Log exports to China will slow, expert says
The red hot Chinese demand for U.S. timber is beginning to cool due to overbuilding, according to a forest economist.
“While we don’t expect a collapse in log exports, we expect exports to slow in the next five years,” said Rocky Goodnow, an executive at Forest Economic Advisors.
Chinese housing starts are outpacing sales, particularly in third- and fourth-tier cities that have made vast investments in building, Goodnow said at the recent American Forest Resource Council annual conference.
Exports to China boosted U.S. log prices during a time when demand from the domestic housing industry was lagging, he said.
As the U.S. housing industry begins to recover, sawmills are faced with high log prices and limited supplies due to competition with exports to China, Goodnow said.
This phenomenon is especially apparent on the West Coast, which has the highest log prices in North America due to its proximity to Asian markets, he said.
As a result, some sawmills have bridled their production increases or continued to process logs on a reduced scale, said Goodnow.
Sawmills should become more competitive as export pressure eases, he said.
At this point, U.S. housing starts are increasing but they remain below the rock bottom levels seen in previous recessions, he said.
The industry probably won’t see a strong growth in demand for lumber until 2016-2017, as more young people form new households, Goodnow said.
“They need jobs to move out of the basement,” he said. “The problem with that is it’s not going to happen overnight.”
Meanwhile, several factors will continue to drive Chinese demand for U.S. logs, though at a lower level, Goodnow said.
Chinese builders have developed a preference for the durable Douglas fir logs, which they use for concrete formwork, he said.
They can reuse the wood five or six times, compared to two or three times for Radiata pine from New Zealand, Goodnow said.
Logging levels in New Zealand are also approaching their limit as far as sustainable harvest, which will hinder exports from that country in the future, he said.