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1 To our China Bulletin Subscribers: Legal Obligations of PDF Subscribers: Copies or excerpts of PDF (electronic) newsletters may only be made and used for distribution at the mailing address of the subscriber, i.e., unauthorized re-distribution and/or reproduction of parts or all of the PDF versions of our China Bulletin, except for use at the single physical street address of the subscriber, are a violation of our copyright. Electronic copies or excerpts of our China Bulletin that are printed, photocopied, faxed, ed or otherwise duplicated and/or released by the subscriber and sent to other company locations, affiliates, customers, associates or external sources or releases are not permitted and are a violation of our copyright without the written permission of the publisher. Multiple-site PDF subscriptions are available at a substantial discount to the annual subscription rate please contact our office for details. The Publisher International WOOD MARKETS Group Inc. Suite E. Cordova Street, Vancouver, B.C., Canada V6A 0A5 PH: FAX: info@woodmarkets.com WEBSITE: International WOOD MARKETS Group Inc.

2 JULY 2016 Special Report: Russian Lumber Imports & Real Estate Updates 1. According to statistics from China Customs released at the end of May, Russian softwood lumber exports to China were reported at an erroneous 1.55 million m3 in April, 2016, or an increase of 81% from March (853,000 m3). This huge increase was reported in the June China Bulletin and caught the attention of many in the industry. To determine if the China Customs statistics were accurate or not, WOOD MARKETS has conducted a deeper investigation on these April statistics. 2. May data on house prices and retail sales in China, which are two indicators of economic trends, have been released and both show that the economic stimulus measures being undertaken by the government are still driving the economy in the right direction. The modest recovery in China s housing market in the first five months of this year has supported the economy, but the pace of house price increases has started to slow. Full report available to subscribers only China Bulletin: Annual Subscription (12 Issues) US$425 Click HERE to order online 1. China Industry News in Brief New Log Fumigation Facility in Dafeng Port Starts Construction AVIC Forestry Announces New Investment Projects in Russia Log Import in Shatian Port up 482% in First Five Months of This Year Timber Import Volume in Manzhouli Up 17% in first 5 Months China s Softwood Lumber Inventories in the Taicang Port Areas China s Softwood Log Inventories at Ocean Ports 3 2. Special Report: Russian Lumber Import & Real Estate Updates 6 3. China Export & Import Statistics China Exports China Imports China Export & Import Tables China Prices Log Prices Hardwood Lumber Prices Softwood Lumber Prices 25 Mark Your Calendars: Russia & China Industry/Market Events Sept 11-19: Siberia Forest & Industry Tour & Northern China/Russia Border Tour Sept 20, 2016: China Market, Supply Chain & Logistics Conference, Qingdao Sept 21-23, 2016: China Industry & Port Tours This will be WOOD MARKETS' 8th forest and industry tour in Russia, 9th industry and port tour in China, and 10th conference in China. This combination of events was last offered in 2010 and was a real eye-opener back then. The 2016 events will allow attendees to understand the new competitiveness of Russia in export markets, from its devalued ruble and the evolving uncertainty in the China market. Choose one or all of these events to gain excellent insight of what's actually going on and obtain first-hand knowledge of the direction of Russian exports and Chinese imports. For details:

