China’s economic downturn is impacting sales of wood products and under present market conditions there is growing over-capacity in the sector. Consumption of wood products has declined and supply exceeds demand.

Analysts suggest that mill capacity utilisation has fallen to only 50% in many plants. Much of the weakened demand is the result of lower housing starts brought on by tighter credit conditions. This is especially noticeable in the economically developed coastal areas such as Shandong, Jiangsu and Guangdong Povinces where house prices have fallen. Timber consumption has also been impacted by lower investment rural housing as many low cost housing projects have suffered budget cuts.

The most important factors currently affecting the Chinese timber market:

1. The economic downturn is obvious, overcapacity, and market demand is obviously insufficient;