As Boston, US-based specialist forestry products information source RISI points out, China is the world’s largest importer of logs and wood pulp, and is the second largest importer of lumber and woodchips. In total, says RISI, the timber content in China’s primary forest products imports in 2014 was equal to about 10% of the global production of industrial roundwood.

However, the slowdown in China’s economic growth has reduced demand for imports of almost every commodity over the last two years. A case in point is New Zealand, whose log exports to China fell 7% last year to 10.9M m3,  albeit still ahead of the next two largest suppliers, Russia (10.5M m3 ) and the US (4.1M m3).

Sensitive state

Commenting on the market this year, leading NZ log trading company TPT Forests said that Chinese buyers are being cautious. “The China market, which has a heavy influence on pricing across all export markets, is in a sensitive  state, and any sign of oversupply of logs or lumber, relative to demand, is likely to cause a rapid response in pricing, with buyers becoming reluctant to hold stock,” said the company.

On the port side, Tauranga was particularly hard hit, with log exports falling by 18.2% to 4.6M JAS – the Japanese Agricultural Standard cubic metre – over the port’s FY 2016. China has gone from taking 63% of logs exported
through Tauranga port to 53%, while exports increased slightly to India and Korea. Other ports in New Zealand fared much better, however, with CentrePort Wellington seeing a 19% increase in log exports to 1.04M JAS. 

At the same time as Tauranga lost raw log exports, it grew trade in other forest product categories. Sawn timber exports increased from 756,000t to 777,000t, and paper products exports increased from 572,000t to 602,000t. The port of Tauranga is currently in the process of building a new warehouse for Oji Fibre Solutions, the world’s fifth largest pulp and paper shipper, which has the majority of its craft paper and packaging manufacturing facilities in New Zealand.

Lots in the air

New Zealand has long sought to encourage more processing of forest products within the country, but processing companies now face increasing competition for trees. Local media have carried reports of overseas log buyers chartering helicopters and flying over rural areas to identify small forest areas planted by private investors. They are then approaching the owners directly with cash offers. 

Some buyers are looking to buy now to take advantage of very low freight rates and bunker prices, and an increase in vessel capacity. Last October, Tauranga hosted Scorpio Bulkers’ MAIA, the world’s biggest specialised log carrier. The vessel is a 61,587 dwt ‘Ultramax’ log carrier with a length of 200m and a beam of 32m, and was charted by TPT Forests to transport logs to India. 

With market factors lining up to support increased log exports, the New Zealand Wood Council (Woodco) has issued a warning that the balance has shifted too far, and timber producers are “being hindered by a current lack of lots, especially in the higher grades”. 

Woodco is a pan forest and timber processing industry organisation, and is concerned that “small-scale woodlot owners are being enticed into quick export contracts instead, where the buyers are not providing the domestic  processors with an opportunity to purchase these logs”.

Securing supplies

Brian Stanley, chairman of Woodco, stated: “If anyone is going to invest in more processing, they need to be sure that there will be a continuous supply of logs, especially where small farm scale woodlots are an important source of that log supply.” 

The organisation does not want to see direct government intervention to prevent sales, but is calling for policies to help steer the market, ranging from more research into wood processing, through to accelerated depreciation and rural roading assistance. 

“The forest industry is our number two primary export earner, behind dairy, and is too important and long term to be subject to government influence or controlled variable pressures outside the marketplace, such as the mad fluctuations in the prices for carbon credits we’ve seen in the past six years,” said Stanley. 

While Woodco is trying not to sound alarmist, others are putting forward the idea that New Zealand will face a supply crunch from 2023, brought on by foreign-owned forestry companies that are now cutting 18-year-old logs, instead of waiting until the trees reach 27 years. 

One opposition party has introduced a Bill to bring in a quota, licensing and management system, modelled on the Canadian forestry management system. New Zealand, however, scrapped a regulatory-led approach to harvesting in the 1990s, and there is no appetite among forest owners to return to it.

Upbeat

Despite the New Zealand ‘doom and gloom’, RISI analysts expect China’s already high timber supply deficit to continue driving import volume growth over the next 10 years. China’s timber and other forest products imports are expected to increase by 60M m3 by 2025, and will eventually account for 12-13% of the global timber harvest. These and other findings were published by RISI in its 2016 China Timber Supply Outlook.

It expects growth in the coming decade will be more in the form of lumber, rather than logs, and in wood pulp imports, rather than woodchips. In total, the wood content of China’s primary forest products imports will increase from an estimated 194M m3 in 2015 to 254M m3 by 2025.

Robert Flynn, lead author on the study and RISI’s director, global timber, said this was a conservative outlook, in the light of overbuilding in the residential construction sector, and weakness in Chinese property and stock markets.

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This complete item is approximately 2000 words in length, and appeared in the September 2016 issue of WorldCargo News, on page 47. To access this issue download the PDF here.