During the past several months, hardwood exports to China have dropped, and while the quietly expressed issue seemed to revolve around the ambrosia beetle, there are other issues also in play, not the least of which is timing, and the recent tight money supply for Chinese importers of those hardwoods.
Initially our own Department of Agriculture allegedly took issue with bugs in the packing crates of some Chinese imports, certainly of some concern, but ultimately solvable. This past spring and summer in the typically wet Pacific Northwest, had a prolonged rainy season extending well into July that had a direct effect on the life cycle of the ambrosia beetle, whose range extends west of the Cascades in Washington state including a portion of Northwest Oregon. Typically this beetle has a seasonal hatch of its eggs, called a “bloom” once a year in the spring. This year’s prolonged rainy season not only increased the size and scope of the initial bloom in early April, but ultimately influenced and resulted in a second bloom in September, the result being a noteworthy increase in the number of beetles well beyond the norm. A reliable source we spoke with explained, “...that (the second bloom) occurred and hit when we were shipping wood to China,” and was noticeable in the log yards and on the docks.
Exports of hardwoods had slowed prior to this then dropped precipitously, and the while the perceived concern was over the unusual number of beetles, at least some have suggested this was connected to the earlier US. Dept. of Agriculture’s actions over the Chinese crate issues earlier in the year. Other sources note while the slowdown may have coincided with the ambrosia beetle bloom, it has more to do with tightening credit for the Chinese that’s put a crimp on the Chinese wood buyer’s ability to fund wood imports.
While the bug issue has people concerned, “...it is a political issue,” our source explained, “and both (U.S and Chinese) sides are trying to find a resolution.” Whether it is fumigation, or double runs through the barkers or new debarkers, the bug issue is solvable.
The credit issues in China are also being resolved, with lower interest rates returning to their markets. Similarly the credit issues for the Chinese customers within China, and their ability to get credit, which tightened up so quickly months ago was a big factor and one of the reasons the hardwood market slowed as quickly as it did. With credit again easing, that will improve that market issue.
With the credit sides being taken resolved, and lower interest rates in their reappearing, “...logs should be able to flow again if the governments get their show together.”
Part of the challenge in tracking what you can see going on within this market comes from none of the party’s being interested in talking, sources are few, yet we were fortunate in finding some explanation.
His conclusion: “...even though we were talking about bugs, it was about the credit... it’s a credit issue,” then continued adding, “...it’s solvable by midway through the first quarter,” perhaps by mid-February.