China Wood Products Prices
1-16th December 2004

Challenges for Fibreboard  

Chinese analysts are reporting that China's fibreboard industry will, eventually, face serious challenge in raw material supply, declining competitiveness due to management and technology weaknesses although this sector has been developing rapidly in recent years. The negative factors affecting the future development of China fibreboard industry have been summarised as follows:  

Forest resources 

Analysts in China say that domestic forest resources will not be able to meet the demands of the fibreboard industry if it continues to develop at the current pace. According to available data, by the end of 2004 Chinese fibreboard production capacity will be such that it will consume more than 35 million cubic metres. However, domestic raw material supply cannot meet this huge demand. 

Moreover, in order to develop grain production, recently the State Council issued the "Urgent Notice Regarding Prevention of Occupying Basic Farmland for Planting Trees and Developing Forest Fruit Industry" which stipulates that the planting of trees on farmland must stop. That means the land use for developing plantations will be limited, especially in Hebei Province and East China. 

The fibreboard industry is in competition with the pulp and paper sector for raw materials. China's pulp and paper sector is also developing at an unprecedented pace in tandem with sharp expansion in domestic paper products consumption.  

In Guangdong Province (whose medium and high density fibreboard production ranks third in China) has listed the paper sector as one of the nine leading industries. Two large scale pulpmills will reportedly be established in western Guangdong (annual production capacity 700 000 tons in Zhanjiang factory and 1 million tons in Singapore Asian Pulp & Paper).  

Production of pulp and paper in the country is also likely to expand as overseas investment in the sector is expected to continue to grow. The timber supply for the medium and high density fibreboard industries of Guangxi, Jiangxi, Hainan and Fujian Province are likely, say analysts, face strong competition for raw materials.

Particle board weak in market  

While there has been considerable growth in consumption of fibreboard the particleboard industry has failed to grow much and this is put down to the reputation this product developed in the past for being of low and variable quality.Guangdong's furniture industry consumes around 9.6 million cubic metres of wood-based panels of which the consumption of fibreboard is around 9 million cubic and the consumption of particleboard only 600,000 cubic metres  

Over the past two years production of good quality particleboard has increased and domestic consumption is growing as the furniture industry has expanded. The current production capacity in the particleboard sector rose by 48% compared to levels in 2003. Local experts estimate that the rapid development of particleboard and oriented strand board (OSB) will challenge the raw material supply of the fibreboard industry.  

A further factor that will impact the whole sector will be the new directives on transportation of goods.  

Because of the excessive overloading of commercial trucks enforcement of trucking loads is now firmly implemented and this has significantly increased the costs of transportation. All sectors face increased costs for raw material and finished goods transport. The new cost structures have hit hard at companies having to transport either raw materials or finished goods over long distances.  

 In the past it was not uncommon to see trucks carrying three or four times the permissible loads but now the loads are strictly controlled.  

Chinese analysts say that in order to guarantee the healthy and sustainable development of China's medium and high density fibreboard industry, several measures must be put in place.  

·         increased integration from forest to mill  

·         resource rich enterprises should expand  

·         The government should act to plan development of fibreboard projects to ensure that raw materials are available in the area where the mill is planned.

 Medium and high quality furniture an opportunity  

In plast 4 years, Chinese manufacturers have been saying that the market for low priced furniture has been satisfied and that the supply exceeds demand in China's medium to large cities. According to estimate from local experts, some Yuan 20-40 billion furniture is in stock and is very diffuicult to sell today. They also say that all the overstocking is of low end products. By way of example, today a cheap bedroom set  (5 pieces) cost only Yuan 2800 which is close to just the raw material cost. 

The prices for raw and supplementary materials for furniture manufacture has been increasing in recent years and the price of lumber is up by about 50%. Prices for paint, glue, hardware and fittings have also increased. 

Some costs such as rent, transportation and wages and salaries have also increased steadily. In this situation, the profit margins of enterprises has fallen lower and lower and has resulted in bankruptcy in many cases.  

According to statistics for 2001-2003 more than 1000 furniture enterprises went out of business in the Pearl River Delta region. At the same time, there were 1-2 factories closing down every day in Shanghai. 

