The March 2020 issue of Global Hardwood Review, a well-known American wood industry magazine, published a monograph on how the global outbreak of the new coronavirus will affect U.S. hardwood sawn wood exports.
With the exception of China and several larger European markets, 2019 was not a bad year for U.S. hardwood lumber exports. Shipments to most countries in 2019 were lower than in 2018, but not significantly lower compared to previous years. Notable exceptions are China, Germany, Italy, and Spain, where shipments in 2019 were the lowest in five years. Conversely, shipments to Vietnam reached a new high in 2019, while shipments to the Asian secondary market remained stable. While total U.S. exports in 2019 were dragged down by China, overall exports are still 71% above their recession-era lows in 2009.
A changing global market
The global market for U.S. hardwood lumber has undergone a complete transformation over the past 20 years. Shipments to Hong Kong and mainland China accounted for only 8 percent of U.S. exports in 1999, and two-thirds of those shipments went to Hong Kong. In 1999, Vietnam was little more than a market, purchasing only 2,145m3 of American hardwood, less than one-thousandth of the total U.S. exports. Ten years later, combined U.S. hardwood lumber exports to China and Vietnam accounted for two-thirds of its total exports. Eight years later, China’s market share peaked in 2017, with almost two-thirds of all U.S. hardwood product exports going to China or Vietnam.
From the first half of 2018 to the end of 2019, during the trade war, demand in China slumped, and Mexico and the United Kingdom regained some lost market share, although actual shipments to these markets in 2019 were also lower than in 2018. In 2019, Vietnam was the only one of the top 10 global markets for U.S. hardwood to increase purchases, but it also grew by only 3%, while combined shipments to the other nine markets fell by 27%, driven by shipments to China. Shipments fell by 39%.
Outlook for 2020
Before the coronavirus outbreak, U.S. hardwood lumber exports were forming renewed growth in 2020. The United States and China have reached a partial trade deal that promises to introduce more discussions and eventually reduce tariffs that affect bilateral trade. But now that the virus has put much of China in lockdown and air travel between the U.S. and China has been restricted, the impact on trade is just beginning to show. Containers containing large quantities of U.S. hardwood lumber are still on the way or have arrived at Chinese ports. It remains to be seen whether they have been picked up, or under what conditions.
Now perhaps in response to the virus-induced reduction in trade -- or because of long-standing pressure on its industry and response to trade tensions -- China has announced that it will remove tariffs on hardwood logs and sawn timber. This is a welcome development that would have probably caused a pretty decent surge in Chinese demand had the virus not shut down trade. However, it also shows that Chinese manufacturers need and want U.S. hardwood lumber, once the virus is contained, laying the groundwork for stronger shipments and trade returning to normal.
As such, 2020 still bodes better than 2019, although improvements may be delayed until the second half of the year. By then, domestic demand in the US will be the strongest this year, and we could see a marked increase in prices as domestic and foreign buyers bid for the limited availability of lumber.