CHICAGO - Lumber contract prices fell along with other agricultural commodities such as cotton and sugar, providing relief for wood industry purchasing managers.
July 2011 contracts for lumber traded at the Chicago Mercantile Exchange, which hit a high Tuesday of $265.20 per 1,000 board feet, on contracts of 110,000 board feet, were down $7.80. At the end of trading Thursday the contracts settled at 248.50.
The fall in lumber commodity prices follows global economic trends, and reverses a rapid jump as economies expand, especially China, whose rapidly growing economy is causing its leaders concern over rapidly escalating inflation.
The turnabout in lumber pricing is highlighted by a quarterly global timber and wood products market update just issued by industry analysts Wood Resources International LLC. WRI says Russian log and lumber exports increased substantially in during the first quarter due to higher wood demand in China, Finland and Japan.
Russia is the world’s largest log exporter, and it increased the shipments of logs in the in the first quarter after four years of declines, reportsWRI. Russian exports of softwood lumber have also gone up substantially, especially to China,
Uzbekistan, Japan and Egypt.
"Russia has for many years been, by far, the largest exporter of logs in the world," says WRI. "When the country announced a log export tax of 25 percent in 2007 and the intention to increase this tax to 80 percent in 2009, many forest companies in Asia and Europe decided to reduce their reliance on Russian logs."
As a result total log exports from Russia fell from 51 million cubic meters in 2006 to about 22 million cubic in 2009 and 2010, says WRI.
Now the downward trend appears to have broken in, with total softwood and hardwood log exports up by almost 40 percent over first quarter of 2010, with much of this increase in shipments heading to China, Finland and Japan. "This recent upward trend can be expected to continue during 2011 and 2012, albeit less dramatically, as Russian log export taxes are reduced," says WRI. Russia has been pressured to reduced log export taxes by the European Union if it wants to join the World Trade Organization.
Russia has not only increased its exports of logs but also of softwood lumber. From 2008 to 2010, exports were up 18 percent, reaching an all-time high of 17.5 million cubic meters last year, according to WRI's Wood Resource Quarterly. So far this year, exports have been 50 percent higher than the same period last year; 2011 may very well be a record-year.
China is the largest market for Russian logs, followed by Uzbekistan, Japan and Egypt. Shipments to China tripled between 2007 and 2010; during the first quarter this year, exports were 150 percent higher than the same quarter in 2010. The trade of logs and lumber between Russian and China can be expected to expand in the coming years because of the continued increase in demand for wood products in China and the country’s relative close proximity to Russian forests and sawmills.
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