Arbor Resources Blog Updates
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Implications for India/New Zealand timber trade
Source: Japan LumberJournal
RUSSIA TO INCREASE LOG EXPORT DUTY INCREMENTALLY TO 80% BY 2021!!!
The Russian government announced a new ministerial ordinance regarding log export from the Far East regions.
It states that if any company, which achieved a certain amount of wood processing, wishes to export logs, 6.5% export duty rate is applied then the duty will be increased step by step and the rate will be 80% after 2021, which practically prohibits log export.
The idea is to promote wood processing in the Far East regions. The ordinance is effective since January 1, 2018.
While promoting processing wood, the government allows export of logs unsuitable for processing and the annual quota of log export is four million cubic meters. Applicable species are whitewood and larch.
Any company, which has amount of share of 20% of all export processed products, is allowed 6.5% export duty then processed percentage is raised year after year like 25% in 2019 and 35% after 2021. Processed products mean lumber, veneer, plywood and wood chip.
Log export duty rate is raised step by step. 25% in 2018, 40% in 2019 , 60% IN 2020 and 80% after 2021.
China buys a sizeable volume of Russian logs and if this new regime is strictly applied, China will need to look for log sources elsewhere and the most likely sources would be North America and New Zealand.
RISI VIEWPOINT: China's demand for imported wood fiber: December 21 2017
By Bob Flynn, Director, International Timber
Imports of logs, lumber and woodchips have been growing at such a rapid rate, and to such lofty heights, that it's been close to unbelievable at times. Between 2012 and 2017 (estimated), Chinese imports of logs (softwood and hardwood) have increased by 42%, hardwood chip imports have jumped 59% and lumber imports (again both hardwood and softwood) have soared 81%. We keep saying that the market can't keep growing at this rate, and indeed it simply can't. For example, if softwood log imports continued increasing at the same rate they have been growing over the past 15 years, then in another 20 years China would be importing every single softwood log harvested in the world. But with imports of softwood and hardwood logs and lumber and hardwood chips all at record levels in 2017, we admit to just a bit of apprehension in publishing a forecast this week which says that the next 10 years are going to look a whole lot different than the previous decade. Fortunately, the outcomes of the 19th National Congress of the Communist Party in China give us confidence that our forecast is on the right track, and might even be optimistic.
Over the past 15-20 years, the excessive and often very wasteful surge in construction activity in China was made possible by lax lending standards, including the rise of the "shadow banking" sector, corruption between banks and local authorities, a lack of concern for environmental impacts or maintaining land for agricultural production, and a rapidly growing mountain of debt. President Xi has been promoting policies to address these issues for several years, but we believe that the 19th National Congress sets the stage for him to make major reforms in the years ahead.
To say that Xi "consolidated his power" would be a serious understatement. Not only did the Congress approve all of his choices for the powerful seven-man Standing Committee, but they unanimously voted to make his "Thoughts on Socialism with Chinese Characteristics" part of the Chinese constitution. While this move might seem odd to Western experience, it has only happened twice before in the history of Communist China: with Mao Zedong and Deng Xiaoping. Elevating Xi to this level, and following several years of his anti-corruption campaign which has effectively eliminated any opposition to a surprising degree, gives us reason to believe that he will be much more successful in pushing necessary reforms than any leader China has had for 30 years. This means that the out-of-control construction binge that we've seen in China for the last decade is going to quickly come to an end.
RISI's new forecast of Chinese timber demand projects a decline of about 18% in softwood log imports and 10% in hardwood log imports over the next decade, relative to estimated 2017 levels. Of course, it isn't just changes in Chinese demand that will drive this decline, but also our expectations on what is happening in the supplying countries and competition from other markets, such as the decline in availability of tropical hardwood logs and an increase in demand for softwood log imports in India.And demand in China is not driven only by construction activity. A significant share of logs and lumber are imported to make value-added products for export. And it has seemed like China's exports of furniture, plywood, flooring, etc. have been doing nothing but increasing for more than a decade. But recently this picture has also changed. And the trend in exports hasn't just slowed, it's actually gone negative in a number of cases. Export values of plywood and flooring began shrinking in 2015, continued on their downward trend last year, when they were joined in retreat by wooden furniture and door and window exports. Even China's exports of paper and paperboard, which had been growing at a 19% CAGR from 2000-2015, have had zero growth over the past two years. Increasing labor rates in China, as well as various trade restrictions by importing countries, have largely been to blame, but the point is that the period of never-ending growth in forest products exports looks to be over.
