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Overview of China's Timber Market

Zhu Guangqian Timber and Wood Products Distribution

Association Sept. 16th, 2013 · Guangzhou

Outline • I. Chinese demand for timber resources

• II. Chinese Import of Timbers in Jan--Jul of 2013

• III. Chinese Export of Timbers in Jan-Jul of 2013

• IV. Chinese Production and Consumption have Slowed Down in Jan--Jul of 2013

• V. Trend and Views on Timber Market

I. Chinese Timber Market--Resource and Consumption

• Chinese timber resources and consumption all reached 500,000,000 m3 in 2011.

• Log and sawn timber resources: Domestic industrial log reached 4,500,000 m3, and imported log + sawn timber reached 72,880,000 m3.

• Consumption mainly came from 4 industries: Architecture 25%; Paper making 29%; Furniture 18%; Export 17%; and other 11%.

China has 500,000,000 m3 timber resource in 2011

China consumed 500,000,000 m3 timber in 2011

Architecture Papermaking

Furniture

Coal Other Industries

Farmer Use

Export

Imported chips and wood products, 3%

Imported sawn timber, 6% Imported log, 8% Above harvest quota and inventory, 4%

Imported paper, pulp and waste paper, 28%

Domestic commercial log, 16%

Farmer harvest for self-use, 2%

Farmer's firewood, 6%

Wood-based particle board, 27%

Architecture Furniture Papermaking Coal Other Industries Farmer Self-use Export

• Influenced by slowed development of domestic economy and declined international economy since 2012, Chinese timber consumption also slowed down. Because inventory declined last year, import in 2013 increased, but economy does not become better, sales shows nothing outstanding, and wood product export remains sluggish.

• Domestic timber mainly originates from plantation, so diameter is generally small and quality is not very good, which are usually used for papermaking, wood-based panel, pitwood or self-use in agricultural or forest areas, and seldom distributed on market; While large amount of timbers for architectural use, furniture, packaging and wood product, are usually imported from foreign countries and constitute the main body in market distribution.

• Here we mainly analyze imported timbers, which can generally demonstrate the trend of domestic timber market.

I. Chinese Timber Market--Almost Dominated by Imported Timbers

2010 2011 2012

Increase or Decrease in

Contrast with 2011

Increase or Decrease %

I. Log 8089.6 8145.9 8174.9 28.9 0.4%

In which, industrial log 7513.2 7449.6 7494.4 44.7 0.6%

firewood 576.4 696.3 680.5 -15.8 -2.3%

II. Sawn timber 3722.6 4460.3 5568.2 1107.9 24.8%

III. Wood-based panel 15360.8 20919.3 22335.8 1416.5 6.8%

1. Plywood 7139.7 9869.6 10981.2 ？ 1111.5 11.3%

2. Fiber board 4354.5 5562.1 5800.4 238.2 4.3%

In which, MDF 3894.2 4973.4 5022.5 49.0 1.0%

3. Particle board 1264.2 2559.4 2349.6 -209.8 -8.2%

4. Other 2602.4 2928.2 3204.7 276.6 9.4%

In which, joinery 1652.3 2034.2 1867.7 -166.5 -8.2%

I. Chinese Timber Market--Domestic Log, Sawn Timber and Wood-based Panel in 2012

I. Chinese Timber Market--Distribution of Wood-based Furniture Output

2012年木质家具分布

山东26%

广东20%浙江

10%

福建9%

其他15%

北京2%

四川3%

河南3%

江西5%

辽宁7%

• Furniture is an important terminal product in consumption. In 2012, the total output of large-scale enterprises reached 654 million pcs, in which wood furniture accounted for 239 million pcs, increased by 3.6% than the same period of previous year. The total output of Shandong, Guangdong, Zhejiang, Fujian, Liaoning, Jiangxi and Sichuan accounted for 80% of the domestic yield.

Output of Wood-based Furniture in 2012 Beijing Other regions

Shandong

Guangdong

Zhejiang Fujian

Liaoning

Jiangxi

Sichuan

Henan

I. Chinese Timber Market--Layout of Domestic Wood-based Panel and Proportion of Each Type

Types of Wood-based Panel in 2012

Other type Joinery Particle board Fiber board Plywood

Proportion of Domestic Wood-based Panel

Shandong, 29%

Jiangsu, 27%

Guangxi, 10%

Henan, 7%

Hebei, 6%

Anhui, 4%

Fujian, 4%

Guangdong, 4%

Other, 19%

II. Imported Timber

• In Jan-Jul of 2013, log import amounted to USD 515 billion, increased by 18.8%, in which softwood accounted for USD 2.7 billion, increased by 26.7%; hardwood accounted for USD 2.45 billion, increased by 11.1%; sawn timber accounted for USD 3.66 billion, increased by 17.7%, including softwood USD 1.97 billion, increased by 20.5% and hardwood USD 1.7 billion, increased by 14.6%.

• Because imported log and sawn timber in 2012 have experienced negative growth (Log -11% and sawn timber -4%), resulting in lower inventory and lower base data, log and sawn timber imports realized two-digit increase this year, but the total timber import in 2013 only increased by 5% than the same period in 2011.

