 4% of wood panel imports by volume

Export Sales

  • 2015: 6.7 million m3 of commodity wood products valued at $1.2 billion (this represents a 13% decrease in volume and a 15.6% decrease in value over the year before)
  • 2016 (through August): 4 million m3 valued at $670 million

Market Overview

China’s global export sales in 2015 totalled 14.3 trillion yuan ($2.9 trillion CAD) and by global standards, China’s GDP growth in 2015 was an impressive 6.9%; however, it was the fifth consecutive year that this growth indicator decreased. In fact, this measure has shrunk by more than half when compared to 2007’s 14.2%.

The Chinese government made several attempts to strengthen the economy in 2015 – the central bank cut interest rates six times throughout the year to reenergize the real estate market and, in August, China devalued the yuan. While China’s GDP growth is forecast to slow even more over the next five years, some view this period of adjustment positively. An era of double digit growth created unhealthy asset inflation, and the country risked a “hard landing”.

In March, 2016 China released its 13th 5-Year Plan (2016-2020), which highlights principles of innovation, coordination and green development. Select growth targets include: doubling 2010 national GDP and GDP per capita; increasing national productivity to $20,000 USD per capita (2015: $14,000); increasing R&D investments from 2.1 to 2.5%; increasing urbanization to 60% (moving 100 million people from rural to urban areas); and lifting 50 million people out of poverty.

This plan reflects China’s “New Normal” and aims to clean up distortions brought about by three decades of development at all cost; however, this is unlikely to come at the expense of economic growth.

While housing markets in the four tier-one cities (Beijing, Shanghai, Guangzhou and Shenzhen) remained strong in 2015, demand in other cities remained soft. As a result, a considerable price difference can be seen between housing units in tier-one versus other cities. China’s ongoing urbanization will further increase home prices in tier-ones and some surrounding tier-two cities, but will have little effect in others.

In 2015, Chinese importers increased their lumber purchases marginally while log shipments experienced significant retractions. According to China Customs, imports of softwood logs fell 17% to an estimated 29.7 million m3 while hardwood species dropped 7% to 14.5 million m3. From the lumber perspective, softwoods fell slightly to 17.6 million m3 while hardwoods climbed 7% to 8.2 million m3 .

According to Statistics Canada, sales of B.C.’s softwood lumber to China fell 13% to 6.6 million m3 , the lowest volume since 2009. The weak ruble in 2015 convinced many Chinese importers to supplant Canadian softwood with cheaper Russian lumber.

China remains a net exporter of wood panels, selling predominately plywood and MDF to the US, Europe, Japan and the United Arab Emirates. However, the devalued yuan did not translate to more sales as panel exports fell 18% to an estimated 14.1 million m3 . In 2015, B.C.’s exports of wood panels to China were reported at just 39,730 m3 (-26%).

The devalued yuan provided more assistance to the already strong value-added sector as exports grew 19% to a record $31.7 billion CAD. Meanwhile, B.C. sales of value-added wood products to China dropped 63% to just below $500,000.

Market Trends

Rapid urbanization – Sustainable urban development is an important priority for the Chinese government, and the government has committed to increasing the rate of urbanization to 60% by 2020, moving more than 100 million people to cities. This means that each Chinese province plans to build four to five new cities in the next few years.

Green development – Three decades of unabated growth has taken a serious toll on China’s environment. The government is now recognizing the need to rectify the issue, raising green development, including green building and prefabrication, on the agenda.

Construction industrialization – In 2015, China introduced new strategic priorities and policies for the construction sector that promote construction industrialization and prefabrication. Municipal governments are also providing subsidies for companies using prefabricated construction methods. There is a significant opportunity for wood in prefabrication.

Rising middle class – With an increasingly large and affluent middle class, Chinese consumers will continue to develop an appreciation for quality, a variety of housing styles, and a greater acceptance of international designs. This may create an opportunity to promote products manufactured with wood.

Continued demand for imported fibre – China has the world’s largest construction market as well as the largest wood products manufacturing base; however, the country has a growing fibre deficit which can only be satisfied by imports.

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