The Trade Numerologist: The wooden road
As the southern US rebuilds after Hurricanes Harvey and Irma - estimates of potential damage are as high as $200 billion -- it should create rich opportunity for global timber companies.
Construction companies buy over half of all logged trees. That's why the US, with its aggressive home-building, low import tariffs and abundant land, is already the world's second best lumber market. Total US wood imports grew 66% to $18.6 billion in 2016 from $11.2 billion in 2011, according to IHS Markit's Global Trade Atlas database. The hurricanes will accentuate that trend.
It's bad timing for Canadian exporters, which have been hit this year with US punitive import tariffs. Over the first seven months of 2017, their shipments to the US declined to 19.9 million kilos, down 7% compared to the same period in 2016, according to GTA data. US buyers have compensated by jacking up imports from Germany, Sweden and Russia.
In developed economies, demand for wood generally follows a steadier trajectory than demand for steel, aluminum and copper. Once an economy has built its core of bridges, highways and high-rises, it needs less metal. Wood is the only construction material that has to be grown, and it can't be recycled like metals can. Seven of the top ten wood importers are developed Western economies.
Top importers of wood products, 2016
|China||$19.6 billion||Italy||$4.2 billion|
|US||$18.6 billion||France||$4.2 billion|
|Japan||$10.1 billion||Netherlands||$3.3 billion|
|Germany||$8.3 billion||Canada||$3.1 billion|
|UK||$6.7 billion||South Korea||$2.9 billion|
The trees that supply the global wood trade are mostly found in large Northern countries with strong export economies. The world's top wood exporters are China, Canada, the US, Germany and Russia, according to GTA. Driven by strong economic growth in Asia, especially China, the aforementioned US housing market, and a growing trade in pellets for bioenergy, the global wood trade has outpaced overall trade this decade.
Total global trade, in all wood products, by dollars
The numbers appear flat but they compare favorably to a sluggish overall market in global trade. Over the same time period, total exports by G20 countries declined 11% to $8.9 trillion from $9.9 trillion in 2011.
Trade data on wood, however, is easily distorted by sluggish prices. Without using dollars, however, it is hard to aggregate, because customs agencies use different units. China, for example, reports in kilos, South Africa in cube meters, and Colombia by number of pieces. Luckily, the GTA database makes it easy to search for an individual country's imports, offering a clearer picture of how fast the global wood trade is growing. The world's biggest import market is China.
Wood imports by China, by kilo, from top 20 trading partners
|2011||7.3 billion kg|
|2012||8.4 billion kg|
|2013||10.4 billion kg|
|2014||68.3 billion kg|
|2015||63.6 billion kg|
|2016||72.1 billion kg|
So what kinds of wood are importers hungry for? In Asian economies, it's all-purpose wood used largely in construction. China's imports of "sliced wood over six millimeters", used for to make everything from chairs to houses, rose to $8.1 billion in 2016 from $5.7 billion in 2011.
In already developed countries, the fastest-growing sector is wood pellets that can be burned as a biofuel. In the UK, for example, imports of wood for fuel have risen to $1.3 billion in 2016 from $223.8 million in 2016, mostly from the US.
UK imports of wood pellets for biofuel
Paper markets are much more volatile, because book, newspaper and magazine reading habits are changing so fast, and the role of print in societies is in flux. The big surprise in 2017 has been Mexico. In the first six months of 2017, Mexico's imports shot up 66% to 4.3 million kilos from 2.6 million kilos in the first six months of 2016. Note the volatility in this list of the top 10 importers this year.
Top 10 paper importers, first six months of 2017 vs. 2016, in kg (and by % change)
|US||4.9 billion kg (+2.3%)||Turkey||1.3 billion kg (-9.4%)|
|Mexico||4.4 billion kg (+66%)||Thailand||862 million kg (+46%)|
|UK||3.2 billion kg (-9.5%)||Russia||788 million kg (+16%)|
|China||2.1 billion kg (+46%)||Taiwan||780 million kg (+9.2%)|
|India||1.8 billion kg (+15.2%)||Philippines||741 million kg (+11%)|
Meanwhile, the paper industry's powerhouse companies remain concentrated in the verdant north. Of the world's top 20 paper companies, six are from the US, four from Japan, two from Finland, two from Chile, two from the UK and one each from Ireland, Sweden, South Africa and Canada.
By comparison, the global market for pulp, the raw material used to make paper, is more predictable. The top importers are China, Germany, the US, Italy and the Netherlands, and the top exporters the US, Canada, Brazil, Chile and Sweden. And the numbers don't show any wild swings. Chinese pulp imports, for example, have stayed between $17 billion and $19 billion every year since 2011.
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
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