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China's Timber Market Bright for Second Half of 2002

China's Timber Market Bright for Second Half of 2002

Generally speaking the timber market mainly remained stable in the first half of this year but demand varied greatly between regions because of differences in economic development levels.

Deforestation in the major forest regions of Northeast China and Inner Mongolia has been effectively controlled through implementation of the NFPP. The decline in domestic harvest resulted in an increase in market price for timber. Hardwoods such as Lime, Oak, Birch, Chinese catalpa have been selling well. The demand was also strong for traditional Korean pine, White pine and Larch.

Timber prices have risen across the board and the future prospects in the market are looking bright according to local analysts for the following reasons:

  • Deforestation has been effectively controlled;
  • The development of wood processing industry is now developing in tandem with the needs of market;
  • Improvements in road and railway transportation have aided timber marketing.

Although market demand in the southern-forested regions is for large diameter Pine and China fir, it will be some time yet until timber production reaches its forecast peak.

Generally speaking there was no strongly rising demand for timber in the first half of 2002 and the buyer's market was maintained, especially for imported timber market. In fact log imports totaled more than 10 million cubic metres in the first five months of the year, up 53% year on year.
Most local analysts in the timber sector have an optimistic attitude view on the domestic timber market for the second half of 2002. Their arguments are as follows:

It is widely felt that the Chinese economy, because of increased construction activity, will grow faster in the third and fourth quarters and as a result demand for timber must rebound.

Work on the four major national strategic projects such as electricity and gas transmission from the west to the east, the water diversion project from the south to the north, the Qinghai-Tibet Railway and the Western Development programme will drive up demand from the construction sector. Also the start of building projects for 2008 Olympic Games will drive up consumption.

In addition, many new projects will start in Beijing, Tianjin and Qingdao City, which will together lift demand for timber.

The domestic real estate industry is growing fast and large quantities of imported medium and high quality hardwood timber are expected to be used during the autumn for construction and indoor decoration. The total value of timber consumption in the decorative sector alone could be RMB 300 billion this year.

Finally, house building in rural areas after the autumn harvest is expected to increase and this will impact demand for timber products.

Timber Market Price Climbing in Henan

Henan Province is located in inland China where economic development has been slower than in the coastal areas and timber consumption trends are less developed. But recently timber markets in Henan Province have been booming, especially in the second quarter and price levels have rocketed up. Domestic timbers and timber from Russia is now used extensively for construction in the provincial capital.
In Zhengzhou City, for example, the market price of Korean Pine logs (length 6 m, diameter 30 cm plus) have increased by RMB 80 yuan per cubic metre in the space of a few months. The market price of large-diameter Larch log is nearly RMB 1,000 yuan per cubic metre while the market price of White pine sawnwood (length 4 m thickness 6 cm) is around RMB 1,130 yuan per cubic metre.

The market price of Ash sawnwood is currently RMB 1,300, which is about RMB 50 yuan per cubic metre higher than that at the beginning of this year, an increase of 16%. Timber prices are rising steadily as the supply of some popular timbers falls short of demand and stocks decline.

Local analysts point to two main reasons for the booming timber prices in Henan Province. First of all, demand for timber is increasing fast because of implementation of national development plans (Middle and Western Development Plan) and the Four Major Strategic Projects close to Henan Province. Secondly, it is very expensive to transport timber to Henan Province so timber prices are high. It is expected that timber demand in Henan Province will continue to grow into the second half of 2002.

Russian Timber Exports to fall, Prices to go up

According to local analysts, timber exports from Russia to China will likely decline in the near future and prices will probably increase in the second half of 2002. The reasons for the decline in availability include the shortened logging season in Russia because of the warm winter and early spring.

Also, China has been enforcing its quarantine policy on imported timber from July 1, 2001. Imported logs must now be chemically treated or should be debarked. Currently Russia reportedly cannot satisfy the Chinese quarantine requirements. The Quarantine agencies in China and Russia are working to resolve this issue but if China is not prepared to compromise its regulations Russian suppliers have stopped exports.

Additionally, illegal logging in Russian forests is said by Russian authorities to be a very serious problem. Much of the illegal logged timber is reportedly exported and Russian authorities are now cracking down on illegal logging activities.

The evidence for the forecast price rise is based on evidence of a decline in availability in the first four months of this year of Russian timber. Also Russia has recently increased rail freight rates by 14% so the costs of exports will go up. Finally, many Chinese companies entered the import business and resultant the disorderly market development has disrupted the market. With so many buyers in the market prices have naturally risen.

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