Of course, with China it isn't just the future that is in doubt, as we have basically given up trying to make sense of the country's wood products production figures. For example, the FAO reports that between 2009 and 2015, Chinese production of sawnwood increased by 42 million m3 and production of plywood increased by almost 69 million m3. This increase in output would have required at least an additional 146 million m3 of roundwood to produce, depending on the conversion factors used. But over this same time period, the FAO reported that total industrial roundwood production in China increased by only 20 million m3, and the net increase in log imports (all species) rose by 16.5 million m3. Thus, the available additional log supply during this period was only enough to produce about one-fourth of the reported surge in wood products output, an absurd situation. (And the Chinese State Forestry Administration reports even higher plywood production, and lower timber harvest statistics!)
In some cases, China's relentless increasing consumption of the world's wood fiber resources will be slowing sharply due to problems on the supply side. For example, China went from being a major hardwood chip exporter early last decade to the world's largest import market in 2016. While demand seems likely to remain strong, we note that 75% of the country's hardwood chip imports in 2017 were from Vietnam and Australia. At the end of 2014, the Vietnamese government adopted new policies to cut the volume of chip exports in half, in order to reserve more wood for the domestic industry. In Australia, a lack of new planting after 2008 and conversion of plantations back to agriculture after harvesting for the last five years means that export volumes will have to reduce by a couple of million dry tonnes over the next five years. This will put China in a battle with Japan to try to maintain volumes in the face of shrinking supply, and will without a doubt limit future growth in what has been a very aggressively growing trade.
New Zealand export log prices edged higher to a new record, buoyed by continued strong demand from China, a weaker currency and historically low shipping rates.
The price for A-Grade export logs reached $129 a tonne, up from $128 a tonne last month, and $127 a tonne the month earlier, marking the highest level since AgriHQ began collecting the data in 2008, according to the agricultural market specialist's monthly survey of exporters, forest owners and saw millers. All of the main log grades tracked by AgriHQ either held steady or lifted as much as $2 a tonne on the previous month, AgriHQ said.
New Zealand is experiencing strong demand for its logs from China, which has clamped down on the harvesting of its own forests and reduced tariffs on imported logs to meet demand in its local market. AgriHQ said Chinese demand for New Zealand logs remained just as firm as previous months, and is set to hold that way until at least the Chinese New Year in February next year.
"Strong and constant demand out of China is the main factor which has pulled wharfgate log prices to record levels," said AgriHQ analyst Reece Brick. A weaker local currency, which had been trading around seven-month lows against the US dollar for most of November and early December, as well as historically low shipping rates had also supported wharfgate log values, he said.
Brick noted that the main issue for the export market at the moment is shipping logistics, with massive volumes of logs heading to the export market creating congestion at ports.
Beyond China, export markets have had mixed fortunes, he said.
In the New Zealand domestic market, trading continued at essentially the same level as a month ago, though some higher prices were reported, he said. This put the national average for structural logs at $129 a tonne, pruned logs at $182 a tonne and roundwood at $97 a tonne.
"Strong housing construction rates continue to underpin wider demand for timber from mills - a situation which is set to remain the norm for at least the medium term," Brick said.
Mills have benefited from consistent wood flows in recent weeks, as dry weather conditions halted any previous disruptions to harvesting, he said.
"All signals point to stable-to-firming domestic log prices through Q1 next year," he said.
Still, Brick noted that rising wharfgate prices over the past 18 months have forced mills to be more price competitive and more mills are battling to make a profit margin, even with strong end-user demand for processed wood.
