China is the second largest timber consumer in the world. With the development of China’s economy, there is a growing demand for timber from industries of construction, papermaking and furniture manufacturing. However, the timber production grows slowly in China as restricted by timber resources and the rising costs of logging. On January 1, 2017, the Chinese government announced the prohibition on the commercial cutting of natural forests. It is estimated that the timber production in China will shrink in the next few years.

From 2013 to 2017, the apparent consumption of timber in China increased by nearly 18% to 192.5 million cubic meters. However, the decrease in the production volume pushed up the import volume. As a result, China’s reliance on timber imports rose from 48.4% in 2013 to 56.4% in 2017, and is expected to keep growing in the next few years.

In 2017, the import volume of timber in China reached about 108.5 million cubic meters, registering a YOY growth of 16.1%. Softwoods and hardwoods account for about 68% and 32% respectively of China’s timber imports. And as labor costs in China are rising, sawn timber is taking up a larger proportion of China’s timber imports. The ratio of sawn timber imports to log imports increased from 1:4 in 2007 to 2:3 in 2017.

According to the researcher, in 2017, Russia, the U.S., New Zealand and Canada, the four largest sources of China’stimber imports, provided 64% of the total import volume of timber in China. In particular, Russia and the U.S. provided about 31% and nearly 10% respectively of the total timber imports. On August 3, 2018, China’s Ministry of Commerce announced a 5% to 25% tariff increase on U.S. exports worth USD 60 billion, including a 25% tariff increase on U.S. timber. Evidently, the Sino-U.S. trade war will have a certain impact on China’s timber import.

The domestic supply of merchantable timber has been contracting, and China’s reliance on timber imports has exceeded 50% since the Chinese government announced the prohibition on the commercial cutting of natural forests in 2017. It is expected that the international timber prices will show an upward trend in the next few years as the import volume of timber keeps rising in China.

Some Chinese enterprises have begun to invest in the forestry industry in other countries, mainly Russia, to ensure a stable and adequate supply of timber. By the end of 2018, more than 100 Chinese enterprises had invested in Russia’s forestry industry with a total of over USD 2 billion. And the figures are expected to grow further. The Chinese government has few restrictions on timber import. Therefore, the Chinese market will provide global forestry enterprises with numerous opportunities in the next few years. 

Source: ResearchandMarket “Timber Import in China, 2019-2023”

As China’s 1.4-billion potential consumers insist on quality in what they buy, global exporters are getting involved, and SA should be in on the deal

Much has been said in recent years about the opulence of China’s new elite, and their outsized impact on anything from Swiss luxury watches to designer handbags and super yachts. Less recognised is how consumption in China is becoming more sophisticated and inclusive, as wealth spreads from urban centres to rural heartlands, bolstered by better-educated new generations who are both web-savvy and worldly-wise.

As rising protectionism and trade tensions create growing unease for businesses around the world, there is no better time for South African companies to take a fresh look at these new consumers and their potential to drive demand for goods from half a world away.

HSBC’s annual Navigator report predicts the value of China’s goods imports to grow at about 8% a year on average between 2017 and 2030, reflecting both demand for intermediate goods for processing and final goods to satisfy China’s increasingly wealthy population.

This is as China is bidding farewell to growth based on exports and state-led investments, and increasingly encouraging its 1.4-billion people to consume. Slowly but surely, the old model of “Made in China” goods heading to markets around the world is shifting to one where China is itself becoming a destination for products made elsewhere.

China is already a top export destination for goods from SA, including ore, steel, iron and mineral fuels, as well as wood pulp, fruit, nuts and raw hides among the top exports. China is SA’s largest goods export market with a value of $7.4bn in 2017, or 9.5% of total exports.

Symptomatic of this rebalancing was the recent China International Import Expo (CIIE) in Shanghai. Previous China-based trade fairs were all about what Chinese companies could sell to the world. This event, by contrast, focused on foreign companies showcasing products from food and medicines, to consumer electronics and cars selling into China — 30 of these were from SA, which was designated as a “guest of honour” country.

Indeed, President Xi Jinping used this recent event to make a new pledge to boost China’s imports with a commitment to buy $40-trillion worth of goods services over the next 15 years.

China’s buying power has exploded in the 40 years since Beijing enacted economic reforms and opened up the country to foreign investors. In 2017, per capita disposable income for urban households was 36,396 yuan ($5,600) — more than a hundred times more than in 1978. Rural household incomes, too, have soared.

And these Chinese consumers have not just become richer; they are also increasingly health-conscious, care about the environment, and are more discerning about brands and the quality of what they buy, according to a McKinsey report.

Companies are taking note. Starbucks sees coffee drinkers in China helping the country overtake the US as its top market, while Tesla is targeting Chinese drivers, who are forecast to account for about half of the world’s electric-vehicle sales by 2025.

E-commerce

Then there is the e-commerce phenomenon, which has helped consumption become more broad-based. Operators, such as Alibaba and JD.com, are helping bring global goods from wealthy coastal regions to smaller cities and towns inland. Nowadays even mums and dads in hard-to-reach rural areas can buy branded milk powder and diapers for their babies, through the creative use of village-based goods depots and delivery by tricycles — or even flying drones.