3 1. China Industry News in Brief 1.1 New Log Fumigation Facility in Dafeng Port Starts Construction On June 18, the first phase of the log fumigation facility zone at Dafeng port (located at Yancheng city, Jiangsu province) officially started construction. This facility is the first one with a fully enclosed log fumigation pesticide treatment plant in China. The designed log treatment capacity is 3 million m3 annually, and the real treatment capacity could potentially reach 3.5 million m3 annually. This is the fifth port in China that has a fumigation facility, following installations at Putian Xiuyu, Taicang, Caofeidian, and Changxingdao port in Dalian. 1.2 AVIC Forestry Announces New Investment Projects in Russia It was reported recently that AVIC Forestry Co.,Ltd (a large Chinese state-owned company) will invest in a new sawmill in northern Siberia that will have 200,000 m3 of annual log production capacity by the end of In the same location, the company will invest in another plant to produce various components with 100,000 m3 of annual production capacity by the end of In the meantime, this company will invest in similar mills in Kyshtovka Rayon, in the Tomsk region this will include 140,000 m3 of sawmilling capacity and 70,000 m3 of components production capacity. All the products are to be sold back into China. 1.3 Log Import in Shatian Port up 482% in First Five Months of This Year According to the statistics from Dongguan Customs, Shatian port in Dongguan city imported 285,000 m3 of logs in break bulk valued at 34.9 million USD during the first 5 months of 2016 this is up 482% by volume and 472% by value, respectively, compared with the same period last year. The main species of logs imported include radiata pine, spruce, hemlock and Douglas-fir, mainly from New Zealand and USA. 1.4 Timber Import Volume in Manzhouli Up 17% in first 5 Months According to the statistics from Manzhouli Customs, Manzhouli port (at the Russia-China border) imported 4.4 million m3 or 4.2 billion RMB (650 million USD) of logs and lumber from Russia during the first 5 months of this year this is up 17% by volume and 18% by value, respectively, compared with the same period last year. The log and lumber import value accounted for 59% of the total import value at Manzhouli port. International WOOD MARKETS Group Inc. Page 2

4 1.5 China s Softwood Lumber Inventories in the Taicang Port Areas According to a source of WOOD MARKETS in China, softwood lumber inventories at Taicang port and the surrounding area totaled 741,000 m3 on June 16, a growth of 8% compared with the previous month. The main lumber species at Taicang areas include SPF, European spruce, Russian spruce and red pine lumber. Of total lumber inventory, SPF volumes were 305,050 m3, a decrease of nearly 9% from last month, and representing 41% of all softwood lumber inventories in mid-june. Other lumber species accounted for all of the increase. 1.6 China s Softwood Log Inventories at Ocean Ports According to data supplied by a key WOOD MARKETS contact in China, softwood log inventories at China s main ocean ports totaled 3.45 million m3 at the end of June, a growth of nearly 8% compared with May. Radiata pine logs from New Zealand and Australia increased 5% in May to 2.07 million m3; representing around 60% of the total log inventory at the end of June. North American Douglas-fir and hemlock volumes totaled 1.03 million m3, a growth of 14% from last month. Softwood log inventories from other countries, including Russia, Ukraine, Europe and others, were at 352,000 m3, a very small increase of less than 1% from last month. International WOOD MARKETS Group Inc. Page 3

5 Note: WOOD MARKETS is using the graph format above from our new information source for softwood log inventory at ocean ports Our previous inventory summary did not include sources beyond New Zealand and Australia (radiata pine), USA and Canada (mainly hemlock and Douglas fir) and Russia. The new source includes volume from Other countries, including the Ukraine, Europe, South America and other suppliers. The above graph prior to March 2015 shows inventory of Russian only softwood logs, while the new source starting in April 2015 groups inventory of Russia with all other countries in the same bar. The log inventories at the end of June, compared to the end of May, at some of major ocean ports (excluding Russian land ports) were reported as follows: June May Lanshan: 645,000 m3 vs 563,000 m3 Lianyungang and Ganyu: 242,000 m3 vs 214,000 m3 Taicang & Wanfang & Meijing: 723,000 m3 vs 783,000 m3 Changshu: 352,000 m3 vs 321,000 m3 Tianjin: 203,000 m3 vs 203,000 m3 Qingdao: 247,000 m3 vs 148,000 m3 Subtotal: 2,412,000 m3 vs 2,232,000 m3 International WOOD MARKETS Group Inc. Page 4

6 Mark Your Calendars: Russia & China Industry/Market Events Sept 11-19: Siberia Forest & Industry Tour & Northern China/Russia Border Tour Sept 20, 2016: China Market, Supply Chain & Logistics Conference, Qingdao Sept 21-23, 2016: China Industry & Port Tours (1-Day and 2-Day options) This will be WOOD MARKETS' 8th forest and industry tour in Russia, 9th industry and port tour in China, and 10th conference in China. This combination of events was last offered in 2010 and was a real eye-opener back then. The 2016 events will allow attendees to understand the new competitiveness of Russia in export markets, from its devalued ruble and the evolving uncertainty in the China market and timber harvest. Choose one or all of these events to gain excellent insight of what's actually going on and obtain first-hand knowledge of the direction of Russian exports and Chinese imports. For details: International WOOD MARKETS Group Inc. Page 5

