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Arbor Resources Blog Updates

​Chinese imports of softwood and hardwood wood products will be
significantly altered in 2022 if Russia’s log export ban is implemented
China is the world’s largest importer of softwood and hardwood logs, and for many decades,
Russia has been a significant log supplier for them. This relationship may change in 2022
if Russia implements their proposed ban on exports of softwood logs and valuable
hardwood logs, while also introducing export taxes on green lumber. All these policy
changes are designed to encourage increased domestic production of higher-valued forest
products.
The Russian parliament has not yet announced the final legislative proclamation, so it is
not clear if there will be a complete or phased-in ban, a significant export tax, or even the
possibility of a state-owned export monopoly. However, a signal has been sent to the
marketplace that Russia will no longer be a major supplier of softwood and hardwood logs.
One consequence of this decision is that Chinese wood manufacturers will need to explore
new long-term log supply regions.
In 2020, China imported almost 6.5 million m3 of logs from Russia, predominantly
softwood species. The trade was substantially less than in any year during the past two
decades. Nevertheless, Russia was still the largest supplier of hardwood logs to China in
2020 (more prominent than any other source of temperate or tropical logs) and the thirdlargest
supplier of softwood logs.
It is crucial to keep in mind that China has shifted from sourcing logs from Russia to
European suppliers the past few years as insect-infested timber in Central Europe has been
in temporary abundance. From 2018 to 2020, softwood log imports from Europe increased
from 1.3 million m3 to 12.3 million m3, while Russian-supplied logs fell from 7.8 million
m3 to 4.2 million m3. However, shipments from Europe are not sustainable long-term.
According to the just-released study by the consulting firms Wood Resources International
and O’Kelly Acumen (Russian Log Export Ban in 2022 - Implications for the Global
Forest Industry), China is expected to source more sawlogs from Oceania, Europe, and the
US short-term. Longer-term, the study anticipates that China is likely to shift further from
WRI Market Insights 2021
- a subscription service from Wood Resources International
Global Sawlog Markets
Wood Resources
International
importing logs to lumber, thus creating opportunities for lumber manufacturers, mainly in
Europe and Russia, to increase shipments to this growing market.
The excerpt above is from the just-released Focus Report “Russia Log Export Ban in 2022 –
Implications to the Global Forest Industry”, published by Wood Resources International LLC
and O’Kelly Acumen. For more information about the study or to inquire about purchasing the
60-page report in easy-to-read slide format, please contact either Hakan Ekstrom
(hakan@woodprices.com) or Glen O’Kelly (glen.okelly@okelly.se). A Table of Contents of the
report is available on our website. Click here!
Contact Information
Wood Resources International LLC
Hakan Ekstrom, Seattle, USA
info@WoodPrices.com

FOREST ACTIVITY AND CORONAVIRUS UPDATE

14/2/2020

2 Comments

 

We published a Coranavirus update to let you know we had stood down the crews in our forests from the 4th of February.

As the Chinese New Year is now officially over there has been some increased activity on the Chinese ports and we have, for now, resumed the crews on a reduced production level (around 60%). We have been in discussions with most of the New Zealand Forestry owners right through from the 189,000ha Kaingaroa Timber forest owners, Earnslaw, Forest Enterprises, China Forestry Group and several other forest owners. At this stage they are all in a similar position to us where the immediate objective is to minimise harvesting but maintain a small amount of work to retain the harvest infrastructure. Ongoing harvest decisions are being considered and made daily.

​It is still too early to determine what level the Chinese activity will reach - this will guide our decisions.

Our priority as always is to maximise returns for investors and it is a fine balancing act between protecting the crew infrastructure that we have built up over the years and maximising investor returns.

We are monitoring the situation on a daily basis and if we find there is no improvement in China, and the expectation is that the situation will take a long time to rectify, we will at some point make the decision to completely stand down our crews. This is not a decision to be taken lightly as we expect some harvest crews will go out of business and once the China situation improves, we anticipate long delays in attracting harvest crews again – they just won’t be around. We have already had some crews go out of business during the previous imposed reduced production periods.

The exporters are still negotiating the February log prices but we expect the average A grade log price could be around the $100-$105 range. This is a drop from last month’s average price of $122 This negotiation is longer than usual as the banks in China have only come back to work in a reduced capacity this week. The banks are required for LCs (Letters of Credit). Affecting the price is the larger port inventories in China. Inventories are currently sitting around 6 million tonnes, a comfortable level for this time of the year is around 4.5 million tonnes. As well, the beetle damaged wood continues to supply the Chinese market from Europe.

