Impact of Covid 19 on timber trade

7.05.2020
News

COVID 19

For information on the progress of the spread and the disease situation: https://www.worldometers.info/coronavirus/ We bring you here, and will continue to do so in the coming weeks, the information provided by our members and partners regarding the tropical timber market and the activities of companies in Europe, Africa and Asia.

INTERNATIONAL

The survey conducted by ITTO’s MIS-Market Information Service correspondents in Brazil, India, Indonesia, Myanmar and Viet Nam is ongoing. See MIS Tropical Timber Market Report 24 on the Tropical Timber Market as at 30 April 2020[

REPUBLIC OF CONGO

The state of health emergency will end on 10/05/2020. At the same time as announcing the extension of the confinement until 8 May, the Head of State announced that the State is making a contribution of FCFA 50 billion to the National Solidarity Fund and is also considering helping companies in difficulty. In the same line, the Head of State invited financial operators to propose as much as possible new credit facilities, with or without the State guarantee, to enable enterprises to reconstitute their cash flow as soon as possible. A postponement of the payment of taxes and duties was also observed in the companies in order to relieve the forestry companies that are experiencing a drop in activity.

“To support private companies affected by the effects of Covid-19, the Congolese government intends to reorganize the fiscal and social obligations of companies, many of which have stopped their activities since the state of health emergency declared by the Head of State came into force.” A rescheduling of loans to companies is currently being negotiated by the government.

A gradual deconfinement plan is envisaged by the Government from 16 May in the event that the preventive measures are effective.

DRC

Following the full containment decreed by the Governor of the city of Kinshasa, there is a temporary cessation of activities in the private sector. As a result, private forestry sector companies are in a legal situation of suspension of contracts for their staff in cases of force majeure, in accordance with Article 57, point 8 of the Labour Code.

No new measures have been taken by the Authority in favour of the companies to date.

NEW ZEALAND

According to the GWMI publication on April 28, 2020 « First shipments of New Zealand’s radiata pine logs to China expected in mid-May ». 10 to 15 ships are expected to arrive to Chinese ports compared to an average of 45-50/month last year.

After almost a month of strict lockdown, forest industry companies are gradually restarting their activities. At the end of April, logging and shipping of New Zealand’s log should in particular begin to pick up, with a return to normal estimated by the end of May/beginning of June.

CHINA

According to GWMI’s publication on May 4 « China’s log imports in the first two months of 2020 totalled 7.73 million cubic metres valued at US$1,104 million, a year on year decline of 9% in volume and 27% in value. »

Of the total log imports:

  • Softwood log imports fell by 7%, corresponding to 71% of total log imports.
  • Hardwood log import decreased by 15%, corresponding to 29% of total log imports.
  • Hardwood log imports, tropical log imports represent 1.30 million m3 with a value of $3.25 million, a decrease of 26% in volume and 37% in value compared to the same period in 2019.

Almost 2 months after the end of containment in China, demand for imported wood is gradually recovering in China. However, the global spread of the epidemic as well as the measures put in place by different countries, particularly in the producing countries (including the countries of Congo Basin) , which are the source of wood imports into China, are currently affecting the production and transport of wood. Chinese wood-processing factories are currently in a state of panic due to the shortage of imported wood caused by the pandemic.

« 80% of China’ wood processing industry depends on imports. […] The timber harvesting exports of the producing countries are generally affected and expect to impact Chinese imports in the second quarter of the year. »

According to our correspondent, the overall situation for the population is as follow:

  1. Business trip within China is now allowed, with the obligation to wear a mask and to make temperature test at airport and railway station. 
  2. Parks have reopened and tourism also began to increase during the 5-day public holiday. 
  3. People start to have meals in restaurant and consumption begin to increase too.
  4. Building construction has already began to operate.

As for timber industry, in April, the imported sale prices raised up a lot. Due to lockdown in timber exporting countries, some traders got panic and began to stock up. Actually, the end consumption hasn’t fully recovered in China, which is the big problems facing by timber industry. For example, there are few buyers to go shopping in home stores. Residence decoration hasn’t fully recovered in big cities, because the controlling in some communities are still restrict.  So, now the sales prices return back. 

 Due to the workplace disruptions, the workers are enough. Some service industries couldn’t operate now, and some farmers couldn’t find job in city and go back to village.

The production has recovered 70-80% as normal. Due to end consumption being not fully recovered, factory store is high.

In order to operate their production lines, the hardwood inventory is enough. There are more than 2 million m3 inventory in Zhangjiagang and Jingjiang, including both log and lumber. Softwood inventory is enough too, and the total inventory decreased a little. Chinese importers already start to purchase from international timber suppliers.

The main difficulties raised today concern the slow down in imports due to the lack of containers and shipping.

As regards the domestic market, demand has not yet returned to normal as people remain cautious against the virus. Therefore, there are no longer the same festivities as before in the big cities. However, in the cantons, everything has recovered as before.