Type Unit

Import Volume Comparison with

the Same Period

Last Year

Port Price (USD/m3) Compar

ison with the Same Period Last Year

Jan-Jul 2012 Jan-Jul 2013 Jan-Jul 2012 Jan-Jul 2013

Log 10,000 m3 2212.4 2495.7 12.8% 196 206 5.1%

In which, softwood 10,000 m3 1513.5 1774.9 17.3% 141 152 7.8%

Hardwood 10,000 m3 699 720.8 3.1% 314 334 6.4%

Incl. tropical 10,000 m3 539.1 555.4 3.0% 339 365 7.7%

Sawn timber 10,000 m3 1184.4 1308.7 10.5% 263 280 6.5%

In which, softwod 10,000 m3 818.6 912.2 11.4% 199 215 8.0%

Hardwood 10,000 m3 365.9 396.5 8.4% 406 429 5.7%

Incl. tropical 10,000 m3 218.8 240.6 10.0% 391 413 5.6%

Chip 10,000 t 418.4 501.8 19.9% 179 167 -6.7%

II. Imported Timber--Origin of Log

• In Jan-Jul of 2013, log imported from New Zealand exceeded that from Russia for the first time, for which it became the largest log importing country of China.

Jan-Jul, 2013 Jan-Jul, 2012 Data of Increase or Decrease


New Zealand 606.9 450.2 156.7 34.8%

Russia 602 690 -88 -12.8%

U.S.A. 295.1 192.7 102.4 53.1%

Papua New Guinea 161.7 163.2 -1.5 -0.9%

Canada 151.4 140.9 10.5 7.5%

Solomon Islands 110.7 114.5 -3.8 -3.3%

Australia 86.5 74.9 11.6 15.5%

Myanmar 78.6 44.4 34.2 77.0%

Ukraine 62.9 17.9 45 251.4%

Other 339.9 323.7 16.2 5.0%

Total 2495.7 2212.4 283.3 12.8%

Other Australia Solomon Islands Canada PNG USA New Zealand Russia

Origin of Imported Log

II. Imported Timber--Proportion of Softwood, Hardwood and Tropical Wood

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

1

进口原木

70.4%

23.2%

6.4%

非热带阔叶原木

热带阔叶原木

针叶原木

Imported Log

Imported Sawn Timber

Non-tropical hardwood log Tropical hardwood log Softwood log

Non-tropical hardwood log Tropical hardwood log Softwood log

Sawn Softwood Timber

1-7, 2012 1-7, 2013 Increase or Decrease %

Russia 314.7 359.6 14.3%

Canada 376.7 350.7 -6.9%

New Zealand 26.4 29.4 11.4%

USA 45.5 43.3 -4.8%

Chile 26.4 47 78.0%

Europe 19.2 64.2 234.4%

Other 9.7 18 85.6%

Total 818.6 912 11.4% Imported Softwood Timber (Log + Sawn Timber)


Russia 1078.7 1055.6 -2.1%

Canada 675.3 648.6 -4.0%

New Zealand 482.9 634.4 31.4%

USA 242.6 334.6 37.9%

Chile 37.5 66.7 77.9%

Europe 68.6 205.2 199.1%

Other 86.7 111.6 28.7%

Total 2672.3 3056.7 14.4%

II. Imported Timber--Softwood

Softwood Log 1-7, 2012 1-7, 2013 Increase or

Decrease %

Russia 631.8 545 -13.7%

Canada 140.4 150.6 7.3%

New Zealand 449.1 605.7 34.9%

USA 178 273.1 53.4%

Europe 41.3 114 176.0%

Other 72.9 86 18.0%

Total 1513.5 1775 17.3%

• Import of softwood log from Ukraine has experienced a rapid growth in recent years, increased by 13 times than the same period of 2010. Ukraine has a larger forest area, which means a higher potential.

• Swede in North Europe ranks second in terms of sawn timber export due to the better quality. Its previous markets were Europe, North Africa and Japan. Recently, sawn softwood from Swede and Finland began to enter into Chinese market, increased by 7 times in the latest 3 years.

• Chile's radiata pine resource is more than New Zealand's by more than 1 time. On Chinese market, Chile's sawn timber increased by over 3 times in the latest 3 years. We have many options for timber import, so no country can dominate the price.

II. Imported Timber--Ukraine, Chile and North Europe

Imported sawn timber from North Europe Imported log from Ukraine

Imported sawn timber from Chile

II. Imported Timber--Softwood Log Species

Softwood Log Unit 1-7, 2013 1-7, 2012 2007

Volume Proportion % Volume Proportion

% Proportion %

Softwood log, total 10,000 m3 1762 100% 1510 100% 100%

Red pine and pinus sylvestris 10,000 m3 316 18% 302 20% 49%

White pine 10,000 m3 274 16% 233 15% 20%

Larch 10,000 m3 134 8% 185 12% 23%

Radiata pine 10,000 m3 648 37% 476 32% 6%

Other 10,000 m3 390 22% 314 21% 2%

II. Imported Timber--Softwood Log Species

• Log Import in the country from January to July, 2013 has increased by 22% in contrast with the same period of 5 years ago (2008), in which Shandong increased by 7 times, Fujian by 5 times and Shanghai by 3 times.

