Russ Taylor travelled in Europe and China in October to obtain a first-hand view of market conditions.
My personal view is that the real situation is probably worse that what is being reported. European demand will be about 11% lower in 2023 vs. 2022 and lower again in 2024. China’s consumption levels are completely stalled from a construction market in chaos. Consequently, it is going to take until some time next year for a recovery to occur. …Overall consumer sentiment in China is at a 12-month low as there continue to be lingering concerns over the future of the Chinese construction market. This has been not only a key driver of the economy (up to 24% of GDP but now closer to 19%), but a key driver in the wealth of Chinese citizens. With the construction industry awash in massive debts and no clear path ahead, this is having a negative impact on end users’ demand for imported logs and low-grade lumber for use in construction.
Inventories of logs and lumber at ocean ports and distribution yards are very low in China, especially when compared to previous years. …Most importers in China are worried about what happens after Chinese New Year in 2024. They remember very clearly what happened in 2023, as everyone thought there would be rising demand and higher prices after the COVID lockdowns were removed. The opposite occurred, and many overbought high-priced lumber in all grades in first quarter 2023 and have been licking their wounds ever since. …If there are more shocks to consumer confidence, then all bets are off for any increases in imported logs or lumber or prices until well after Chinese New Year in 2024. …This all means that lumber exporters to China should be also careful on their shipment volumes, as their future business in China could be negatively impacted if prices decline from weaker demand and/or there are excessive inventories after Chinese New Year.