"Although short-term cash flow is an issue, part of the concern is the mills' inability to invest in new technology," Brick said. "Many are unable to front the cash to invest in more efficient machinery that would allow them to make larger margins on logs. This calls into question the longevity of these mills, especially if there’s no reprieve in competition from overseas traders."
Log imports up 8% in the first half of year - China’s log imports in the first half of 2017 totalled 25.89 million cubic metres valued at US$4.535 billion, a year on year increase of 8.3% in volume and 14% in value. The average price for imported logs was US$175 per cubic metre, a year on year increase of 6%.
Of total log imports, softwood log imports rose 8.6% to 17.51 million cubic metres, accounting for 68% of the national total. The average price for imported softwood logs was US$130 per cubic metre, up 9% on the same period of 2016.
Hardwood log imports grew 7.6% to 8.38 million cubic metres (32% of the national total log imports). The average price for imported hardwood logs in the first half of 2017 was US$269 per cubic metre, up 3% on the same period of 2016. Of total hardwood log imports, tropical log imports were 4.43 million cubic metres valued at US$1.278 billion, up 7% in volume but down 2% in value on the same period of 2016.
New Zealand and Russia main sources of logs - New Zealand was the main log supplier to China in the first half of 2017 accounting for 24% of total log imports.
Imports from New Zealand totalled 6.2 million cubic metres in the first half of 2017, a year on year increase of 10%.
The second ranked supplier of logs was Russia at 5.87 million cubic metres, accounting for about 23% of the national total. In the first half of 2017 a year on year decrease of 1% was recorded for log imports from Russia.
Average prices for imported logs from New Zealand rose 10%, average prices for imported logs from Russia grew 7% in the first half of 2017.
NZ structural log prices advance to 23-year high as mills compete with export demand - New Zealand structural log prices edged up to the highest level in more than two decades as mills compete with the export market to secure supply for the local construction market.
The price for structural S1 logs lifted to $128 a tonne this month, from $127 a tonne last month, and is sitting 11 percent above last year's level and 21 percent higher than the five-year average, according to AgriHQ's monthly survey of exporters, forest owners and saw millers. The S1 structural log price is at its highest level since April 1994.
Demand for New Zealand logs is strong in China, New Zealand's largest log market, with in-market prices for unpruned logs at their highest level since mid- 2014 and pruned log prices just shy of their last peak in mid-2016, AgriHQ said. China has clamped down on harvesting of its own forests and reduced tariffs on imported logs. It imported 2,894,326 tonne of logs in July, the highest level since April 2014, with New Zealand recording the largest lift, making up 37 percent of imports in the month, ahead of the 35 share it typically holds, AgriHQ said.
"As far as the market is concerned, any potential downward movement in values will have to be driven by wharfgate values," said AgriHQ analyst Reece Brick. "Mills are ruing the on-going strength of the export market, forcing them to meet these values or find themselves short on supply."
Some mills have paid premiums above the main contract market to secure supplies from the spot market, Brick said, noting that the current price for structural S1 logs is about $3 a tonne more than the wharfgate price A-grade logs.
Still, Brick said further upward movement in prices is less likely as domestic pruned log supply moved into balance over recent weeks and export interest remains short of the level experienced in early 2016.
He noted residential construction activity is slowing in Canterbury as the bulk of the earthquake rebuild reaches completion, while talk of stagnating house prices has slowed building from property investors.
"Whether this is a temporary state brought about by winter or an indication of a longer-term trend will become more obvious over the next month or two," Brick said. "Other areas have displayed a little more resilience, though it does appear that construction has come back from its peak through Auckland and the central North Island."
Forest products are New Zealand's third-largest commodity export behind dairy and meat products.
BusinessDesk via Scoop News
ncreased demand for softwood lumber worldwide has pushed lumber prices upward, particularly in the US and China during the first half of 2017, according to the Wood Resource Quarterly.
Global Lumber Trade
International trade of softwood lumber is on pace to a new record high in 2017 if the trend from the first six months of 2017 continues in the second half of the year. Of the ten largest lumber-exporting countries in the world, Russia, Finland, Austria and Ukraine increased shipments the most year-over-year during the first half of 2017.
