Selective Cuttings

Selective Cuttings

China lumber imports in 2012: the first dip

February 14, 2013

The volume of China’s softwood lumber (SWL) imports fell slightly in 2012 (-4.7% y/y), the first dip since the strong rally started in 2000. As discussed in our previous blog post, this slowdown were mainly a result of a series of government tightening policies to control rapidly rising housing prices, and their impact on new construction.

Generally speaking, Canada has fared relatively well in these negative market conditions, with a 45% market share (down only 0.6% relative to 2011).  However, with the decline in overall market size, this still represented a reduction of 6% in volume of Canadian softwood lumber exported to China between 2011 and 2012.  Meanwhile, imports from the U.S. were down 42%, and the U.S.’ market share fell from 8% to 5% over the same period.

China’s softwood lumber imports

This chart shows the trend of China’s Softwood Lumber Imports from 1995 to 2012, including the imports breakdown by major trading partners, such as Canada, Russia and the U.S. China’s softwood lumber imports, after years of exponential growth, fell slightly in 2012. It is the first dip since the strong rally starting from 2000. The volume of softwood lumber imports was down 4.7% compared to the level of 2011.

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Thus North American producers absorbed all of the decline in Chinese SWL imports, and imports from other major exporters actually increased, both in market share and import volume.  The largest percentage gains were registered from New Zealand (+18%), Chile (+18%), and Russia (+3%).  The total volume increases from these three countries amounted to 0.2 million cubic metres, which is negligible over the total import market of over 14 million cubic meters.

Is North America losing its edge in the Chinese market?  Our answer is “probably not”. It is more likely that the high North America lumber prices and increasing domestic demand are distracting North American lumber producers’ from their previous focus on China as they seek to meet a relatively more lucrative North American market.

Going forward, ramped-up North American lumber production driven by strong prices, coupled with a recovering Chinese demand, may stabilize exports to China, though if domestic demand continues to increase, producers could renew a focus on North American markets and exports to China may edge downwards.  This view is not universally shared however, with some analysts bullishly forecasting a 7% growth of Canada’s lumber exports to China in 2013.