China removes tariffs on wood products from LDCs

According to the office of Customs Tariff Commission of the State Council, China had decided to remove tariffs on 4,762 commodities imported from 33 of the world’s Least Developed Countries (LDCs). Commodities with zero tariffs include wood products. The zero tariff treatment came into effect on 1 July 2010.

The countries involved are 26 African countries and 7 other countries, including Ethiopia, Benin, Burundi, Equatorial Guinea, Maldives, Nepal and Bangladesh.

For some time, China has not been imposing tariffs on imports of logs, sawnwood, fuelwood, wood chips, paper pulp and waste paper from all countries. However, tariffs are levied on plywood (15%), paper products (20%) and furniture (22%). These tariff regulations were applied to all countries, before the zero treatment came into effect.

Since 2001, China has imposed zero tariff for 41 of the world's LDCs.

Buoyant timber market in Beijing
The stable development of the real estate market this year has brought improved timber sales in Beijing and its surrounding areas. Some trends in the timber market are noted:

• demand for construction timber is strong: both supply and sales of logs are flourishing;
• the main traded log species are China’s Northeast conifers, Scotch pine from Russia and radiate pine from New Zealand and Australia;
• demand for industrial hardwood is growing and prices are rising;
• the market for timber and wood products for decoration has recovered and there is brisk trade in various kinds of flooring (especially rare species solid wood flooring).

As the sawnwood market is picking up, demand for hardwood is stronger than for softwood. The supply of African sawnwood is falling short of demand as African countries act against exports of illegally harvested timber. This has led to significant price increases for imported sawnwood. For instance, prices for sapelli fetched RMB7,100 per cu.m and mahogany was priced at RMB6,000 per cu.m. South East Asian sawnwood is also in short supply. Price for teak from Myanmar reached as high as RMB16,000 per cu.m.

Similarly, prices for hardwood sawnwood from Europe and North America such as beech, oak, maple and walnut have risen, albeit slightly. The average increase was RMB40-110 per cu.m. However, prices for some domestic sawnwood, such as ash, oak and linden, were relatively stable.

In May, the wood based panel market in Beijing was stable with slightly improving prices for some grades. The thick board (over 9mm) market was sluggish while thin boards were selling well. Prices for OSB increased slightly due to brisk demand and limited availability.

Consumers’ preference for laminated wood is growing steadily. Sales continued to be brisk for different products of laminated wood in the triangle area of Beijing, Tianjin and Hebei province. The laminated wood made from traditional species, such as beech, ash, oak, elm and birch are the most demanded products. The laminated Southern species like rubberwood and tung wood (Aleurites fordii) also have good markets.

Different kinds of preserved wood products and decorative veneer are selling well in Beijing and its surrounding areas. According to analysts, the factors generating demand for these products are following:

• buildings must now meet stricter building codes in Beijing and its surrounding areas and this has created markets for preserved wood;
• environmental issues are emerging and supporting the use of wood in buildings;
• Chinese government has been advocating and promoting the use of preserved wood;
• wood products with decorative veneer are currently in high demand.

The prices for preserved wood have remained relatively stable while the decorative veneer prices are improving steadily.

China imposes measures on wood transportation
The State Forestry Administration recently announced that it will intensify the management of wood distribution and transportation. The revision will also include additional financing to improve infrastructure.

According to the announcement, a nationwide system with stations controlling timber transportation will be set up within three to five years. In addition to permanent control stations, supplementary mobile stations will be established around the country.

The new wood transportation regulations came into effect on 1 July 2010 and the wood transport documentation has been modified according to the new regulations.

China faces increasing labour costs for furniture manufacturing
In the past, the world furniture manufacturing centres had shifted from Europe and North America to Taiwan P.o.C in early 1970s, to South East Asia in the late 1970s and to mainland China at the end of the 1980s.

Some analysts are predicting that furniture manufacturing will gradually move out from China as labour and other costs are increasing compared to levels in some ASEAN countries.

The reason for the higher labours costs is the rapidly improving China economy. In addition, on 1st July, the Chinese government lifted the minimum wage in 18 provinces by 20%. As a result China's overall cost advantage is shrinking, say analysts.

In the future, the world furniture manufacturing centre is predicted to move to some ASEAN countries. In fact, some foreign enterprises have already increased production in Vietnam and Bangladesh. Analysts believe that this will inevitably have an impact on Chinese furniture markets and production.