China Wood Products Prices

01-15th April 2005

Dollar Exchange Rates of 8th April 2005
China Yuan 8.28
Report from China    

Future Timber Trade 

Given the trends in the international timber and trade and changes in China's timber resource base and economy, local analysts have some tentative projections for China's timber imports and exports trade in the coming years. 

While there are few changes in the number of countries supply wood products to China trade flows are thought likely to change. Analysts expect log imports will still focus on Russia, Malaysia, Gabon, Papua New Guinea, Myanmar, Germany and New Zealand. But it will be Russian timber that will dominate imports. 

As could be expected, imports of raw materials, that is logs and sawnwood will increase but, say analysts the proportion of sawnwood to logs will change in favour of processed items initially sawnwood. 

In terms of price, imported logs look set to continue to firm as supplies become tighter and as demand grows.  Russian timber is currently competitively priced, but analysts see these firming rather quickly.

As prices for high quality timbers increase demand will flatten and at some point will begin to decline as prices rise.  Analysts expect this to be seen first for tropical timbers and this will lead to increased softwood imports. 

With regards to panel products, imports of plywood and veneer are likely to fall further and plywood exports will continue to increase and some products new to the Chinese market will gain in popularity. Currently Chinese imports of plywood come mainly from Indonesia and Malaysia. Chinese exports are targeted at Japan, South Korea and some South East Asian countries.  

In the future China will likely be successful in expanding its plywood exports to the US and to Europe. It is likely that the use in China of reconstituted panels especially MDF and OSB will grow. If OSB demand were to grow fast, until Chinese manufacturing capacity is sufficient, imports would be necessary. 

China has taken steps to reduce import tariffs on many products and this will lead progressively to more diverse imports including greater imports of new and added value products. At the same time, say analysts, imports of wood processing technologies will increase which, with the competitive production costs in China, will drive the expansion of exports. This expansion is going to create strong competition in overseas markets and many countries will likely move to protect domestic industries. 

China's MDF/HDF Industry 

China's MDF/HDF industry has developed rapidly in recent years. By the end of 2003 national  output of medium/high density fiberboard had reached 10.49 million cubic metres, making up 93% of the national total fiberboard output (11.28 million cubic metres).  

According to the latest statistics, some recently installed capacity has increased annual capacity by 4.95 million cubic metres.  Of the total, there are 8 continuous flat press production lines (1.415 million cubic metres per year). 

By the end of 2004 there were 474 medium/high density production lines with the total production capacity of 18.8 million cubic metres per year. Analysts forecast that by the end of 2005 China will have 520 production lines with the total production capacity of 22 million cubic metres per year. It should be noted that the bulk of the MDF/HDF produced in China is consumed locally 

New  Production Capacity in Medium/High Density Fiberboard

Fiberboard production lines newly putting into production in 2004 scatter 18 provinces and counties of which top 5 have 41 production lines with the total production capacity of 3.22 million cubic metres, making up 65% of the national total production capacity (see table 2). 

Top Provinces In terms of production lines and output in 2004

 By the end of 2004 fiberboard production capacity in China extended to 28 provinces and counties except in Tibet, Qinghai and Ningxia. The top 10 provinces in terms of capacity had 324 production lines (14.25 million cubic metres) and accounted for around 76% of the national  production capacity . 

Local experts have put forward three main reasons why domestic MDF/HDF has grown so fast: 

rapid growth in disposable incomes as the national economy has grown, competitively priced MDF/HDF and the continuously expanding range of applications for MDF/HDF.  

In recent years the annual average growth in MDF/HDF domestic sales has been nearly 30% in volume terms, faster than the growth rate of demand in international markets (around 12%). However, along with the rapidly expanding domestic consumption has come some problems. 

Foremost of these is the issue of log raw material supply. There are reports that, for many new plants, raw material sourcing was not well thought through and as a result some mills are operating well below capacity. 

Another issue is that the countrywide distribution of production capacity is uneven. Mills have been established mostly in eastern (42% of national capacity) and the mid-south (30%0 of China.

But there are relatively few mills in the north west, south west or north east of the country. There are no MDF/HDF production enterprises in Qinghai, Ningxia and Tibet up to now. 

The top 5 provinces in terms of MD/HDF output are in south east coastal regions. Of the total MDF/HDF output, Shandong accounts for 2.16 mil cubic metres; Jiangsu 9. 78 mil. cubic metres; Guangdong 0.9 mil cubic metres; Zhejiang 0.87 mil. cubic metres and Fujian 0.8 mil. cubic metres. 

Other problems include the continued existence of many small and technolgically inappropriate mills and problems with very varied quality of the product.  

Currently there are many, what could be best called 'home made' mills where the average annual production capacity is just 39,000 cubic metres per year.  For these enterprises it would be difficult to shift to high-tech and high capital cost mills even if they wanted to modernise the production lines. 

In terms of quality of product a report from the State General Administration for Quality Supervision, Inspection and Quarantine shows that, overall, the quality products from the larger high-tech mills is good while products from small mills are of highly variable quality. 

For the smaller mills there are there outstanding issues of high formaldehyde emission levels,  and variable product strength ratings. Up to now, most of the medium and small mills produce medium thickness boards (average around 15 mm) much of low quality such that imports are needed to complement domestic production of higher quality products so as to meet demand. 

Future Trends 

Analysts are confident that proportion of MDF/HDF in total wood-based panel production will increase further. Local experts suggest that  MDF/HDF output will grow to around 40% of the panel market by 2010 up from the 23% in 2003.  This will result in major changes in wood-based panel consumption patterns in China. It is forecast that the proportion of non-veneer wood-based panel (including MDF and particleboard) will continue to grow while the share of plywood will reduce decline. 

To tackle the growing problem of log supply the trend is now towards integrating plantation development with mill plans in order to guarantee raw materials supply and to manage raw material costs. Already some enterprises have begun large scale plantation. 

Local production, it is anticipated will diversify with greater output of large size boards, a higher proportion of thin boards (especially products for overlaying with impregnated paper laminates which will compete with plywood) and the production of added-value panels such as moisture proof boards will develop quickly; 

Finally the impact of consumer demands for environmentally friendly products will increase and consumers will increasingly turn to environmentally friendly products as their awareness of environment issues expands. This will mean that the product standards established by China will need to be adhered to so mills will need to improve their technology to reduce environment pollution in production and in terms of consumer use of the product.

Japanese logs expensive for China 

Large quantities of mature plantations in Miyazaki Prefecture, Japan need to be logged urgently but there is limited demand for these logs in Japan. Recently, the Japanese regional forest union sent a delagation to Fujian Province of China to investigate the opportunities for exporting Japan cedar logs to Fujian.  

To promote the sale of these logs the Japanese group displayed logs, sawnwood and exhibited a Japanese folk-style wooden house at the Fujian's Academy of Forestry, Fuzhou City.  

Japanese cedar is a construction timber suitable for high market end housing and it has a good decay and insect resistance as well as a fragrant scent.  The timber can be of high quailty and has a decorative pattern.  The physical properties are similar to Fujian-grown cedar so there is an opportunity but the landed price of Japanese logs, as quoted, is two or three times higher than that of Fujian cedar so there is some way to go before deals can be made. 

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