Russia alone, has accounted for 22% of global lumber trade so far in 2017, which is up from 15% ten years ago, according to the WRQ. Canada’s seven consecutive years of expanding shipments may reach an end this year with export volumes having declined 2.2% during the 1H/17.
Lumber markets – North America
During the first five months of 2017, lumber production in the US South bounced back after having declined during the second half of 2016. The total production output from January through May was 7.3% higher this year as compared to the same period in 2016, according to the WWPA.
In Canada, lumber production was up seven percent in the Eastern provinces during the first five months of 2017, while it fell 2.1% in British Columbia. The decline in BC occurred mostly because of a reduction in lumber exports to China by 10% year-over year.
Lumber prices in both the US and Canada have trended upward for almost two years and reached 13-year highs in July. One exception has been pine lumber prices in the US South, which have fallen the past few months to the lowest level seen in almost a year.
Lumber markets – China
Demand for softwood lumber has picked up in China in 2017 with import volumes during the first seven months being 16% higher than during the same period in 2016. By far, the biggest jump in supply sources has been from Russia, which increased shipments by 24% y-o-y to 7.1 million m3 from January to July.
Russian sawmills also increased their market share from 42% of total Chinese imports in 2014 to 62% in 2017. Despite a substantial decline in the cost of Canadian lumber delivered to China from the record highs in 2013 and 2014, Canadian sawmills have lost market share substantially, dropping from a 40% share in 2013, when it was the largest supplier of softwood lumber to the Chinese market, to a current 22%.
Lumber market – Japan
Japan has increased importation of softwood lumber by two percent during the first half of 2017 as compared to the 1H/16. Total import volume in the 2Q/17 was 1.6 million m3, the highest level in two years. The biggest changes on the supply side this year compared to 2016 has been an increase in imports from Canada and Sweden, and a decline from Russia. In Yen terms, domestic lumber prices have moved up slightly in 2017, while import prices have remained practically unchanged.
Lumber market – Russia
Russian sawmills have increased production by an estimated 14% the past five years, mainly driven by a rise in demand for wood in China. Although domestic softwood lumber demand was up three percent in 2016 from the previous year, domestic consumption has fallen 12 percent the past five years.
Russia has become a major player in the global lumber market the past ten years, but exported a surprisingly small share to Europe or the US. Instead a majority of the Russian lumber has been shipped to China, Japan, Iran and the CIS countries (see detailed export data in the latest WRQ Trade Snapshot). Export prices have trended upward for more than a year, and in June 2017, reached their highest levels since February of 2015.
Source: Wood Resources International
Globally traded softwood lumber reached an all-time high in 2016. WRI estimates that 118 million m3 of lumber was traded last year, or 10 percent more than in 2015. Imports to the US account for about one-third of globally traded lumber and have almost doubled in five years. China accounted for about 17% of import volumes in 2016, followed by the United Kingdom, Japan and Germany.
Lumber markets – North America
Lumber production in North America in 2016 was up six percent from the previous year, reaching its highest level since 2007. The biggest rises in production occurred in the US South and Eastern Canada, while the increases in western Canada and the western US were more modest.
Prices for lumber in the US have jumped during the first four months of the year to hit a 13-year high in April. Many of the commonly traded grades surged in price by more than 20% from April of 2016.
Lumber markets – Northern Europe
Sweden exported 12.9 million m3 of softwood lumber in 2016, which was the highest volume exported since 2006. The increase from 2015 was a modest 1.5%, with shipments to Denmark, Japan, China and France rising the most. Domestic lumber prices in both Finland and Sweden continue to be close to their lowest levels in ten years in US dollar terms, as reported in the Wood Resource Quarterly.
Lumber markets – China
Prices for imported softwood lumber to China have been in a steady upward trend during 2016 and 2017 with the average import price in March 2017 being 13% higher than 18 months earlier. The biggest change in pricing over the past two years has been that prices for Russian lumber are no longer substantially cheaper than those for lumber from other supplying regions, but instead are rather close to the average import price.
