The slowing economy in China has reduced the importation of logs from New Zealand, Russia and the US by about 15 percent during the first six months of 2012. Prices for imported and domestic softwood logs in China have fallen this year by 14 percent and 10 percent, respectively.

The slowing economy in China has reduced the importation of logs from New Zealand, Russia and the US by about 15 percent during the first six months of 2012. Prices for imported and domestic softwood logs in China have fallen this year by 14 percent and 10 percent, respectively.

China’s phenominal GDP growth of between 9 and 14 percent annually over the past decade slowed down last year and is forecasted by International Monetary Fund (IMF) to be “only” 8.25 percent in 2012. Reduced investments in public projects and a cooling residential property market have resulted ina decline in the importation of sawlogs during the first six months of 2012.

Softwood log imports in the first and second quarter this year were 6.2 million cubic metres and 6.6 million cubic metres respectively, down from all time high of 8.6 million cubic metres seen in the 3Q/11. The total imports for the first half of 2012 were 15 percent lower than during the same period last year, with the biggest declines occuring in shipments from Russia, the US and Australia. Western Canada is the only major supplier that has increased shipments so far this year; annual shipments may reach over 2.5 million cubic metres, which would be a record high.

THe reduced demand for logs in China has not only impacted import volumes, but also prices for domestic and imported logs. The average price for imported softwood logs was doen 14 percent from 2Q/11 to 2Q/12. Prices for New Zealand radiata pine logs dropped the most, while red pine logs form Russia showed the smallest price drops as compared to other species of imported softwwod logs.

Domestic log prices in China have also fallen over the past year, with Chinese fir prices being down six percent year over year in the 2Q/12, according to the WRQ. Mongolian pine and larch prices were also lower by 8 and 16 percent, respectively.

Contrary to the recent downward price trend for softwood log, prices for domestic hardwood logs, including Eucalyptus, birch and poplar, have gone up this year and were close to, or at record high levels in 2Q/12.

Much uncertainty surrounds investment activities in the Chinese construction sector, private consumption in the country, and the demand for Chinese foredt products in North America and Europe. If the assumption taht the Chinese domestic consumption and private investments will improve somewhat in the 2H/12, as IMF forecasts, both softwood amd hardwood prices are likely to stop falling and instead increase slightly in the second half of 2012.

 

 

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