Importation of softwood logs and lumber to China has increased continuously over the past 15 years, and in 2011 the country was the largest importer of softwood lumber and logs in the world, WRQ notes. Total import value equaled almost $8 billion last year, which was an increase of 57% from 2010, and up from only $70 million 15 years ago. Annual growth during the past five years has been almost 30%, and during the past 15 years, the CAGR has been as high as 36%.
Imports of softwood lumber have increased faster than imports of softwood logs in the past few years, but log imports still constitute a higher share of the total import value of softwood products. After having increased for seven consecutive quarters, the importation of softwood logs and lumber fell for the first time in the fourth quarter last year because of reduced domestic demand and high inventories at many of the country's ports. The decline was 14% from the third quarter, but the total import value was still higher than the fourth quarter of 2010.
By volume, importation of softwood log and softwood lumber to China fell 10% in the fourth quarter compared with the previous quarter. Importation of logs and lumber from Russia decreased the most, while lumber from New Zealand and logs from Canada actually increased slightly during the fourth quarter.
Much of the increased import demand for softwood raw-material has been, and continues to be, driven by the fast expansion in the house construction sector combined with the fact the China lacks domestic forest resources to meet the growing demand for most forest products.
A tightening monetary policy with a restricted money supply resulted in reduced activities in the construction sector in the second half of 2011. It has also been reported that there were overstocked inventories of real estate (more than 20 months of unsold inventory in Beijing and Shanghai), and that housing transaction volumes in many big cities fell by more than 50% in the fourth quarter. Societe Generale reported that housing starts were down 25% in December compared with the same month in 2010.
The housing market in China likely will continue facing headwinds during the first half of 2012 unless the Chinese government steps in to ease the country's monetary policy. As a consequence, the prospects for log and lumber imports will be faced with uncertainty short-term, but will propbably continue to trend upward long-term.
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