To be sure, selling into a vast, complex and rapidly evolving market like China is not without challenges. As the economy matures, incomes aren’t rising as fast as they once did. And today’s trade tensions naturally affect business and consumer confidence.

What’s more, foreign companies need to be able to react to constantly shifting tastes and head rapid developments in e-commerce and digital payment tools. And they need to brace for intensifying competition from nimble and increasingly hi-tech local companies. Tesla, for example, faces a host of local electric-car players competing to become the “Tesla of China”, while in the coffee arena, Beijing-based Luckin is snapping at Starbucks’ heels, opening hundreds of outlets since its launch less than a year ago.

But none of this should obscure the enormous long-term potential that 1.4-billion shoppers represent for exporters from around the world. From the millennial brunching in a Shanghai café to the parent waiting for diapers in a Hunan village, China’s consumers are becoming ever more affluent and discerning. Now more than ever, they represent an essential market for businesses everywhere. This is why South African companies with international ambitions should visit China soon. (Liao is president and CEO of HSBC China.)

Source: BusinessDay, 20 DECEMBER 2018

Yaoundé, Cameroon, March 2018—More than 30 participants met last week to evaluate the outcomes of a project aimed at reducing the illegal timber in supply chains between Cameroon and China, the world’s largest importer of timber and a key consumer, processor and re-exporter of timber products, increasingly to and from Africa.

The three-year project and workshop were funded by the UK Department for International Development (DFID) and aimed to increase compliance with timber harvest and trade controls along the supply chain from Cameroon to China and the European Union.  

Those attending included representatives of the Ministry of Forestry and Wildlife (MINFOF), Cameroon Customs, the Regional Intelligence and Liaison Office of the World Customs Organization for Central Africa (RILO-CA), International NGOs, civil society organizations and local community representatives. 

Key outcomes of the project they discussed included: commitments made by Chinese businesses to respect legality definitions and source timber from sustainably managed forests in Cameroon; new tools to enhance timber legality adherence including a timber trade legality manual and handbook; and increased engagement and improved capacity of local communities to engage and benefit from legal and sustainable timber trade. 

China makes a significant contribution to Cameroon’s forestry sector and economic growth: some 60% of all Cameroon timber exports currently go to China and Chinese investments in Cameroon’s forestry sector increased exponentially between 2004 and 2016. China consumed some 550 million m3 of timber and its by-products in 2015, and wood imports are extrapolated to reach almost 100 million m3 by 2018. 

According to Mrs Hortense Batindek, the Project Technical Assistant and representative of the Network of Forestry and Environmental Training Institutions of Central Africa (French acronym RIFFEAC[1]): “The work done in developing the various training tools on timber legality definitions for use by Chinese timber operators and other actors in Cameroon should be used to build the capacity of Forest Law Enforcement Officers both in the field and in training institutions.” 

Source: TRAFFIC INTERNATIONAL, Published 9th March 2018

The booming housing economy and furniture manufacturing, and even demand for whiskey are all affecting the surge in hardwood exports to North Asia markets. One in three boards coming off the production line is destined for the People’s Republic of China. Companies nationwide are supplying a variety of hardwood species to customers in China, Korea and Japan.

One third of the U.S. is forested area accounting for 751 million acres, which is second only to Russia’s 766 million acres. In 2017, the U.S. value of industry shipments of wood was $95 billion. Asia markets are depending on a sustainable source of temperate hardwood (ash, cherry, maple, oak, walnut) and the U.S. can increase exports because of careful management of its forests. In fact, the U.S. grows more hardwood each year than it harvests for reliable supplies, according to United Kingdom based International Timber. Moreover, the American Hardwood Export Council (AHEC) confirmed to the AJOT that the U.S. surpassed Russia as the top temperate hardwood exporter to China.

Hardwood Exports

Quality hardwoods are grown in rural areas not near shipping hubs and these rural family-owned companies are now quite adept at exporting over the past ten years. The eastern region is heavily forested with hardwood supply from the Appalachian Mountains from North Carolina up through New England as well as in the deep south of Louisiana, Mississippi and Alabama. “At this point, just about every lumber company in business today is exporting in some capacity,” explained Tripp Pryor, International Program Manager, AHEC, based in Virginia to AJOT. Recent exporters are from the Midwest and “North Central” regions of Iowa, Minnesota, Wisconsin and Michigan. Some exporters are in Oregon and Washington in the Pacific Northwest, but are primarily softwood (logs) companies with hardwood divisions to buy hardwoods from the East Coast region for foreign customers and export smaller volumes of local species like western red alder. “Most of our members utilize inland freight as well as international shipping. I’ve even heard from some of them that shipping to China has become cheaper than inland freight to U.S. ports,” exclaimed Pryor.

