China’s unquenchable demand for forest products has buoyed the market, even during this economic downturn. While the Chinese economy has slowed, the medium term prospects remain positive for increased imports of wood products by China. By George Lauriat, AJOT During the last twenty years China has become the world’s largest importer of forest products and even with dampened demand is the prime market mover, the bringer of life to an otherwise moribund sector. China’s State Forestry Administration said that forest products’ import and export trade value hit US$116 billion in 2011 up 24% from 2010. But it’s no secret that despite the country’s enormous size, China is poor in forests, and Beijing’s system of logging quota limits the supply of domestic timber. Equally, China is the world’s largest processor of wood products, sometimes referred to as the world’s “woodshop” principally designed for the export market. However, until the recent economic slowdown, domestic demand – fueled by the housing boom in coastal China – has also contributed to the rise of imported forest products. China’s need for wood products is right across the board: recycled newsprint, pulp, chips, lumber and logs are all in high demand. The recycled print is used for China’s manufacturer of paper. China’s reputed to be the largest manufacturer and consumer of paper in the world, and recycled paper is the largest US box export to China. Logging In Logs are in particularly high demand in China, as they provide the raw material for the flooring and furniture manufacturing, the nation’s key wood product related exports. China accounts for around 30% of the world’s total log exports and more significantly, around half of the tropical wood exports. In fact China’s log imports exceed the logs imports of the next four countries combined (India, Japan, Austria and South Korea) at roughly 30 million cu/m. The sources of the raw log imports have varied over the years. In 2011 Canada became China’s largest source of lumber, eclipsing Russia. Canada shipped 6.8 million cu/m of both hardwoods and softwoods to China (according to International Wood Markets). This is a massive increase in exports, as Canada shipped only 331,000 cu/m of lumber to China in 2006. The main reason that Canada vaulted into the top spot in the China trade was the collapse of the US housing market in 2005. Traditionally, Canadian lumber has been exported to the US for the building and construction industry. However, with the collapse of housing starts in the US, lumber prices plummeted. When the US housing market recovers is a million board feet question. Even with the huge increase in China exports, the US still accounts for 63% of Canada’s lumber exports. Canada’s export of logs doesn’t come free of debate. The export of raw logs is a concern, as processing in China is tantamount to the exporting of the jobs themselves. The NDP (New Democratic Party) would like to see an export tariff put on log exports to encourage processing in Canada. However, the Chinese importers are for the moment paying considerably more than the local mills for raw logs, so the benefit of an export tariff might well go to Russian producers rather than local mills. For now, China is the key market – Canada exported 1.45 cu/m of softwood in the first quarter, representing about 47% of the softwood market in China, with Russia a distant second at a 35% share. (The US has been around 8% but with the lifting of bans in Virginia and South Carolina this could increase.) In the case of tropical woods, Malaysia accounts for around 48% of China’s imports (coming from the states of Sabah and Sarawak, located on the island of Borneo/Kalimantan). A majority remainder of tropical wood is imported from Africa, New Zealand, Papua New Guinea and Indonesia. Indonesia lumber exports are especially problematical. Officials in Indonesia have long alleged that much of the country’s timber is exported illegally to Malaysia and China and then re-exported to other countries (EU nations were c