The coronavirus outbreak that originated from China has now infected more than 80,000 people globally and is currently spreading in Europe and the Middle East tumbling markets across the world. As the virus advances throughout the world, wood trade in and with China is at the moment disrupted and suffering delays.
Production in China is largely paralyzed due to the government measures to curb the virus. In many Chinese ports, work is jammed due to the lack of log yard space following the flood of orders after the extended Chinese New Year.
China: Activity partially resumes, with many difficulties
Chinese companies interviewed by Fordaq complained that either they are not allowed to start production until government approval, as some provinces are still in lock down, either they resumed production but are not able to fulfill orders for numerous reasons.
An importer of raw materials and exporter of finished products to the US, mostly flooring, has not been able to start production or deliver stocks. A furniture producer which mainly exports to North America, and another Chinese global supplier of furniture interviewed, have all production lines stopped until March, when they expect the government approval.
A Chinese importer of logs complains that its stocks haven't received custom clearance and warehouses are only working partially. Many others complain that even if they've resumed production, they're employees come from different provinces of China, affected by the lock down, where they are stuck and not able to return to work.
European wood companies face delays and rising freight costs
In Europe, companies from the wood industry complain about delays in shipments to China and fear about hikes in prices of ocean freights. Fordaq has learned from discussions with both European logs and lumber exporters that even if the Chinese government has partially allowed the resumption of activities, there are still many issues: factories that have restarted activity have other services restricted, such as the drivers, which are not allowed to travel all over China.
The Chinese customs are at the moment understaffed, due to the travel ban, and containers are blocked. Moreover, shipping companies announced a freight increase in March and another one is expected in April.
Some log exporting companies in Europe complained that current orders by Chinese customers are cancelled because of the delays in wood treatments and shipping, which means that the Chinese clients recover the logs only in April.
Importers of finished products from China fear of a psychosis, a suspicion about buying Chinese products which is connected with the spread of the coronavirus in Europe. Nearly all the companies interviewed complained about delays in shipments, although still a progress after the cessation during the Chinese New Year and one or two weeks after.
Things seem to start again slowly, however it seems that at the moment there is too little ship space and the prices will increase. One exporter said that the shipping costs will increase to 400-500 US$ from Hamburg-Rotterdam-China, which will be difficult especially for exporter of logs with this hike in shipping costs.
Vietnam's forestry products exports hit by the coronavirus outbreak
According to the Vietnamese statistics office, Vietnam’s first quarter 2020 exports could be down around 20% from the same period last year as trade will be disrupted by the coronavirus epidemic. The decline in exports is expected to affect a range forestry products. In January foreign trade was down almost 13% and exports dropped almost 16% year on year. In response measures to support exports as a result of the suspension of cross-border trade with China are being considered. The Director General of the Foreign Trade Agency in the Ministry of Industry said Vietnam could see a loss of around US$200-300 million in export revenue from declines in agricultural, forestry and fisheries exports.
According to Vietnam Timber and Forest Product Association (VIFORES), there are currently 867 foreign enterprises in the wood processing sector in Vietnam of which 161 are Chinese companies processing and exporting wood products from Vietnam. Around 20% of these companies are in the services and distribution isectors.
Due to current coronavirus outbreak Chinese businessmen and workers are not permitted to enter Vietnam and this is seriously affecting business operations of the Chinese enterprises as well as domestic companies providing services.
On the other hand, the coronavirus only accelerated the transfer by US importers of their sourcing to Vietnam. Vietnam factories focused on exports to the US are working at full capacity to fulfil orders and in many cases increasing capacity.
Because of the coronavirus many timber sector events such as VIFA Expo, VIFA GU and the Hanoi Wood 2020 scheduled for the first half of 2020 have to be postponed.
New Zealand exporter of logs face blocked Chinese ports
For China's main source of logs, New Zealand, the lack of space in Chinese ports is bringing a virtual halt in the country's log exports to China. As the New Zealand's Forest Owners Association says precautions in China against coronavirus have resulted in almost no offtake of logs in China for processing and exporters understand that the remaining log yard space at most ports near processing centres is quickly disappearing.
The Association President, Peter Weir says '' [New Zealand] exporters had hoped that business would return to normal after the extended Lunar New Year holiday finished in China two weeks ago, but that hasn't happened, and many Chinese sawmills are yet to get back to work''.
Moreover, the bark beetle infestation in Europe has resulted in a boom of cheap European log exports to China, thus competing with the radiata pine logs from New Zealand. NZ's exporters complain that except China they have no other destinations for their logs, while domestic sawmills only absorb about 40% of the log production.
Even though the situation has somewhat changed in China in the past two weeks, meaning that from a total lock down, the activity has partially resumed, there are still many delays in shipping, the ports are overwhelmed and companies that resumed activities are having a lot of problems in resuming production. As the coronavirus has now stepped in Europe and will probably spread in other parts of the world, at the moment it is nearly impossible the forecast the potential consequences for the global wood industry, which can be unprecedented.