Analysis of the 2024 Wood Market Situation
The Chinese timber market seems to be experiencing a sustained decline. In the past, with the continuous growth of real estate construction area, relying on real estate and land finance, infrastructure projects, and strong export trade, timber import traders can easily increase their profit margins by increasing credit leverage. Due to factors such as the international situation and rising shipping costs, the profit margin for exports continues to shrink.
Will the timber market continue to shrink in the future? Next, we will explain the impact on logs and boards from the perspectives of real estate market demand, import and export situation, and shipping.
The new construction area and construction area of real estate have both declined to varying degrees, and downstream demand may further shrink in the future. According to data from the National Bureau of Statistics, the newly started construction area of real estate has been declining year-on-year since July 2021. Since then, it has maintained a downward trend. The decline in May 2024 has increased compared to the same period last year. The new construction data of real estate has been declining year-on-year for three consecutive years, and the incremental demand in the market continues to decrease. The downstream demand for wood is highly correlated with land utilization. Therefore, changes in real estate related data will greatly affect the actual demand for wood.
The inventory of the timber market is at a historical low, and the shipment volume has also decreased. However, due to downstream demand, there may be structural differences in the subsequent demand recovery. Inventory is at a historical low and prices have not rebounded as expected. According to the latest data from Qianlimu, the inventory of major ports in China is 2.43 million cubic meters, which is lower than the average inventory of 2.6 million cubic meters in the past two years. Inventory is at a historical low, but prices have not rebounded as expected.
According to the data, there were a total of 15 log ships departing from New Zealand from June 11th to 23rd. During the same period last month, there were 19 ships departing from New Zealand from June 11th to 23rd, of which about 6 went to Lanshan Port and 5 went to the Yangtze River Delta. The price in the Yangtze River Delta region remained the same as last week, while the price in Shandong region slightly decreased. It is understood that most processing factories in Shandong have poor orders. Although the shipment volume in Shandong region has increased, it is mainly composed of laminated timber and radial pine A, and the demand for furniture materials is stronger than that for building wood direction. The shipment volume in the Yangtze River Delta region decreased by 12.3% year-on-year, while the shipment volume in the Lanshan region increased by 14.9% year-on-year. Due to the traditional rainy season, shipments in the Yangtze River Delta have been affected to a certain extent.
The domestic and international prices in the sheet metal market are inverted, inventory continues to decline, and some available material specifications have decreased. As inventory continues to decline, there is a certain amount of speculation space around the reduction of optional specifications in inventory.
After March, the inventory in the sheet metal market entered the active destocking stage, and there are structural differences in the recovery of downstream demand. Since the beginning of this year, the world economy has continued to move towards a 'soft landing'. The support policies for the real estate industry continue to emerge, and the Chinese real estate market is gradually shifting from a risk mitigation stage to a sales recovery stage. In the first quarter of 2024, the inventory of Taicang board continued to rise, but the prices of mainstream material specifications in the board market continued to decline. The Chinese sheet metal market is currently in a relatively fragile balance.
In the first quarter of 2024, the inventory of Taicang sheet metal rapidly increased, reaching nearly 1.4 million cubic meters by the end of March 2024. Since then, the Taicang sheet metal market has entered an active destocking stage. After mid to late May, the domestic sheet metal market gradually became flat, and after entering June, the market became even more sluggish.
The daily average outbound volume of Taicang market decreased from a high of 23900 cubic meters per day in mid May to 15300 cubic meters per day at the end of June, a decrease of about 8600 cubic meters per day. During the same period, the spot market prices remained weak, and the transaction prices of some material brands fell: currently, the SF grade price of spruce has dropped to the range of 1850-1950, and traders who are eager to ship may still ship at prices lower than the market average.
In terms of Pinus sylvestris var. mongolica, although some traders have increased their quotes by 50-100 since the second half of June, the actual transaction price has not significantly increased, and some specifications have even slightly decreased. From the actual effect, the downstream acceptance of this price increase is not high. At the current market price, spruce has shown a relatively obvious inversion, while camphor pine is also hovering around the cost line. The overall market situation is not optimistic, so many traders in June held a pessimistic attitude towards the future market and became more cautious about receiving goods.
The real estate construction area from January to May 2024 decreased by more than 10% year-on-year, and it is expected that the demand for construction materials will further decline throughout the year; According to customs statistics, the export value of furniture and its spare parts from January to May 2024 increased by 16.6% year-on-year. Stimulated by the rise in shipping costs, some subsequent orders were fulfilled in advance. It is expected that the demand for furniture materials will increase in July and August, but with the arrival of the off-season for consumption, the demand may further decline; The total export value from January to May 2024 increased by 2.7% year-on-year, and it is expected that with the arrival of the peak trade season, the demand for packaging materials will also increase. Overall, although the Taicang board market still faces a situation of oversupply, with the gradual release of real estate risks and the arrival of the traditional peak consumption season, there may be structural differences in downstream demand for the board market.
According to data from Qianlimu, the mainstream sheet prices in the Taicang market have been continuously declining from the beginning of the year to mid June. At present, prices and inventory have both decreased. In addition, domestic and international prices are inverted, and due to a negative attitude towards the subsequent recovery of the Chinese market, it is expected that the order volume of traders will decrease in the future.