Lumber market – Japan
Total housing starts were up 3.2% in Japan in the 1Q/17 as compared to the same quarter in 2016, and the economic outlook for the coming year is slightly more optimistic than that for last year.
Prices for domestic and imported lumber have remained practically unchanged for almost a year in Yen terms. With the Yen strengthening against the US dollar during the first four months of 2017, lumber prices have increased so far this year in US dollar terms.
Lumber market – Russia
After a substantial decline in softwood lumber export prices during 2014 and 2015, Russian lumber prices have trended upward for most of 2016 and early 2017. Average export prices in March 2017 were 12% higher than in the same month last year, and prices for wood going to China have gone up even faster over the same time-period. Export volumes to China in the 1Q/17 were unchanged from the previous quarter, holding steady at the second highest level on record.
Source: Wood Resources International LLC
New Zealand structural log prices have hit their highest level in more than two decades as local mills compete with the export market to secure supply to meet demand from the domestic market.
The price for structural S1 logs lifted to $124 a tonne this month from $123 a tonne last month and $114 a tonne at the same time last year, reaching the highest price for the grade since April 1994, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.
"The New Zealand domestic log market has slowly but consistently risen this year, and the past month was no different," AgriHQ analyst Reece Brick said in his report. "Supply and demand fundamentals remain skewed in favour of sellers rather than buyers, squeezing even more returns out of harvested logs."
The market remains strong for most segments of the domestic industry, even as the volumes traded slowed when winter weather stymied construction activity, AgriHQ said, noting that local wood supply had been hampered due to difficulties harvesting in wet weather. While strength in the local housing market is helping stoke demand, the main driver behind higher domestic prices is that export markets are draining supplies out of New Zealand, the report said.
"Domestic mills are in a tug-of-war with export log traders for unpruned logs and are facing the prospect of further hikes in log procurement costs," Brick said. "A large portion of mills are still paying below the export market for logs. Log suppliers are currently attempting to gauge mills ability to absorb higher log prices. All signs suggest more increases are on the cards."
Prices in the log market are heavily reliant on Chinese demand, which is expected to hold in the medium term after the Chinese government introduced restrictions on logging native forests and reduced tariffs on imported logs to 11 percent from 13 percent to discourage the use of native wood, AgriHQ said.
New Zealand exported 1,666,639 cubic metres of logs in April, up 3 percent on March volumes and 21 percent higher than a year earlier. Some 72 percent of the volume was exported to China. "The volume exported in April is one of the largest amounts exported in the last 10 years and is only surpassed by August 2016," Brick said.
The value of log exports is expected to climb to NZ$2.66 billion this year from NZ$2.22 billion last year and reach $3.14 billion in 2021, according to the latest Situation and Outlook for Primary Industries published by the Ministry for Primary Industries last week.
Global demand fuelling NZ forestry export growth
Strong demand from key markets is driving up export growth in forestry products, New Zealand’s Associate Primary Industries Minister Louise Upston says. The latest Ministry for Primary Industries’ Situation and Outlook for Primary Industries (SOPI) shows strong growth in the forestry sector.
“Forestry exports are expected to grow 6.4 per cent to NZ$5.5 billion in 2017, before increasing further to NZ$6.3 billion by 2021 as increased volumes of wood become available for harvest,” Ms Upston says. Strong demand for logs and sawn timber from key markets such as China and the US are keeping prices high while favourable exchange rates are also contributing to strong returns for exporters, the SOPI shows.
Demand is expected to remain strong, as increased construction activity in China and the US, combined with China’s bans on harvesting native forest should ensure continued demand for New Zealand logs and sawn timber.
“With a bright outlook for forestry production and exports, the Government continues to invest in improved harvesting techniques. This investment is primarily through the Steepland Harvesting Primary Growth Partnership programme, which also encourages afforestation by allowing previously unsuitable land to be planted with production forestry,” Ms Upston says.
Planting is encouraged through other programmes such as the Afforestation Grants Scheme, the Erosion Control Funding Programme and the Sustainable Land Management and Climate Change research programme.Global demand is fueling NZ forestry export growth