The low priced furniture market is saturated but the market for medium and high priced quality furniture still has room to grow say local analysts especially in big cities and in the coastal developed regions of south east of China.  

In Shanghai for instance, according to market investigations in November of 2002, the demand for furniture valued at below Yuan 5000 was just 20.5% of the total market (down from 32% in previous market analysis). 

The demand for furniture valued at below Yuan 10 000 accounted for 51% (up from 25% in previous studies) while the demand for furniture valued at between Yuan 10 000 and Yuan 20 000 accounted for 31% of the market (up just 6.5%). The demand for furniture valued at above Yuan 20 000 accounted for a approximate 11% share.  

According to forecasts, the population of the wealthier middle class in China will increase to 400-500 million by 2010 from the current 200 million. Viewed from an international perspective  consumers of developed countries have high incomes and consume imported medium and high quality furniture. Chinese analysts suggest that China's furniture manufacturers should not go on a "price war" in the low price level market but that they should tap into the medium and high quality furniture market.  To do this would require Chinese manufacturers to invest in research and develop and come with innovative products to meet the needs of the international and domestic markets.              

Popular wooden flooring  

China's wooden flooring products are becoming popular in the international market driven by progress in the flooring industry in terms of technologic standards, styles and designs. According to statistics from China's Customs, during January to September China exported 193,000 tons of wooden flooring valued at US$240 million, a year on year increase of 77% in volume and 51% in value.                          

China's exports of wooden flooring includes mainly impregnated paper laminated floor and solid and composite floor. Of the total, exports of wooden parquet flooring made up 70% of the total. 

China's wooden flooring is exported mainly to the western countries. In the first nine months of 2004 China exported 57, 000 tons of flooring to the US, 47 000 tons to Canada, 19 000 tons to Japan and  11 000 tons of wooden flooring to the UK.  

Exports of the wooden flooring to the above-mentioned four countries were 134 000 tons, making up three-fourth of the total of China's wooden flooring exports. China's wooden flooring industry has developed as an integrated industry through 10 years' of development.  

Manufacturing plants are spread over more than 20 provinces. There are 350 impregnated paper laminated floor factories alone and 440 production lines in China. It is predicted that, by the end of 2004, the annual production in China's wooden flooring sector will be around 180 million cubic metres, a year on year increase of 19%.  

New Zealand timber promotion in China

It has been reported that more than 20 New Zealand forestry and wood processing companies decided to jointly undertake to market NZ wood in the Chinese market and aim to conducting joint market surveys and promotion for New Zealand timber products targeting China's construction, furniture and home improvement markets. 

A spokesperson from the New Zealand Forestry (NZFA) said that the expanding markets for New Zealand's forestry and wood sector was very important because New Zealand is facing the competition in the market from Canada, the U.S and Northern Europe.  

The NZFA estimates that China will need 260-280 million cubic metres of timber in the next 6 years and only half of that can be met from China's domestic forests. Reportedly, New Zealand is planning to establish a wood and building materials centre in Shanghai. 

Guangzhou City Imported Timber Market 

Shanghai Furen Wholesale Market 

Hebei Shijiangzhuang Wholesale Market  

Shandong De Zhou Timber market 

Tian Jin City Huan Bo Hai timber Market  

Abbreviations

LM        Loyale Merchant, a grade of log parcel	Cu.m         Cubic Metre
QS         Qualite Superieure	Koku         0.278 Cu.m or 120BF
CI          Choix Industriel	FFR            French Franc
CE         Choix Economique	SQ              Sawmill Quality
CS         Choix Supplimentaire	SSQ            Select Sawmill Quality
FOB      Free-on-Board	FAS            Sawnwood Grade First and
KD        Kiln Dry	Second
AD        Air Dry	WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through	MR              Moisture Resistant
the boards from one log are bundled	pc         per piece
together	ea                each
BB/CC  Grade B faced and Grade C backed	MBF           1000 Board Feet
Plywood	MDF           Medium Density Fibreboard
BF         Board Foot	F.CFA         CFA Franc
Sq.Ft     Square Foot	Price has moved up or down