While we are encouraged by the news that other Southeast Asian markets are developing for our hardwood resource (see article on Vietnam’s role in hardwood consumption), it is very heartening to hear as well that Chinese demand for both hardwood logs and lumber is apparently on the rise again.

Over the last few years we’ve discussed the importance of Chinese interest in our resource, and as stated in a prior article, it seemed that just as the negative effects of the China-US trade war had been mitigated by the signing of the Phase 1 agreement, the COVID pandemic suddenly curbed the gains we were finally seeing in prices.  In dealing with the coronavirus, China and other countries went through a shutdown period like the US, and demand for our hardwood quickly decreased.

Thankfully, reports are that this important market sector is beginning to open up again, and we wanted to share with you excerpts of some of the key points about this brought forward in a recent issue of The Hardwood Review Weekly (July 24, 2020; Vol. 35, Issue 45.)

Excerpts from an Editorial by Dan Myer, Regional Editor, titled

Log Exports Booming Again to China – But, So Too Are Lumber Exports

 

Current Trends

While still a ways (sic) below their early 2018 peak volumes, hardwood log shipments to China are, indeed, growing again.  U.S. hardwood log exports to China hit a 15-month high in May, with Red Oak log shipments the highest since May 2018, the first month under the tighter import rules.  Walnut log exports to China set new record highs in both April and May, with combined volumes 18% higher than the previous record volumes of April/May 2019.  Ash log shipments continued to creep higher in May, and even White Oak log volumes were at a 22-month high.

It is possible that some of the increased log shipments to China in 2020 have resulted from lower shipments to Canada, Vietnam and Japan, especially in April and May.  However, China’s purchasing was already up 43% in the first-quarter, relative to Q4 levels, so it seems more likely that a post-pandemic return in demand in these other major log markets, when it comes, will only add to the gains we are seeing in China.

Lumber Now Booming Also

While Chinese demand for logs grew three times faster than lumber in Q1, April and May brought large surges in lumber shipments to China, as well.  Average monthly lumber shipments to China in April and May were 73% higher than in Q1, while average log shipments were “only” up 42%.  In the end, average April and May shipments of both logs and lumber to China were twice the monthly volumes shipped in the fourth quarter (Table 1).  That means there is no longer statistical evidence that log shipments are growing faster than lumber shipments in 2020.  But it confirms that both are recovering strongly in an environment with no tariffs and fewer COVID restrictions.

Though total log and lumber exports to China have trended up together over the last six months, log exports for some species (Walnut and White Oak, in particular) have grown much faster than lumber exports of those same species.  If these trends continue, American sawmillers may find it increasingly costly to source logs in those species.  Conversely, Ash and Red Oak lumber exports grew at a much faster rate than log exports in Q2, though some of the disparity results from the fact that Ash and Red Oak lumber exports dropped to historic lows in February and March, while log shipments in those species did not.

We find this very interesting and encouraging and will report any new developments as they become available to us.  Fingers crossed that this upward demand trend continues!


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