Main Provinces' or Cities' Log Import in Jan-Jul, 2013

Softwood Log

Hardwood Log Total Red pin and pinus sylvestris White pine Larch Radiata pine Unknown Total

Heilongjiang 28.6 80.82 58.46 167.88 47.73 215.61

Inner Mongolia 225.07 26.69 23.51 5.67 280.94 6.23 287.17

Jiangsu 5.35 86.12 35.85 63 179.78 370.1 384.34 754.44

Shandong 24.35 41.77 6.32 229.17 79.86 381.47 28.28 409.75

Fujian 7.21 9.23 0.05 148.17 15.74 180.4 9.37 189.77

Tianjin 7.21 12.78 0.05 14.16 33.44 67.64 9.47 77.11

Guangdong 1.37 0.74 0 22.38 3.49 27.98 104.8 132.78

Shanghai 3.56 2.32 1.17 135.71 42.98 185.74 42.47 228.21

Total 302.72 260.47 125.41 612.59 360.96 1662.15 632.69 2294.84

II. Imported Timber--Radiata Pine 进口辐射松数量单价

647.9

897902.6

661.2

483.4

208.4134.6

141

128141

131

95

126

117

0

100

200

300

400

500

600

700

800

900

1000

2007年 2008年 2009年 2010年 2011年 2012年 2013年1-7月

80

90

100

110

120

130

140

150

数量

单价

• Influenced by SPF, radiata pine price kept increasing. In Jan-Jul of 2013, import reached 6.479 million m3, which was an increase of 36%, price increased by 12%. In July alone, import increased by 33% and price increased by 13%, resulting in larger inventory of radiata pine, smaller shipment and demurrage at Shandong Port.

Unit Price of Imported Radiata Pine

Volume Unit Price

II. Imported Timber--Radiata Pine

2013年进口辐射松数量（万立方米）

0

20

40

60

80

100

120

140

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

2013年

2012年

2011年

2013年进口辐射松单价（美元/立米）

110115120125130135140145150155160

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月

11月

12月

2013年

2012年

2011年

• Compared with Russian timbers and domestic softwood, radiata pine is higher in price, but lower in cost performance. Due to the high price, its market will be compressed. The price has already deviated from reasonable level, so the upward margin is limited. As the price of North American timbers and SPF decreased and inventory pressure increased, the price trend is similar as the latter half of 2011. Since current price hangs upside down, operation is confronted with certain risk.

Imported Volume of Radiata Pine in 2013 (10,000 m3)

Unit Price of Radiata Pine in 2013

II. Imported Timber--Russian Timber

Encouraged by Russian policy, sawn timber production and export have experienced rapid growths in recent years. Some Chinese, Japanese and Swedish enterprises invested in Russia through purchasing forest lands and opening processing plant, and now they are gradually forming their production capacity and aiming at Chinese market. As the import increased by 3 times in 5 years, Russian sawn timber increased in proportion year by year. It is estimated that Russian sawn timber proportion will keep increasing rapidly on Chinese market.

进口俄罗斯锯材（万立方米）

117159

197

437

607 622

0

100

200

300

400

500

600

700

06年 07年 08年 10年 11年 12年

Import from Russia (Log + Sawn Timber) Sawn Timber Import from Russia (10,000 m3)

Russian sawn timber Russian log

Proportion of Imported Russian Sawn Timber %

II. Imported Timber-Russian Log 俄罗斯原木月度进口数量

60

70

80

90

100

110

120

130

140

150

2011年

2012年

2013年

2011年 111.3 114.4 136.6 122.2 117.3 116.6 121 127.6 118.4 118.6 101 102

2012年 91.73 103.8 116 100.3 92.81 81.77 103.7 88.48 68.76 87.12 83.65 100.3

2013年 80.11 66.46 98.81 97.77 92.62 77 89.13

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

俄罗斯原木月度口岸单价

125

130

135

140

145

150

155

160

2011年

2012年

2013年

2011年 140 141 142 144 155 156 155 154 154 155 155 155

2012年 154 152 153 151 136 134 132 130 131 130 133 133

2013年 135 134 139 140 140 136 135

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

• Due to the high price of SPF, smaller sawn timber processing equipment in the first half year almost doubled in number to process North American hemlock, Russian white pine and pinus sylvestris. Import of Russian white pine has increased by 17.5% than that of the same period last year, which may force SPF price down.

• Russian log tended to decrease in general, together with price remained lower than that in the latest two years. But the white pine log import increased by 17.5% from this January to July, and price increased by 7.1%. Larch import decreased rapidly this year, by 27.8% than that of the same period last year, and price also decreased by 10.8%.

• Russian log continues decreasing and sawn timber's trend upward will remain unchanged. Price slightly increased but with a limited margin to continue the increase.

