Que 2021 and a number of these companies started having a few liquidity issues following Beijing’s introduction of the ‘three red lines’ rule after a realization of over speculation in the residential property market. Unfortunately, this might have been a bit like the current government’s ‘Tough on crime’ policy – too little too late. He Keng, the former deputy head of the statistics bureau has said that, at the extreme, there could now be enough empty homes to house 3 billion people, but more likely, there’s enough to easily house 1.4 billion, which co-incidentally matches the entire population of China. In hindsight, they should have had a bit more hui before all the doey and, unless the entire population wants to move into a new house tomorrow, new builds might stay subdued for a while.
What does this mean for us? Exports to China make up around half of our total NZ harvest level and the majority of what we send there goes into single use construction so it’s a reasonably important market. The old adage that ‘when China sneezes, we get the flu’ comes to mind and unfortunately at the moment the Chinese economy has a really good dose of pneumonia.
There is still underlying demand from China at the level of around 60,000m3 per day, which is around 2,000 truck and trailer loads, but it’s an unknown what that will look like going forward. October at wharf gate prices are down around $5/m3 on September to the $114/m3 level (A grade) which is $12/m3 lower than the 3 year rolling average and $14/m3 under this time last year. With current cost structures for harvesting and cartage, anything under the 3-year average is a bit marginal.
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