By Bob Flynn, Director, International Timber, RISI
I have a confession: I am addicted to the Global Trade Atlas. Having spent considerable time tracking down reliable statistical sources during my nearly 30 year career as a forest industry consultant, I admit to considerable pleasure at being able to almost immediately check on various trade flows whenever my curiosity gets fired up.
In my job, I’m supposed to know “what’s happening” in log, lumber and woodchip markets around the world, so it’s very handy to be able to have the latest available data readily to hand, wherever I’m traveling. But as much as I enjoy a ride on the GTA, my experience has taught me that there are many pitfalls to be wary of, because at the end of the day GTA, like any statistical source, is only as good as the information that Customs departments in countries around the world contribute.
A relatively straightforward situation is what happened with China this year. I track log and lumber imports in that key market on a monthly basis, and was more than a bit shocked when the January 2014 data was posted.
The volume of log and lumber imports into China has always been reported in cubic meters, but in 2014 the Chinese Customs authorities decided to report data in tonnes, and GTA dutifully reported Chinese imports only in tonnes. But, how was I supposed to make comparisons with previous years to understand year-to-year changes?? With no exact conversion factor to cubic meters, how could we track changes in average prices??? I was not happy, to say the least.
The fix here was relatively easy, as we soon discovered that it is possible to still obtain data in cubic meters from China Custom… for a price. A small price to pay, in my opinion, but that’s just me. The point is that China was no longer such an easy read, without making this extra connection.
Why this matters is easy to see in the following chart, which shows that, despite all the talk about a slow-down in the Chinese market, through the end of September the volume of softwood log and lumber imports was at an all time record in 2014. Prices have corrected, to be sure, but even though reports of high inventory at the ports are discouraging, so far the monthly volumes have remained surprisingly strong.
Source: China Customs
India is a much smaller market for softwood logs than China, to be sure, but it has been rapidly growing. In terms of domestic supply, India has pathetically little volume of softwood timber, so any increase in consumption has to be met with imports. But when we query the GTA for India’s imports of 4403.10 (softwood logs), we get a surprisingly low figure, only 6,000 m3 in 2013, including almost nothing from New Zealand.
This is puzzling, because any visit to Kandla and nearby Mundra ports makes it quite clear that the volume of radiata pine logs coming into the country from New Zealand is sizable and growing. The problem is that, when they provide information to GTA, Indian Customs mysteriously reports a large volume of hardwood logs imported from New Zealand.
Mis-classification like this is not unusual, and those of us familiar with the trade can spot problems like this easily. But because of problems of this nature, we are forced to depend on either tracking the global exports of softwood logs to India (my preferred alternative), or trying to correct the species mix of log imports reported by Indian Customs on a country by country basis.
It turns out that the Indian market for softwood logs grew very quickly from 2004-2011, stagnated for a few years, but then based on actual shipments through the first three quarters of the year again leaped forward in 2014. The chart below indicates that softwood log shipments to India increased to an estimated 2.1 million m3 in 2014, including 74% from New Zealand and 5% from Australia.
Source: Global Trade Atlas Export Data
Finally, if you query the GTA for global log exports by country, you might be surprised to discover that little Uruguay is the world’s largest exporter of logs. Since I know companies which do export logs from Uruguay, in containers to Asia, I am aware of the small volume of trade (e.g. 83,000 m3 of hardwood logs and 35,000 m3 of softwood logs in 2013) that does occur.
As a result, it was easy for me to spot this huge “error”, which occurs in the data because Uruguay reports any shipment of logs into the free trade zones in Uruguay (where the two large pulp mills are located) as being “exported” from the country. The actual market for log exports is interesting, because of the premium paid for FSC certified logs by furniture producers in Asia, but in truth the market is much smaller than a cursory glance at the GTA would indicate.
Source: Uruguay Customs Data, courtesy of Pike y Compania
The point of all this is that while in this internet age it may seem that any grad student with a computer can quickly compile all the information that a company needs to understand its markets, this is not necessarily the case. When even reputable sources like the Global Trade Atlas contain numerous and substantial errors in data, it is still necessary to run the data through the filter of experience to come up with meaningful, and accurate information.
About the author: Bob Flynn is Director, International Timber for RISI, the leading information provider for the global forest products industry. Bob focuses primarily on timberland investment and global trade flows in logs, lumber and woodchips. He can be reached at rflynn@risi.com.