Monthly Import of Russian Log Monthly Unit Price of Russian Log at Port

II. Imported Timber-Russian Sawn Timber

月度进口俄锯材数量

20

30

40

50

60

70

80

1月

2月

3月

4月

5月

6月

7月

8月

9月

10月

11月

12月

2011年

2012年

2013年

俄罗斯锯材口岸单价

180

190

200

210

220

230

2012年

2013年

2012年 219 223 226 225 210 202 201 201 197 194 193 193

2013年 199 198 200 197 194 190 192

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

• In Jan-Jul this year, sawn softwood imported from Russia reached 3.596 m3, increased by 14.3%

in volume, but decreased by 8.1% in price; while sawn hardwood reached 366,000 m3, decreased

by 17.9% in volume than that of the same period last year, and decreased by 1.5% in price.

Monthly Import of Russian Sawn Timber Unit Price of Russian Sawn Timber at Port

II. Imported Timber--Sawn Softwood Species

• Imported sawn softwood species also changed a lot, with sawn pinus sylvestris proportion decreased, but white pine (mainly SPF) increased rapidly, sawn and became the most important species in Chinese imported sawn timbers, which increased by almost 20 times in 5 years.

1-7, 2013 1-7, 2012


Proportion in 2013 %

Proportion in 2007 %

Sawn softwood 912.2 818.6 11% 100% 100%

Korean pine 267.2 227.7 17% 29% 47%

白松 383.9 355.6 8% 42% 12%

辐射松 78 52.2 49% 9% 16%

其它 183.1 183.1 0% 20% 25% 进口白松锯材数量

61.7

185.7

352.6

33.5

630.5

619.3

0

100

200

300

400

500

600

700

2007年 2008年 2009年 2010年 2011年 2012年

Sawn White Pine Timber Import

II. Imported Timber-Sawn Softwood Species

• In Jan-Jul of 2013, import of sawn timber increased by 3.3 times than that of the same period at 5 years ago, i.e. Jan--Jul of 2008, in which, Jiangsu increased by 12 times, Fujian increased by 5.8 times, and Shandong increased by 6 times. The South-east coastal area is the rapidly-developing place of timber industry.

2013年1-7月主要省市进口锯材数量

1-7, 2013 Total Pinus sylvetris

White pine

Radiata pine

Douglas fir

Other softwood

Sawn hardwood

Sawn timber, thickness ＞6mm 1308.66 267.26 383.91 78.03 19.66 163.41 396.39

Guangdong 246.1 2.82 17.83 18.15 6.26 43.56 157.48

Inner Mongolia 241.7 205.5 21.8 14.4

Jiangsu 146.1 103.2 4.26 3 16.13 19.51

Shanghai 134.4 7.79 44.76 19.94 3.12 11.92 46.87

Zhejiang 101.3 3.77 30.3 3.66 1.15 7.18 55.24

Shandong 89.1 6.47 26.47 9.24 3.77 14.78 28.37

Heilongjiang 86.9 16.39 23.32 24.34 22.85

Tianjin 71.5 52.46 3.94 0.24 3.92 10.94

Fujian 70.1 4.1 26.36 11.63 1.51 9.32 17.18

Liaoning 41.9 3.47 14 3.84 0.13 6.1 14.36

II. Imported Timber--Canadian Sawn Timber

• In the first half year, Canadian sawn softwood

price soared to USD 232 / m3 in June. After July,

the price on foreign market became stable or

decreased, but shipment reduced.

• The high purchase price at the beginning of the

year stimulated and misled the activeness of

supplier, resulting in large amount of ordering

and shipment, and persistently increasing

domestic inventory. According to relevant

information, the domestic SPF inventory at main

ports exceeded 1 million m3 and suffered from

slow sales.

Volume and Unit Price of Imported Canadian Sawn Softwood

VolumUnit p

II. Imported Timber-Canadian Sawn Timber • Since 2009 when Canadian sawn timber entered into Chinese

market on a large scale, the average price was USD 149 only. In this

April, the import price at port increased by 60% to USD 239. The

high price has already led to difficulty in acceptance, changed

market, with customers began to look for replacement, such as

white pine, hemlock, spruce and pinus sylvetris, and rapid increase

in processing facilities in Lanshan. From the begining to the end of

April, domestic SPF price dropped. In May, it kept decreasing by

15%, resulting in production suspension.

• Now the price on Chinese market and overseas supplier's quotation

for SPF were hung upside down.

• House construction rate in USA has increased by a large extent in

2012, and the house market expanded by 28% from 2011 to 2012, to

950,000 in quantity. It is estimated that the house built ready in 2013

may exceed 1 million.

• It is acknowledged that Canadian exported products to America will

be charged with 10% tas since August 1st. In addition, USA

increased house mortgage rate since this August, which may

influence real estate industry. After September, SPF may enter into

Chinese market by a large extent, which may cause the price

fluctuation.

