It is well known that the impact of the tsunami on China’s floorboard and furniture industries is becoming increasingly obvious. Since Indonesia and other countries carry out the export restraining policy, which makes the supply of log materials get pressed globally and enables those Chinese down-stream enterprises over-dependent on offshore purchase to get stuck in a difficult situation. People in the industry are turning their eyes to South America and Africa; nevertheless, if they can not seize upstream resources, they also have difficulty swallowing the bitter fruit of the sudden and sharp cost rise.

It is learnt that China’s log materials and raw materials for downstream products are mainly imported from Malaysia, Indonesia, America, Russia and Thailand respectively. Since Indonesia, Malaysia and Thailand were all attacked by the tsunami, they are bound to need a large quantity of log materials in their own reconstruction, which will definitely affect their export volume and exert impact on the price of log materials.

Nevertheless, people in the industry hold the point of view that the tsunami only serves “the last straw that breaks the camel’s back”. A log material trader said that the impact of the tsunami on the import of log materials was firstly embodied at the psychological level. Last year, most companies had log materials in stock but worried about that the import volume of log materials in the future would decrease. Thus, exporters went into action without delay and raised the prices of log materials.

As a matter of fact, prices of raw materials of floorboards have generally advanced since the Spring Festival in 2004 at an annual growth rate of 10%, and the growth rate of some varieties is even over 20%. “Forests in Southeast Asia have suffered excessive hewing, many countries begin to implement their restraining policy on production and export of precious log materials successively under the weight of environmental protection.” The trader said. Take Indonesia for example, in order to preserve the ecological environment and maintain the prices of plywood and converted products of other log materials, the country has forbidden the export of log materials since January 2002 and permanently forbidden the export of log materials since June 8, 2002. And due to the log need in reconstruction after the tsunami, the country seriously cracked down on log smuggling.

Lu Weiguang, chairman of Shanghai Anxin Floorboard Co., Ltd., a company which has acquired 1000 square meters of forest resources in Brazil and firmly grasped the upstream resources, said the prices of log materials would be a threshold for the year and distinguish enterprises with resources and those without resources. “I reckon that 40% of Chinese enterprises will go bankrupt this year, and for Anxin, the increase of the prices of log materials is good news instead.” Lu said with a smile.

At present, 70% of log materials of Anxin come from Brazil, 15% from Indonesia, 10% from Russia and the rest 5% from Africa and Burma. The increasingly constrictive source of supply in Southeast Asia cannot meet the increasingly large demand of China for the import of log materials, however, Lu is a rare case under the current background.

It is reported that log materials of Australia, Europe, Africa and America entered the Chinese market a few years ago, and currently, China’s import volume keeps increasing. From Lu’s point of view, “the one who masters the upstream resources can win the market”. The predicament where the prices of current log materials get stuck may be a good enlightenment that when mastering resources, enterprises should also diversify their procurement channels.

Source: Source: http://www.ccd.com.cn