AHEC finds the growth of the Chinese market is unlike anything ever encountered in this industry. They estimate that 60% of all hardwood lumber produced is exported and of that 54% ends up in China. They opened offices in Shanghai and Hong Kong in 1992 when U.S. hardwood exports to Hong Kong were $7 million and $1 million to China per year. In 2017, hardwood lumber exports to China alone jumped to over $1.5 billion. The surge was after the financial crisis when in 2009 the U.S. exported $209 million of hardwood lumber to China, then $507 million in 2011 and going over one billion dollars in 2014 exported to China. The compound annual growth rate (CAGR) from 1992-2017 was 34% of total hardwood lumber in dollars exported to China whereas Japan and Korea decreased over that 25-year period by 11.47% and 1.8%, respectively.

Source: AJOT report, Mar 12, 2018

NDO – Amid the world’s growing demand for wood products and with many key foreign markets tightening their wood material exports, Vietnam’s wood industry may reach a new record export turnover of US$9 billion this year, thanks to firms’ purchasing the materials from new markets.

After spending nearly US$200,000 on importing a modern production chain in late 2018, locally-owned X26 Joint Stock Company in Hanoi has earned approximately US$1.2 million in revenue, over the past four months, from exporting its furniture products, up 10% annually.

“The figure is expected to be roughly US$5 million for the whole year,” Nguyen Viet Thang, head of the firm’s Planning Department, told Nhan Dan Online.

Nguyen Ton Quyen, vice chairman of the Timber and Forest Product Association of Vietnam (Vifores), told Nhan Dan Online that the X26 company is just one among many wood firms in Vietnam that are seeing bright prospects. Vifores has received reports from many wood exporters in Vietnam.

“Eighty percent of hundreds of exporters have landed big export contracts until the year’s end,” Quyen said. “The domestic wood industry is projected to hit a record export turnover of approximately US$9 billion this year, up from last year’s record US$7.6 billion.”

In April, the industry enjoyed a record export turnover of US$750 million, raising the four-month turnover to a record US$2.65 billion.

Wood Land, one of Vietnam’s biggest wood product exporters, is reported to have signed export contracts for the whole year, with an expected turnover of US$55 million this year, up from US$50 million last year.

In another case, Nam Dinh Nafoco JSC has also landed export contracts for the entire 2018, with a forecast turnover of US$50 million this year, up from US$45 million last year.

Many other firms such as Tien Dat, Dai Thanh, Cancia Pacific, Hiep Long, Minh Phat and Phu Tai, which are located in the central and southern regions of the country, have also signed 80% of the contracts for the whole of 2018. They are also expecting an export turnover of US$30-50 million this year, up 10-15% annually.

While enterprises’ production is improving, the global demand for Vietnamese wooden products has been strongly rising, focusing on key markets including the US – which imports 43% of Vietnam’s total wood exports, with China at 14%, Japan (14%) and the Republic of Korea (over 10%). Periodically, the export has tended to strongly increase in a year’s fourth quarter, while demand from these key markets has risen 20% a year.

“We have been seeking new export markets, such as Qatar, Australia and Cameroon, whose demand for Vietnamese products has been climbing by 20% since early this year,” Quyen said. “In addition, many firms have boosted their export of medium-density fibreboard (MDF), with total turnover of over US$250 million.”

Lack of materials

For example, Laos, which used to export nearly one million cubic metres of round timber to Vietnam per year, has decided to stop the export of timber materials under the nation’s governmental Decree 15 on banning the export of raw timber, issued in May 2017.

“The decree has almost curbed all timber supplies from Laos for Vietnam. The volume of round timber has reduced from 322 m3 in 2015 to over 36,000 m3 in 2016. The figure sat at nearly 6,000 m3 in the first half of the year,” said the report.

In another case, although Cambodia remains a big source of timber materials, the source is unstable and difficult to forecast, while Cambodia’s government is planning to more strictly control the country’s timber exports.

“Thus, at least in the short term, this source will likely contract,” the report noted.

Also according to the report, timber supplies from Papua New Guinea and Africa are facing certain issues in terms of the quality and legality of timber, which will also affect Vietnam’s wood production and exports in the years to come.

A way out

However, Vifores and other firms have been working with many partners in the US, France, Finland and some other EU nations, Japan, and New Zealand concerning wood material supplies.

“These are Vietnam’s new wood material suppliers. They even came to Vietnam to seek supply contracts with the firms. In spite of the higher prices, materials from these markets have higher quality and a clearer origin,” Quyen said.

Nguyen Viet Minh, director of Binh Minh Hanh Furniture JSC in the south-central province of Binh Dinh, told Nhan Dan Online that this firm’s export turnover hit US$5.5 million last year – up about 17% against 2015, and about US$3 million in this year’s first four months, up 20% annually.

“We expect the figure will be approximately US$7-7.5 million this year. We will continue to seek more export markets, in addition to our existing markets of Japan and the US, so that we can reach our target of US$10-13 million by 2020,” Minh said.

Currently Minh is working with a number of Japanese and European partners to purchase wood materials.

“They are offering prices 15-20% higher than our existing suppliers, but the quality of their wood materials is better,” he said.

Source: NDO Friday, 2018-05-04