American Wood-frame House and Chinese Import of North-American Sawn Softwood

American wood-frame house

Import of North-American sawn softwood

2013年1-7月阔叶木材（原木+锯材）

美国

12% 俄罗斯

8%

所罗门

9%缅甸

6%泰国

11%

非洲

15%

其他

5%

欧洲

8%

亚洲其他

国家

14%

巴布亚新

几内亚

12%

Hardwood in 1-7, 2013 (Log + Sawn Timber)

1-7, 2012 1-7, 2013

USA 130.1 151.9 16.8%

Russia 121.3 109 -10.1%

PNG 163.2 161.7 -0.9%

Solomon Islands 114.5 110.7 -3.3%

Myanmar 44.4 78.6 77.0%

Thailand 117.4 145.7 24.1%

Other Asian countries 183.5 176.1 -4.0%

Europe 103 104.5 1.5%

Africa 188.9 191.6 1.4%

Other 55.9 67.1 20.0%

Hardwood Log in 1-7, 2013

2013.1-7 2012.1-7

USA 15.7 13.8 14%

Russia 57 58 -2%

PNG 161.7 163.2 -1%

Solomon Islands 110.7 114.5 -3%

Myanmar 78.6 44.4 77%

Other Asian countrties 33.5 43.6 -23%

Europe 68.9 73.7 -7%

Africa 157.8 153 3%

Other 49.9 38.4 30%

Total 733.8 702.6 4%

Sawan Hardwood in 1-7, 2013 (10,000 m3)

1-7, 2013 1-7, 2012

USA 95.9 81.9 17%

Russia 36.6 44.6 -18%

Thailand 102.6 82.7 24%

Other Asian countries 100.4 98.5 2%

Europe 25.1 20.6 22%

Africa 23.8 25.3 -6%

Other 12.1 12.3 -2%

Total 1137.5 744.1 53%

II. Hardwood Hardwood in Jan-Jul, 2013 (Log+Sawn Timber)

Africa Other USA

Russia

Papua New Guinea, 12%

Solomon Islands, 8%

Myanmar, 6%

Thailand Other Asian countries

Europe

II. Imported Timber--Hardwood Species

1-7, 2013 1-7, 2012


Sawn hardwood 396.47 365.85 8.4%

In which, tropical sawn timber 240.63 218.8 10.0%

Teakwood 5.25 3.04 72.7%

Merbau 5.27 3.73 41.3%

Rosewood 4.17 4.37 -4.6%

Other 225.94 207.66 8.8%

Temperate sawn timber 155.84 147.05 6.0%

Oak 51.32 50.38 1.9%

Beech 22.73 17.94 26.7%

Maple 4.03 3.62 11.3%

Cherry wood 2.98 1.65 80.6%

North-American hardwood 28.73 18.06 59.1%

White ash 13.5 9.65 39.9%

Other 32.46 45.75 -29.0%


Hardwood log 733.83 702.46 4.5%

In which, tropical log 555.44 539.1 3.0%

Teakwood 11.66 6.1 91.1%

Okoume 35.24 36.19 -2.6%

Apitong 20.61 9.42 118.8%

Merbau 10.44 4.53 130.5%

Rosewood 62.23 44.3 40.5%

Other 415.26 438.56 -5.3%

Temperate log 178.39 163.36 9.2%

Oak 27.3 25.25 8.1%

Beech 42.55 45.48 -6.4%

Ash 12.46 13.77 -9.5%

North-American hardwood 9.63 7 37.6%

Other 86.45 71.86 20.3%

II. Imported Timber-Temperate Hardwood

• Imported temperate hardwood log (beech and oak) mainly came from Europe, accounting for 56%; while imported temperate sawn hardwood mainly came from USA, accounting for 62%.

Imported non-tropical hardwood log Imported non-tropical sawn hardwood

Europe or Australia Russia USA

Europe or Australia Russia USA

II. Imported Timber--Import Port of Log

2013年1-7月进口原木主要到港地区

山东, 449.4,18%

上海, 196.9,8%

广东, 135.5,5%

天津, 104.8,4%

黑龙江,190.1, 8% 内蒙, 302.5,

12%

江苏, 797,33%

其它, 159.8,6%

福建, 159.7,6%

1-7, 2013 1-7, 2012


Jiangsu 797 684.1 17%

Shandong 449.4 333.9 35%

Inner Mongolia 302.5 357.4 -15%

Heilongjiang 190.1 196.2 -3%

Shanghai 196.9 153.9 28%

Fujian 159.7 135.5 18%

Guangdong 135.5 111.8 21%

Tianjin 104.8 95.3 10%

Other 159.8 144.3 11%

Mian import ports of log in Jan-Jul of 2013

Tianjin

Guangdong

Fujian

Shanghai

Heilongjiang Inner

Mongolia

Other

Jiangsu

Shandong

II. Imported Timber--Import Port of Sawn Timber

2013.1-7进口锯材口岸

上海, 334,

25%

其它, 131.1,

10%天津, 73.6,

6%

黑龙江,

75.6, 6%

内蒙, 263.5,

20%

江苏, 91.8,

7%

山东, 99.2,

8%

广东, 239.9,

18%

1-7, 2013 1-7, 2012


Shanghai 334 302 11%

Inner Mongolia 263.5 251 5%

Guangdong 239.9 181 33%

Shangdong 99.2 77.9 27%

Jiangsu 91.8 119.5 -23%

Heilongjiang 75.6 69.2 9%

Tianjin 73.6 78.6 -6%

Other 131.1 105.2 25%

Import Port of Sawn Timber in Jan-Jul, 2013

Other Tianjin

Heilongjiang

Shanghai

Jiangsu

Shandong Guangdong

Inner Mongolia

II. Imported Timber-Imported Chip

• Due to the large demand from papermaking industry and MDF, import of chips in recent years has been developing rapidly, which increased by 5 times in 5 years and creating very good business opportunity. China is the world's second largest chip importer after Japan.