7 2. Special Report: Russian Lumber Import & Real Estate Updates Part 1: China Softwood Lumber Import Update Follow up on May Statistics The following is an analysis outlining an error in China Customs import data on Russian lumber in April, According to the statistics from China Customs released last month at the end of May, Russian softwood lumber exports to China were reported at an erroneous 1.55 million m3 in April, 2016, or a potential increase of 81% from March levels of 853,000 m3. This large increase was reported in the June China Bulletin and this big jump caught the attention of many in the industry. To determine if the China Customs statistics were accurate or not, WOOD MARKETS has conducted a deeper investigation on these April statistics to determine their accuracy. Below are two tables showing the official China Customs data for softwood lumber imports by country during last three months - by volume & value please look at the Russian volumes: TABLE 1 shows the import volume in cubic meters (and value), and TABLE 2 shows the import volume by ton (and value). TABLE 1: China Softwood Lumber Imports by Country (x000 m3 & million USD) March April May Mar/Apr change (%) Country Volume Value Volume Value Volume Value Volume Value Russia , , % 21% Canada % -4% Chile % 0% Finland % 0% USA % -31% Sweden % -17% New Zealand % 17% Germany % 0% Brazil % 50% Argentina % 0% Others % -14% Total 1, , , % 7% Source: CC TABLE 2: China Softwood Lumber Imports by Country (x000 ton & million USD) March April May Mar/Apr change (%) Country Volume Value Volume Value Volume Value Volume Value Russia % 21% Canada % -4% Chile % 0% Finland % 0% USA % -31% Sweden % -17% New Zealand % 17% Germany % 0% Brazil % 50% Argentina % 0% Others % -14% Total 1, , , % 7% Source: CC International WOOD MARKETS Group Inc. Page 6

8 From above two tables, the growth rate on China import volumes from Russia was a more reasonable 23% based on tons as compared with the increase in cubic meter volumes, which was reported at 81%. Looking at more detailed China Customs data on China softwood lumber imports, the big jump in growth based on cubic metres was from red pine lumber. From the two tables below (table 3 and table 4), the import volumes by m3 in Qingdao port in April was extremely high compared with March and May. In comparison, there were almost no changes in the import volumes based on tons and USD between April and May. As a result, we have concluded that the China Custom data providers delivered incorrect Russian volumes in cubic metres for imported red pine lumber at Qingdao port for April, and this caused the big jump in imported softwood lumber volumes from Russia in April as compared to March. If considering the same Russian import values in USD between April and May for red pine, the lumber import volumes in m3 in Qingdao should be adjusted lower to around 12,000 m3 for April. In doing this, the original China Customs data of 521,000 m3 would end up being a whopping 509,000 m3 higher that what should be expected on a value basis. On this basis, WOOD MARKETS has reduced the Russian softwood lumber import volumes in April by 509,000 m3, resulting in a revised and estimated volume for April of 1,037,000 m3 (vs. the erroneous 1,546,000 m3). This adjustment results in a more reasonable import volume that fits International WOOD MARKETS Group Inc. Page 7

9 the growth rate in tons as well - see the revised table below with the estimated April import volumes for Russia. Never-the-less, the Russian softwood lumber import volume of 1,037,000 m3 in April is still a massive number and still represents the highest monthly import volume of any country. More importantly, the May import volume is even higher at 1,184,000 m3 a new monthly record. So, the Russians are still coming, just not at the pace that the earlier customs data suggested. Part II: China Real Estate Development Update May data on house prices and retail sales in China, two indicators of economic trends, have been released by China s National Bureau of Statistics (NBS) and both show that the economic stimulus measures being undertaken by the government are still driving the economy in the right direction even though there has been some cooling in the rate of growth. The modest recovery in China s housing market in the first five months of this year has supported the economy but the pace of house price increases has started to slow. Below are some key summaries on real estate development in China during first five months of this year: 1) The sales of commercial buildings continue to increase During first 5 months of 2016, sales of floor space in commercial buildings in China was 480 million m2, up 33.2% from the same period of last year, but the rate of growth rate was 3.3% lower as compared with first 4 months of In the meantime, the sales value of commercial buildings was 3.7 trillion RMB (570 billion USD) during first 5 months of 2016, up 51% from the same period of last year, and the rate of growth was 5.2% lower as compared with first 4 months of Even though the growth rate of the sales in floor area and the sales value were slower as compared with previous months, they still stayed at favourable levels of growth. International WOOD MARKETS Group Inc. Page 8

