Arbor Resources Blog Updates
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.