Volume of Imported Chip (10,000 ton) and Increase Rate (%)

Volume of imported chip Increase rate

Volume of imported chip

Increase rate

III. Export of Wood Products

2012年出口木制品

人造板22%

木家具及木框坐具59%

其它木制品15%木门竹木地板

4%

Wood-based panel

Wood door, bamboo and wood flooring, 4%

Other wood products, 15%

Exported wood products in 2012

Wood furniture and wood-frame seat

Unit Export Volume Increase in

contrast with same period of previous year

Export Value (USD 100 million) Increase in contrast

with same period of previous year 1-7, 2013 1-7, 2012 1-7, 2013 1-7, 2012

Plywood 10,000 m3 586.9 576.1 1.9% 28.66 27.33 4.9%

Wood furniture 10,000 pcs 11068.2 11581.7 -4.4% 67.61 66.26 2.0%

Wood-frame seat 10,000 pcs 4922.6 4933.4 -0.2% 38.21 36.05 6.0%

Bamboo and wood flooring 10,000 ton 23 24.54 -6.3% 3.75 3.99 -6.0%

Wood door 10,000 ton 19.19 17.76 8.1% 3.65 3.42 6.7%

Fiber board 10,000 ton 134.1 150.8 -11.1% 9.02 9.85 -8.4%

Export value USD 10,000 179.08

174.33

2.7%

III. Export of Wood Products • In June, hardwood plywood imported by USA decreased by 7% than that of last month and

dropped to 200,248 m³ in volume, in which 1/3, i.e. 65,377 m³ came from China. In contrast, before anti-dumping and anti-subsidy duty were levied against Chinese hardwood plywood, e.g. in 2012, 2/3 American import of hardwood plywood originated from China.

• EUTR will continue to influence the transformation of Chinese plywood market. European buyer paid more attention on exporters which can provide legality certificate required. European companies would rather maintain long-term cooperative relationship with such suppliers, in order to ensure their products being companied by qualified technical and environmental-friendly certificate. Such a trend was mainly driven by the new demand generated from Construction Product Regulations proposed by EUTR. Since July 1st this year, EU adopted the compulsory requirement of CPR to plywood, specifying the requirement for CE certificate.

• According to Japanese report, kitchen furniture from China to Japan in this June dropped by 37%, and bedroom furniture dropped by 26% and office furniture dropped by 30%.

IV. Jan-Jul of 2013--Consumption Increase Remains Weak

PMI of China's Manufacturing Industry Increase Rate of Fixed Assets Investment %

GDP (Comparison between Same Period of Different Years Increase rate of Industry (%)

IV. Industrial Production Slightly Increased in July, 2013

• According to the Climate Report of Wood Product Manufacturing Industry published by CTWPDA in this July, the industry is now under production expansion, featuring increased production than the previous period, active raw material purchase and same amount of domestic purchase orders as that of last period, so the export trend seems not optimistic; while finished product inventory slightly decreased by a small extent, basically balanced supply and demand in marketplace, slightly increased raw material purchase price and increased raw material inventory in contrast with that of last period. Currently, the most typical problem is timber purchase price remains at a very high level, resulting in higher production cost, weakened export and lower profit.

V. Trend and Views on Timber Market

• China is the world's largest timber market. The rapidly-increased economy in the past years has attracted the world's major timber providers to China. In the future, the market is bound to experience some changes, but its increase rate will be slowed down.

• According Chinese National Think Tank--The Development Research Center of the State Council, GDP increased by 7.6% in the first part of 2013, which obviously slowed down from the rapidly-increasing trend in the past years and showed slowed export increase, decreased consumption, reduced investment into manufacutring industry, difficulty in maintaining high-speed increase of infrastructure investment, dropped increase in real estate investment and intensified difficulty in enterprise operation. Li Wei, the Director of the Research Center, the State Council, believes current situation is more complicated than that of 2008' financial crisis, since the disorder in economic structure and unsustainability of development pattern became increasingly obvious. It is estimated that Chinese economic development will remain slower than before, with the GDP in 2013 remains at 7.5% and will remain at the level in 2014. As for the national macro control, the Government will not stimulate its growth massively and will not emphasize increase, but will attach importance on optimizing and vitalizing inventory.


• Internationally, some developed economies, such as USA, EU and Japan, have started to revitalize, e.g. American GDP in the second quarter was 1.7%, unemployment rate was 7.4%, together with house constructor's and consumer's confidence indexes kept increasing; EU's GDP increased by 0.3% year to year, terminating the shrinking state in the past 6 quarters in a row, and the President of the European Central Bank indicated that EU has gone through the most severe recession period; and Japanese GDP in the second quarter was 2.6%, which was lower than expected level, but it has been maintaining positive increase in 3 quarters in a row. But it is still unclear that how strong the revitalization of developed economies will be and how long can it sustain. The newly emerging economics now have been staying in the bottleneck period, with economic increase remains slow and requires at least 2-3 years of adjustment.


