It seems that everybody is talking about China these days. The phenomenal growth of the economy in recent years, and the entry of the country to the World Trade Organisation have ensured that it remains a strong topic of conversation.
In the wood-based panels arena, China has embraced the continuous pressing technology long favoured by European manufacturers, with around 30 lines being built since 1994. These are mainly, though not exclusively, for the production of MDF and have capacities in excess of 150,000m3 a year. Many multi-opening, Chinese-made, press lines have also been built and these generally have capacities of 50,000-80,000m3 a year.
However, the rate of expansion has been slowing since 2003 as wood raw material becomes increasingly difficult to source. Another factor was a recognition by banks that some of their lending for new MDF projects had been perhaps precipitate, resulting in bad debt when the projects ran into raw material shortage problems. That eased during 2005, with banks prepared to provide funding again, but only for well-researched projects.
Most raw material comes from government and private plantations of species such as poplar, eucalyptus and pine; productive natural forests are few and far between, with many areas out of bounds to logging. To provide a much needed boost to supplies, most serious wood products players are now also involved in their own planting – usually with government backing – but this is a relatively recent development and it will be some time before these new plantations are producing serious wood volumes.
The use of recycled wood in panels has not really taken off yet, nor has the use of cereal crop residues such as straw and bagasse – but all that will probably come.
MDF capacity
In the meantime, it has been realised that a lot of MDF capacity has been added in recent years. Hence only five or six continuous lines are being quoted by the three European suppliers Siempelkamp, Dieffenbacher and Metso Panelboard this year.
There is also a move towards chipboard instead of MDF. Traditionally there has not been much of a market for chipboard in China and the quality of what was available was very poor. In the past two years, however, some large capacity mills have been built and this is partly attributable to the well-documented move of furniture manufacture into China. This furniture is largely for export and requires good quality chipboard components, as well as good quality MDF.
A speaker at a conference in Vancouver, “China’s boom: implications for investment and trade in forest products and forestry” in January, said that 250 US furniture makers had closed because of Chinese competition.
But exports are not the whole story. There is a growing number of people with increased spending power, looking for more sophisticated furniture and interior products. Shanghai, for instance, has some very expensive housing and Ferrari, Bentley, Rolls Royce and other luxury brands are appearing in the big cities.
If increased furniture production in China is the threat, the shortage of wood is an opportunity – and one that is well recognised in Canada. At that Vancouver conference, Professor Zehui Jiang, fellow of the International Academy of Wood Sciences, said that total wood consumption in China in 2004 was 310 million m3 and 35.5% of that was imported.
Rich Coleman, British Columbia’s minister of forests and range, said his province was building a C$60m container port in Prince Rupert and expanding road, rail and port networks, pointing out that “BC is the largest exporter of softwood lumber and the Chinese market is of growing importance”. He also told the conference that “When China needs wood and wood products, we intend to be their supplier of choice”.
At the same event, Lars Gôran Sandberg, president and chief executive officer of Timwood AB, Stockholm, said, “Global wood products company senior management must assess China as a market, a sourcing opportunity and a competitor.”
China’s growth in the wood products sector may be constrained by wood supply, electricity delivery and infrastructure issues, but they are being addressed rapidly to ensure that growth in the economy continues.
Whether you consider that a threat or an opportunity depends on where you are in the supply chain.
