Maritime & Trade Blog

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

2011 $240 billion
2012 $233 billion
2013 $251 billion
2014 $275 billion
2015 $245 billion
2016 $251 billion

 

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

2011 $222.8 million
2012 $310.4 million
2013 $659.7 million
2014 $907.1 million
2015 $1.2 billion
2016 $1.3 billion
 

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. 

About The Author

John W. Miller is a global journalist with 18 years experience reporting from six continents and 45 countries, on print, digital, video and audio platforms. As a Brussels-based foreign correspondent, corporate and investigative reporter for the Wall Street Journal, Dow Jones Newswires and Time Magazine, and Pittsburgh-based global mining and metals correspondent for the Journal, he wrote over 60 stories for the Journal’s front page, and won awards from the National Press Foundation and the German Marshall Fund. 

Miller has covered elections around the world, the World Trade Organization, the ups and down of the European Union, economic and business trends, Fortune 500 corporations, mining and metal-making from Appalachia to Australia, the World Cup, and the Tour de France, and is an expert on global commodity trade, coal, copper and iron ore mining, the steel industry, US manufacturing, Chinese export policy, WTO and anti-dumping trade law, and EU politics. 

Miller is from Brussels, speaks fluent French, and holds US and Belgian passports.