10 2) The floor area for sale in commercial building continues to decrease Driven by the high growth in sales for commercial building, there was a destocking of building inventory for sale and this is a positive sign, as the commercial building areas for sale have been reducing every month this year. The commercial building areas for sale was 722 million m2 in May, a decrease of 5.2 million m3 from the end of April. The residential building sales have achieved much better performance than non-residential building sector. 3) The growth rate of investment on real estate development slowing down The total investment in real estate development in the first five months of 2016 was 3.46 trillion RMB, a nominal increase of 7% year-on-year, and the growth rate went down by 0.2% over the first four months. Of this, the investment in residential buildings was 2.3 trillion RMB, up by 6.8%, or 0.4% higher over the first four months of Currently, the destocking of nonresidential building is more difficult to accomplish as compared to residential buildings. 8 China: Growth Rate of Investment in Real Estate Development (%) Source: NBS ) The growth rate of real estate price slowing down I. The Sales Prices of Newly Constructed Commercial Residential Buildings (excluding affordable housing) Among the 70 medium and large-sized cities in China and compared to the previous month, the sales prices of newly constructed commercial residential buildings increased in 60 cities, declined in 4 cities, and 6 cities remained at the same level. In terms of month-on-month price changes, the highest increase was 5.5%, and the lowest was down by 0.5%. Compared with the same month of 2015, the sales prices of newly constructed commercial residential buildings increased in 50 cities, decreased in 18 cities, and 2 cities remained at the International WOOD MARKETS Group Inc. Page 9

11 same level. In terms of year-on-year price changes, the highest increase was 54%, and the lowest was down by 3.2%. II. Sales Prices of Second-Hand Residential Buildings Compared with the previous month in 2016, the sales prices of second-hand residential buildings increased in 49 cities, decreased in 13 cities, and 8 cities remained at the same level. In terms of month-on-month price changes, the highest increase was 6.3%, and the lowest was down by 0.5%. Compared with the same month of 2015, the sales prices of second-hand residential buildings increased in 50 cities, decreased in 18 cities, and 2 cities remained at the same level. In terms of year-on-year price changes, the highest increase was 46.8%; the lowest was down by 6.5%. The table shows details of Investment in Real Estate Development for first five months of 2016: International WOOD MARKETS Group Inc. Page 10

12 3. China Export & Import Statistics 3.1 China Exports International WOOD MARKETS Group Inc. Page 11

13 International WOOD MARKETS Group Inc. Page 12

14 3.2 China Imports International WOOD MARKETS Group Inc. Page 13

15 International WOOD MARKETS Group Inc. Page 14

16 28,000 26,000 24,000 Annual 9. China: Lumber Imports by Country Monthly 3,500 3,250 3,000 x000 m3 / month 22,000 2,750 20,000 2,500 Others 18,000 2,250 Germany 16,000 2,000 Chile x000 m3 / year 14,000 12,000 10,000 1,750 1,500 1,250 Finland Sweden Philippines 8,000 1,000 New Zealand 6, Thailand 4, USA 2, Canada 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M Source: CC Russia 10. China: Softwood Lumber Imports by Country 18,000 Annual 16,000 14,000 Monthly 2,700 2,400 2,100 x000 m3 / month 12,000 1,800 Others x000 m3 / year 10,000 8,000 6,000 1,500 1, New Zealand Chile USA Russia 4, Canada 2, J F M A M J J A S O N D J F M A M J J A S O N D J F M A M 0 Source: CC International WOOD MARKETS Group Inc. Page 15

17 11. China: Lumber Imports by Species 28,000 26,000 24,000 22,000 Annual Monthly 3,500 3,250 3,000 2,750 x000 m3 / month 20,000 18,000 2,500 2,250 Other Temperate H/W Beech x000 m3 / year 16,000 14,000 12,000 10,000 2,000 1,750 1,500 1,250 Oak Tropical Hardwood Other Softwood Douglas Fir Radiata Pine 8,000 1,000 White Spruce 6, Red Pine 4, , J F M A M J J A S O N D J F M A M J J A S O N D J F M A M 0 Source: CC International WOOD MARKETS Group Inc. Page 16