• Considering the above-mentioned trend, Chinese timber market growth will be slowed down, although large-scale demand still exists. The following are some of my views on:

• I. Domestic timber enterprise: 1. shall pay attention to adjust product structure, which is both

market demand and the focus of national policy. Now it is an integrating period, during which small enterprises suffering from poor quality, raw material waste and product homogeneity will be gradually eliminated.


• Some smaller furniture factories poor in quality and lacking of individual characteristics are facing difficulties and also suffered from weak export in recent years. According to relevant report in USA, America intends to revitalize its manufacturing industry, too. In this July, American manufacturing industry's economic activities have witnessed expansive trend for two months in a row, and the overall economic activites have been expanding in 50 months in a row. Also in July, furniture industry and related products' manufacturing industry again became the most rapidly increased industries, which would exert impact on Chinese furniture export. Currently, overall customized furniture is emerging domestically, which deserves relevant enterprises' concern.


• Plywood companies are facing more difficulties. Firstly, most of their products are poor in quality and low in class, which is really wasting timber resource. The formwork of plywood, featuring low price and poor quality, can only be used for 3-5 times, which is left far behind foreign parity product, e.g. the formwork made by Chauman, Finland can be used for 30-50 times, and even above 100 times if working on 400g/m2 peritoneal paper; while film covered playwood and double-faced HD film-covered panel made by Simpson, USA can be used for 30-50 times and even 200 times in system shaping operation. The utilization rate of wood formwork only accountes for 1/10 of foreign rate, resulting in serious waste of timber resource. Secondly, too many plywood manufacturers and too small scale mills are adopting backward technology and equipments. It cannot be precisely calculated how many playwood mills there are in China, but it is estimated at above 5,000. Most of playwood mills are poor in both equipment and mechanization. Manual operation results in difficulty in quality control. Limited by economic strength, technical workforce and management, such enterprises lack of development capacity of new technology and cannot make quality products. Hebei was once one of the 4 largest plywood production areas. There were nearly 3,000 plywood producers in the thriving years, but now the number has shrank to less than 200.

Output (10,000 m3) Plywood mill 10,000

m3/mill

China 10981(6000) 6000 1.8(1)

Finland 160 23 7.0

Canada 200 12 16.7

Indonesia 678 113 6.0

• Chinese plywood industry, initiated with low cost and backward production capacity a dozen years ago, realized a wonder of the largest output in the world. Now the situation has changed, poor production capacity could not meet the new demand, so changes are required. Currently, our plywood exported is characterized by high labor intensity, high raw material consumption, but low added value, so the unit price of exported product never went up a little bit in 5 years (see the figure), while labor price at least doubled in the 5 years, together with raw material and energy prices increased. To export poor quality plywood usually generates very low profit, but consumes large amount of timbers (Every 10 million m3 plywood exported at least consumes 20-25 million m3 log), so it is a product with no future. Therefore, product structure must be changed, quality and added value must be improved.

V. Trend and Views on Timer Market

胶合板出口单价（美元/立米）

473

448

451

453

478

430 440 450 460 470 480 490

2008年

2009年

2010年

2011年

2012年

Increase in 5 years (2008-2012)

Unit price of exported plywood 1.1%

Worker's wage 50%-70%

Raw material price: Poplar 30-40%

Okoume 36.0%

Exchange rate increase 9.4%

Unit Price of Exported Plywood (USD/m3)


Firstly, to develop softwood plywood, since there are abundant softwood resources with high intensity, especially Russian larch, pinus sylvestris, white pine. With the rich resources and proper plywood production technology, the only problem lies on our thinking. Although raw material and technical costs increased slightly, better quality and more times of using formwork, plus potential in establishing a successful brand, will generate better economic returns;

Secondly, to develop solid-wood laminated flooring, pure solid wood flooring is high in price and consequently small in market, due to the limitated output of valuable timbers; laminated flooring is low in class; and solid wood laminated flooring is the mainstream product on marketplace, with its moderate price and stable quality. It is not difficult for a plywood manufacturer to change into a solid wood laminated flooring manufacturer, one of the successful cases is Jiashan of Zhejiang, which was renown as the City of Solid Wood Laminated Flooring;

Thirdly, poplar hardening technique. Currently there are some manufacturers in Henan involving in relevant production of flooring.


• Fourthly, to develop engineering wood-based product, including OSB (oriented strand board), LVL (laminated veneer lumber), PSL (parallel strand lumber), LSL (laminated strand lumber), etc. Currently, China does not produce or produce few above-mentioned products. The raw material used for the products is only small-diameter timbers from plantations, but those products, characterized by equal structure, high intensity, large specification and stable size, meet the requirements of wood-structure building, bridge, furniture and outdoor landscape construction. Small timber for large use, superior timber for inferior product realized efficient utilization of fast-grown timbers and expanded its application, which perfectly suits for Chinese national situation featuring less large-diameter quality timbers and high proportion of plantations. The high added-value of the products may further stimulate active forestation.

