Other sources of softwood logs for China

SEATTLE, WA, Okt. 31, 2011 (RISI) - Note to RISI readers who may feel that we are becoming the "All China -- All the Time" channel: I really did have another subject in mind for this Viewpoint, on South America, but then I received an interesting email from Lithuania and got a bit side-tracked. Next time, I promise, something different! Final caveat to those who are currently discovering the joys of trying to export logs into a grossly over-supplied China market -- the following will probably not make you feel a whole lot better, but we suggest that this is a trend which also deserves your attention.

Last week I received an email from a member of the Western Timber Enterprises Association of Lithuania. The author, from a company which manufactures log cabins, was complaining that local mills were having an increasingly difficult time buying logs because so many unprocessed logs were being exported to China (sound familiar?). As an example, he reported that in the month ending September 15, 2011, a total of 684 containers of softwood logs were exported from Lithuania, of which more than 96% went to China. This got me thinking about the "minor" sources of logs for China, a source that I have basically ignored in the past, but which recently have added up to some very significant figures.

In 2009, 98.2% of softwood log imports into China were from the "Big 5": Russia, New Zealand, the USA, Canada and Australia. Europe has not been a noticeable exporter of softwood logs to China in the past. For example, as recently as April 2010, European logs accounted for less than 1% of China's softwood log imports. But this picture has changed with remarkable speed, and by July and August of this year, European sources made up more than 5% of China's softwood log imports. In September, European sources accounted for 4.5% of Chinese imports. Now, 4.5-5.0% may not sound like much, but in a rapidly weakening market (as China has been recently, at least for softwood logs and lumber) this is enough volume to make a significant impact, especially when you consider that European logs are entering China at competitive prices. In August and September, for example, softwood logs from the top four European sources, Ukraine, Lithuania, Romania and France, averaged US$157/m3, CIF China. This was only slightly higher than the average for Russian logs crossing the border into China ($153/m3), and was considerably lower than the average for logs from Canada ($185/m3 average for August imports) or from the USA ($186/m3).

It's easy to see why wood products producers in Lithuania (and the other Baltic countries of Estonia and Latvia) would be a bit disgruntled about log exports. Comparing the January-July 2011 export data with that from the same period in 2009, exports of softwood logs from the Baltic countries were 152% higher, and exports of hardwood logs (mostly pulpwood) were 174% higher. But the vast majority of these log exports were to Sweden and Finland, with the rapid increase in volume to China really only kicking into high gear over the past several months.

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