We will update you again when we have more information.

Attached is an update from the Forest Owners Association explaining the current situation.

Kind Regards
Will Dickie


11th February 2020

FOA, FICA and Te Uru Rakau have been working collaboratively to monitor the situation and provide as much up to date information as we can on a very fluid situation. The summary messages below follow the briefing provided at the end of last week.
Coronavirus and the forestry sector situation as at 11 February, 2020.
  • Now that the Chinese lunar New Year is officially over supply chain activity has picked up again in China as hoped but it is not a business-as-usual level of activity.
  • Coronavirus restrictions are still impacting some businesses and the level of impact varies regionally. The central government is encouraging workers to return after the extended holiday period but, depending on the area, local jurisdiction restrictions may remain in force including self-quarantining in some instances. Working from home will be also be used by a number of companies.
  • NZTE have established a web link to provide people with what information they have access to. The URL is: https://www.nzte.govt.nz/coronavirus
  • The resumption of pre-coronavirus market conditions is likely to be gradual and take time. If the coronavirus spreads within China this recovery could rapidly reverse and become very serious for all exporters – growers and processors.
  • The resumption of activity in China post the lunar New Year extension has led to a pick-up in activity in New Zealand but this is also not universal. The export activity represents a slow easing of pressure on the system and is influenced by existing commitments. The extent to which this is maintained or improves will be influenced by a number of factors that have still to resolve themselves including very high inventory levels on the Chinese ports, the approval of fresh lines of credit and what happens to prices which have already fallen.
  • The situation for NZ log suppliers and traders varies. PFP have taken the decision to resume purchasing and some companies in Gisborne and Southland that had curtailed operations are following suit by also resuming production but at a reduced level. As is usually the case the corporates will all be maintaining a level of production that will reduce the impact on the workforce as much as possible. The reduced level of harvesting, however, is likely to be in place for some time.
  • Woodlot owners and smaller forest owners have less ability to even out the market highs with the lows and thus be more likely to cease operations until more favourable market conditions return. The stalling of a lot of woodlot purchasing is also affecting roading set-up work. The latter is a concern as this is a prerequisite to allow woodlot crews to operate through the winter.
  • The impact on the contractor workforce mirrors the variability in grower response - for some there are manageable reductions in activity; at the other end of the spectrum some are facing losses of jobs and/or businesses.
  • Te Uru Rakau, FICA and FOA are investigating what support may be made available to that section of the workforce who are facing a total loss of income or unsustainable cashflows. This is only a proportion of the forest industry and is being looked at in other areas of the economy.
Regards
David Rhodes

2 Comments

Advice from our forester - impact of Coronavirus

11/2/2020

0 Comments

 
​Early last week we were advised that the flow of our logs into China is facing significant global disruption caused by Coronavirus. China is our main buyer of logs and is the market that sets the price for all other end users – including the New Zealand domestic market.
 
Last week, after discussions with the exporters and a number of forestry companies we made the decision to stand down the harvest crews. Other forest management companies have made similar decisions. For most of the crews their last day of work was Tuesday last week – with a plan to review operations today.
 
Over the past week we have been closely monitoring the Coronavirus situation. Businesses, ports and government departments in China remain operating on very restricted capacity. The Chinese workforce is still under movement control and in many cases cannot get to work, or back home. The government extended Chinese New Year, which is normally celebrated around this time of the year, this means log inventories on ports have continued to build. And with no one returning to work, transporting from the ports and processing hasn’t begun.
 
Because of the build up of logs on the wharves, price indications for February have reduced significantly with indications of A grade logs dropping from around $125 to $90 per JAS. Coupled with this is an increased supply of beetle affected spruce logs being railed from Europe to China and competing with our Radiata.
 
The situation remains very dynamic. Today we are continuing discussions with the exporters around log movements off the ports. All parties are unsure how long this disruption will last.
 
The underlying demand from China for logs remains positive – it’s a matter of working through the short term Coronavirus repercussions and the current build-up of inventories on the port.
 
We will send you more information as the situation develops.
  
Kind regards
 
Will Dickie & Roger Dickie
0 Comments

    Author
    ​FRANK T DAVIS 

    A SURLY AND CYNICAL OLD CURMUDGEON WITH A JAUNDICED VIEW OF THE POLITICAL ELITE .

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