Stumped – Searching for trends in the global trade of forest products

Global Forest Product Markets

The damage done by the tariff war to U.S. forest product exports to China is pretty clear. In June, Michael Snow, executive director of the American Hardwood Export Council said, “Wood exports to China dropped by $700 million, or 42%. Industries affected included firms that buy logs of hardwoods like walnut, maple and cherry and turn them into boards for furniture and flooring. Before the tariffs, about 1 in 4 of these boards went to China.”

The damage to U.S. forest product exporters is obvious in year-on-year stats. U.S. market share of the China’s forest products imports dropped by 35% from the first quarter of 2018 compared to the same period in 2019. Meanwhile, the U.S. loss has been their competitor’s gain as Canada’s share has risen 12% and Russia’s take 4%.

Russia stands to be one of the bigger beneficiaries of the U.S.-China tiff. According to Seattle-based Wood Resources Quarterly (Hakan Ekstrom), “China imported almost eight million m3 of softwood lumber” in the 2^nd quarter, a new quarterly high.” Russian deliveries reached almost five million, m3, a 39% increase from the 1Q/19 and 15% higher than in the 2Q/18.” In from the same report and Ekstrom noted that the Nordic countries have expanded their shipments to China and now rank behind Canada and Russia as China’s main forest product suppliers.

Of course, this is a key take away from any trade war – one country’s loss is another’s gain. Which is part of the difficulty in finding true “trends” in the turbulence of a tariff war.

For example, China has a well-established ravenous appetite for forest products but that demand is founded on a three-legged stool of domestic construction, domestic demand for lumber-based consumer goods and strong export markets for wood-based finished goods. With growth slowing at home and export markets also stressed by the global economic slowdown, China’s wood stockpiles are up and consequently prices are weak. But is this a “trend” or simply a marketplace aberration?

And then there are reports China’s wood interests have been looking to invest abroad with Russia being a prime target with over 100 Chinese entities investing a total of $2 billion in Russia’s forest industry.

And while the U.S may have lost a market in China, Vietnam’s forest industry may well be taking a cut out of China’s export share.