18 3.3 China Export & Import Tables (All units are x000 m3) Softwood Logs 35,707 29,736-17% 13,030 12,736 2% Hardwood Logs 15,703 14,834-6% 6,657 6,530 2% Total Logs 51,410 44,570-13% 19,687 19,266 2% Softwood Lumber 17,638 17,462-1% 8,258 7,066 17% Hardwood Lumber 8,006 9,162 14% 3,925 3,748 5% Total Lumber 25,644 26,624 4% 12,183 10,814 13% Particleboard % % Plywood imports % % Wood Chips (x000 tonnes) 8,854 9,830 11% 4,514 4,122 10% Sulfate (Kraft) Pulp (x000 tonnes) 14,281 15,716 10% 6,806 6,376 7% Source: CC Products China Import Summary - Key Products 2014 (x000 m3) 2015 * WOOD MARKETS Estimate % Change Anuual 2016 (Jan- May 2015 (Jan- May) % Change YTD 1. China Plywood Exports by Country Note: Includes laminate flooring 2. China Door Exports by Country International WOOD MARKETS Group Inc. Page 17

19 3. China Fibreboard Exports by Country 4. China Particleboard Exports by Country 5. China Log Imports by Country International WOOD MARKETS Group Inc. Page 18

20 6. China Hardwood Log Imports by Country 7. China Softwood Log Imports by Country 8. China Log Imports by Species International WOOD MARKETS Group Inc. Page 19

21 9. China Log Imports by Province 10. China Lumber Imports by Country % Change Country Annual Annual J F M A M YTD YTD YTD Russia 7,911 9, ,144 1,305 4,756 3, % Canada 6,633 5, ,348 2, % Thailand 2,230 3, ,554 1, % USA 2,801 2, ,098 1, % Chile % Finland % Sweden % New Zealand % Germany % Philippines % Others 2,973 2, ,110 1, % Total 25,644 26,624 2,213 1,483 2,859 2,773 2,855 12,183 10, % * WOOD MARKETS Estimate 11. China Hardwood Lumber Imports by Country International WOOD MARKETS Group Inc. Page 20

22 12. China Softwood Lumber Imports by Country % Change Country Annual Annual J F M A M YTD YTD YTD Russia 7,210 8, *1,037 1,184 4,304 3, % Canada 6,566 5, ,316 2, % Chile % Finland % USA % Sweden % New Zealand % Germany % Brazil % Argentina % Others % Total 17,638 17,462 1,496 1,023 1,785 1,919 2,035 8,258 7, % * WOOD MARKETS Estimate 13. China Lumber Imports by Species % Change Species Annual Annual J F M A M YTD YTD YTD White Spruce 7,411 7, ,330 3, % Red Pine 5,330 5, ,965 2, % Radiata Pine 1,383 1, % Douglas Fir % Other Softwood 3,156 2, ,432 1, % Tropical Hardwood % Oak 1,047 1, % Beech % Ash % Other Temperate H/W 5,633 6, ,806 2, % Total 25,644 26,624 2,213 1,483 2,859 2,773 2,855 12,183 10, % * WOOD MARKETS Estimate 14. China Sulfate (Kraft) Wood Pulp Imports by Country Note: the units above are x000 tonnes International WOOD MARKETS Group Inc. Page 21

23 4. China Prices 4.1 Log Prices *Note: Wholesale Market Prices below are the CIF delivered China port cost and include VAT (17% for lumber, or 13% for logs), documentation fees, local transportation fees, profit, etc. Note: some Wholesale Market Prices are no longer available and some items have been dropped. Disclaimer: IWMG does not take responsibility for the accuracy of the source for this information; It is intended as general information for the reader. June 2016 Softwood log price CFR China port USD/m3 1 mo. Change US$/m3 Ukraine red pine, 20-25cm (35%) and 26cm+ (65%) $ Russian Larch log, 22-30cm $ Hemlock/Douglas fir log, mixed grade, debarked (28-30c $ New Zealand Radiata pine log, A grade $ Source: Importer in Shandong province, China Note: US $/mbf scribner conversion at 6.5 to US$/m3 International WOOD MARKETS Group Inc. Page 22