Parallel Strand Lumber (PSL)

• Best in structure, suitable as a main component

for house and commercial building structures.

The 610-2440mm pine veneer block is made by

gluing, micro-wave pressing, and can be used

for many purposes nakedly.

Laminated Strand Lumber (LSL)

• LSL is made from long fast-grown poplar chips,

which underwent high temperature, high pressure

and adhesion, into 20m long, 2440 mm wide and

90mm thick lumber, which can be used as pillar,

stud, main beam and lintel after cutting.

Laminated Veneer Lumber (LVL)

• Multiple layers of veneers are parallely piled up according to

their textures and made into 1220mm wide, 90mm thick and

24m long lumber after high temperature, high pressure and

adhesion. Each lumber is of straight line and outstanding

intensity, so it can be used as main beam and lintel.

I-shaped Wood Joist

• A kind of structural

material, which was

adhesived with LVL and

OSB (oriented strand

board), can support large

load without bending or

sinking, with its excellent

structural capacity.


• 2. Pay attention to online business. Large-scale shopping malls as Red Star and Easy Home, have already become chicken rib, of little value or interest. Traditional sales channel is losing its capacity in selling comodities, because consumers' value and behavior, together with life style have tremendously changed. Su Ning now has realized same price on line and off line, and its off-line sales has turned into operation of experience shop. 3. Timber importer and trader shall keep an eye on main trend, instead of blind following others or raising price to stimulate sales, since there have been many enterprises which suffered loss because of the above actions in the first half of year.


• II. Foreign timber manufacturer and trader shall understand the situation of Chinese market, and avoid randomly raising price, e.g. foreign supplier set the price for North-American SPF according to American market price this year, so the different situations resulted in both parties' losses. Timber is renewable resource, instead of scarce strategic material, so its price cannot be dominated by a few countries as iron ore. There are large amount of softwood resources in North America, Russia, North Europe, Chile and New Zealand, allowing their mutual exchange.


• III. Advantages • Although economic growth is slowed down, but Chinese total demand remains

large and has its own advantages: • 1. Urbanization. Stiglitz, an American famous economist, once pointed out, two

major events in the 21st century have influenced the course of human society: The first is the new technological revolution in America and the second is the urbanization in China. Urbanization means the largest potential in domestic need in China, and it expands domestic need through: Firstly, stimulating the investment demand into large-scale construction of infrastructure and housing; Secondly, generating enormous consumptive demand arisen from massive rural population's immigration into cities and change in life style. Every one percentage point of increase in urbanization results in 13 millions of new urban population. Chinese urbanization may be increased, but quality will be improved. Farmer workers being urbanized may stimulate their consuming willingness and purchase capacity.

The Distributors' Sales across Home Furnishing Market in 2012 (Based on 150,000 questionnaires)

Sales Increased

Sales Unchange

d

Sales Decreased

Market of third or fourth tier city 80% 15% 5%

Market of first or second tier city 12% 18% 70%


• 2. Pay attention to Mid and West China, together with third and fourth tier cities. Although investment increase rate of fixed assets decreased this year, Chinese increase rate in Jan-Jul maintained at 20.1%, in which East China accounted for 18.7%, Mid China accounted for 23.5% and West China accounted fro 22.7%. This is a long-term trend.

2012 East China Mid China West China

GDP increase rate % 8.8% 11.3% 12.6%

Investment increase rate % in Jan-Jul of 2013 18.7% 23.5% 22.7%


• 3. Wood-structure buildings, Including light wood structure, heavy wood structure, log cabin wood structure, outdoor recreational furniture, board walk and barrier, experienced rapid development in China in recent years. Wood-structure buildings have many advantages, e.g. energy saving, environmental friendly, anti-earthquake, fast construction, efficiency rate, comfortable and healthy. More than 90% residences are wood-structure buildings. In China, it is just initiated, so quantity is small, but it is still the future trend. In 2000, China has only 5 enterprises dealing with wood-structure building. But in 2010, the number has increased to more than 130. A wood-structure building manufacturer in Suzhou once realized the output value of RMB 100 million yuan in 2010, and achieved approximately RMB 500 million yuan last year.

• Currently, the raw materials used for wood structure building are mainly imported products. The log cabin structure in North China is mainly made from timbers imported from Russia, while light wood structure in South China is mainly made from timbers imported from North America.

• China has 79 billion tons of verified exploitable lime and quarry reserves. If calculated on the basis of current 2.2 billion tons of cement yield, the resources can be exploited for 30 years. But timbers can realize sustainable use if being scientifically managed to keep harvest less than growth. Therefore, timber is bound to be used as main building material for less-floor houses. If being widely used, timber will be significant in energy saving, environmental protection, anti-earthquake and upgrade of Chinese wood-based industrial products.


Conclusion • Influenced by both international and national economy, Chinese timber market

in 2013 witnessed less demand. Manufacturers shall grasp the opportunity to adjust the way of growth and product structure, while importers and exporters shall grasp the opportunity to operate cautiously.

• In the long run, China, as the world's largest market, will encounter a fast development period in the following 20 years. We should be confident in timber industry's future prospect!

Thank you!

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