In 2022, both the US and most of the EU placed several trade restrictions on Russia in wake of the country’s war on Ukraine. This move, unsurprisingly, dropped wood exports to zero by the end of 2022 for these countries.
China and other central Asian countries are not adopting the same restrictions seen in the west. This has led to several of these areas becoming the primary markets for Russian timber exports.
Despite the open policy for Russian exporting, the road between these countries is not so easily followed. Restrictions on the route between Russia and central Asian countries are causing issues in the supply chain process. This has driven the costs up for transport in all those who deal in Russian timber.
The precise numbers in terms of cost changes and expected increases have yet to pan out.
Depending on how and where new Russian bans persist and current ones persevere, transport routes will also face an uphill battle for feasibility in the Chinese market.
Chinese Economy Moving Toward Consumption Over Investment
Another bit of important news: many of China’s import and export tariffs dropped at the start of 2023. The decrease is modest – from a 7.4% to 7.3% average tariff rate. However, this shows China’s intention to shift into a much broader growth economy focused on consumption.
China’s economic model has mostly relied on investment to drive its growth. As that investment now bears fruit, the model will adjust toward more consumption powered “high quality” domestic growth.
As for where the future will lead the Chinese wood market, multiple factors are at play:
Relationship with Russia
Like the rest of the world, Russia’s export ban on raw softwood applied to China as well. China will continue importing Russian woods despite the political and economic hurdles they face in transport.
It is very likely that Chinese importers will continue upping their wood imports from Russia if they can strike discounted deals with exporters. Based on Russia’s political relationships in other major markets, a deal like this is certainly possible.
Chinese Politics and Power Structures
President Xi Jinping carries a significant amount of power and influence across China. His ideological policies may cause further problems in their market due to potential misinformation on the state of global economic factors. Similarly, inter-country tensions and the ongoing struggles with Taiwan further exacerbate these issues.
Superpower Status Battle with the US
China’s ambitious goals seek to vault the country into becoming the world leader in just 20-30 years. As a result, we will continue to see strife between the US and China within the next several years.
These tensions will assuredly impact the global wood market. Exactly how and where will remain an important focal point in market analysis and economic forecasting.
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