24 $170 $160 China: NZ Radiata Pine Logs in Wholesale Markets - Shanghai Annual Monthly $150 USD/m3 $140 $130 $120 $110 Radiata Pine, Middle A Radiata Pine, Small A $100 $90 $80 JF MAMJ JASOND JF MAMJ JASOND JF MAMJ Source: Timber Markets in China; Note: * = YTD June Wholesale Market Price* Imported log from New Zealand (3.9 Average 1 mo. Change RMB/m3 metres long) in Shanghai RMB/m3 US$/m3 US$/m3 Radiata pine, Middle A (>30cm ) $ Radiata pine, Small A (20-30cm) $ Radiata pine, K (>26cm) $ Souce: Timber Market in Shanghai June Wholesale Market Price* Softwood log price in Manzhouli - Average 1 mo. Change RMB/m3 China/Russia border RMB/m3 US$/m3 US$/m3 Russian Larch, 28cm, 6 m, Irkutsk origin $ Russian Larch, 29cm, 6 m, Krasnoyarsk origin $ Russian Red Pine, 24cm, 4 m, Bratsk origin $ Source: Wholesale markets in Manzhouli, China International WOOD MARKETS Group Inc. Page 23

25 4.2 Hardwood Lumber Prices China: Hardwood Lumber Prices in Wholesale Markets US$ / m3 $1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 $850 $800 $750 $700 $650 $600 $550 $500 $450 Annual Monthly J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ White Oak, #1 Com, 1" Red Oak, #1 Com, 1" Beech - Romania, Grade A Red Oak, FAS, I" Source: CC; Note: * = YTD June Wholesale Market Price* Imported Hardwood Lumber in Shangh RMB/m3 Average 1 mo. Change RMB/m3 US$/m3 US$/m3 Red Beech from Eastern Europe, Grade A 4,100-4,700 4,400 $ Red Oak, FAS, 2-inch, US 7,800-8,800 8,300 $ 1,277 - Red Oak, FAS, 1-inch, US 5,400-6,500 5,950 $ Red Oak, COM 1, 2-inch, US 5,000-6,500 5,750 $ Red Oak, COM 1, 1-inch, US 4,200-5,000 4,600 $ White Oak, FAS, 2-inch, US 9,800-12,000 10,900 $ 1,677 - White Oak, COM 1, 1-inch, US 4,500-5,800 5,150 $ Cherry, FAS, 2-inch, US 8,000-10,200 9,100 $ 1, Maple, FAS, 2-inch, US 9,800-10,500 10,150 $ 1,562 - Black Walnut, FAS, 2-inch, US 14,200-17,500 15,850 $ 2, Souce: Timber Market in Shanghai International WOOD MARKETS Group Inc. Page 24

26 4.3 Softwood Lumber Prices Late June CIF Taicang (Shanghai) Softwood Lumber Prices in China Major Ports US$/m3 1 mo. Change CIF China US$/m3 SPF lumber, S4S, KD, 2X4, Economy grade (#4), $ SPF lumber, S4S, KD, 2X4, Utility grade (#3) $ SPF lumber, S4S, KD, 2X4, #2 grade $ SPF lumber, S4S, KD, 2X6, Economy grade (#4), $ SPF lumber, S4S, KD, 2X6, Utility grade (#3) $ SPF lumber, S4S, KD, 2X6, #2 grade $ Hemlock lumber, 40x90 metric, rough, green, utility & better $165-5 Source: Importer in Shanghai International WOOD MARKETS Group Inc. Page 25

27 CHINA BULLETIN Published by International WOOD MARKETS Group Inc., Vancouver, B.C. Canada Publisher: Russell Taylor, President; China Office Manager: Jane Guo Annual Subscription (12 issues per year): US$425 (PDF copy by ). To order an annual subscription, please contact WOOD MARKETS at: PH: FAX: WEBSITE: where you can order online at our Shopping Cart. International WOOD MARKETS Group Inc. International WOOD MARKETS Group Inc. Page 26