Thread Content
On the situation of wood chip production and export in our country and related recommendations On the situation of wood chip production and export in our country and related recommendations Following the instructions of Assistant Minister Gao Hucheng, we conducted a preliminary investigation into the issues related to wood chip production and export. Based on visits to the Wood Chips Management Office of the Forestry Bureau, the China Forest Products Distribution Association, relevant forestry production departments and export enterprises in the three northeastern provinces, as well as relevant forestry departments and forest areas in Hainan Province, and through the study of relevant historical documents, the following information was obtained: I. Basic situation of wood chips production and exports in China. Wood chips production in China began in the 1960s and saw development in the 1990s. From the 1960s to the end of the 1980s, the wood chips produced in our country were mainly used domestically for manufacturing various types of fiberboard, density board, and particle board. In 1988, the Guangdong Nanyou Economic Development Company exported China’s first shipment of eucalyptus chips to Japan from Zhanjiang Port in Guangdong Province, marking the beginning of China’s history of exporting wood chips. The main market for wood chips is in Asia. According to data provided by the China Forest Products Distribution Association, over the 13-year period from 1988 to 2000, China exported 10.007 million metric tons of wood chips to Japan, South Korea, and Taiwan combined. Of this, 5.714 million metric tons were exported to Japan, 2.201 million metric tons to South Korea, and 2.092 million metric tons to Taiwan; the total value of these exports amounted to over 1 billion US dollars. The wood chips exported are mainly used for producing pulp. The wood chips produced in our country fall into two categories: hardwood mixed-wood chips and eucalyptus chips. The production of hardwood chips is concentrated in the three northeastern provinces as well as the forest areas of Inner Mongolia and Hebei. It is manufactured using \"three types of residues\" – namely, the residues resulting from forest logging, processing, and production, as well as the \"sub-small timber\" generated from forest tending and thinning operations ； The production of eucalyptus chips is concentrated in the southern regions, mainly in Hainan and southern Guangdong and Guangxi, using fast-growing and high-yield eucalyptus plantations cultivated through artificial directional methods (ready for use after 6 years). According to statistics from relevant authorities, the residues from timber production in China, the technically necessary felling for forest cultivation, as well as the timber from eucalyptus forests grown through deliberate planting, can provide 30 million cubic meters of raw material for chip production each year. Based on the rate of 2 cubic meters of wood producing 1 metric ton of wood chips in terms of dry weight, China’s annual production capacity for wood chips can reach 15 million metric tons of dry weight. Since 1995, China’s annual production of wood chips has been 4 million metric tons on a dry basis, with an economic value of 2–2.5 billion yuan; of this amount, only 1–1.5 million metric tons are exported, accounting for 1/4 to 1/3 of the total output. “The Eighth and Ninth Five-Year Plans marked a period of rapid development in China’s wood chip production. The opening up of foreign chip markets has stimulated the development of the domestic chip industry. In 1992, in Reply No. 1992 (1992) issued by the General Office of the State Council in response to the Ministry of Forestry regarding the production and export of wood chips, it was stated that: “Developing wood chip production in forest areas is an important measure for making rational use of and conserving forest resources, as well as for promoting economic development in those areas.” Strong measures must be taken to tap production potential and vigorously develop chip production. ”At the same time, the letter also states: \"Under the current situation of limited domestic markets for wood chips, it is possible to organize exports of wood chips in a planned manner. Relevant departments are called upon to cooperate closely, provide active support, and take necessary supportive measures to accelerate the development of wood chip production, improve the overall utilization rate of forest resources in forestry areas, and promote the economic development of those areas.\" ”According to incomplete statistics, by the year 2000, there were over 200,000 people employed in wood chip production, and 148 export-oriented enterprises. Objectively speaking, the development of wood chip production has played a positive role in making full use of forest resources, improving economic efficiency, and promoting the development of the forestry areas. It has also helped to employ surplus labor force, stabilize social order, as well as expand exports and increase foreign exchange earnings. II. Current international chip market and domestic chip production management situation: The main countries in the world that produce and export chips are the United States, Canada, Australia, Chile, South Africa, New Zealand, etc. The annual total volume of chip trade is around 15 million metric tons on a dry basis, with my country’s annual exports accounting for 10% of the world’s total trade volume. Japan is the largest importer, accounting for about 80% of the world’s total imports, which amount to 12–13 million metric tons on a dry basis. Therefore, the economic conditions in Japan and market demand directly influence the trends in global wood chip trade. Currently, the international wood chips market is facing a situation of supply exceeding demand, which is partly due to the impact of the overall international economic environment. As the largest importer of wood chips, Japan has managed to recover from the effects of the Southeast Asian financial crisis, but its economy remains sluggish and even fraught with risks; therefore, it is not possible for there to be any new growth in the wood chip trade. South Korea is also a major importer of wood chips. During the Asian financial crisis, Donghae Pulp, Asia’s largest pulp manufacturer, went bankrupt, leading to a decline in demand for wood chips. Now, although the pulp mill has resumed production under court supervision, its operations are subject to various restrictions, making it difficult to achieve any breakthroughs in the short term. Secondly, there is an overproduction of wood chips in the major exporting countries, while pulp has poor sales prospects and high inventory levels, which also contributes to a sluggish wood chip market. Third, the plantation forests in some pulp-producing countries are well-developed, ensuring a stable supply. As the pulp plant forests in Japan’s overseas locations have gradually reached maturity and entered the rotation period, the supply of wood chips to Japan itself is increasing steadily. Based on the analysis of the above circumstances, if there is no new demand for pulp production, global chip trade volume will not increase significantly. Under these circumstances, it is extremely difficult for our country to expand its wood chip exports and further seize market share. Looking at the domestic production and management of wood chips, the export volume of wood chips is also on a downward trend. The period of rapid development of wood chips in the 1990s exposed significant problems in production, operation, and management that could not be ignored. In particular, the issues related to the production and export of northern hardwood chips are quite prominent. For example, there are too many enterprises engaged in the processing and export of wood chips; some of these companies violate relevant regulations by using timber of specified grades to produce wood chips, thereby damaging forestry resources ； Local forestry authorities fail to provide adequate supervision over wood chip production and manufacturing enterprises, as well as to enforce regulations strictly ； There is a lack of regulatory mechanisms for export enterprises, export ports are scattered, and it is difficult to coordinate prices. These issues have also drawn the attention of the relevant authorities. **On June 9, 2000, the Forestry Bureau held in Shenyang the first meeting on northern chip management since the establishment of the Chip Production Leadership Group by the Forestry Bureau. It was clearly stipulated that chip production and operation must adhere to the new requirements of \"four unifications\" in management: chip production and operation are to be incorporated uniformly into forest logging quota management, uniformly into timber production plan management, uniformly into timber transportation management, and subject to a uniform minimum price. It is also emphasized that when cutting down trees for the production of wood chips, a tree felling permit must be obtained in accordance with the law. Trees with a breast diameter of 5 centimeters or more must be included in the annual forest felling quota system, while those that reach a length of 2 meters and a breast diameter of 8 centimeters must be incorporated into the annual timber production plan, under a centralized management system. To strengthen management, forestry departments at all levels have implemented a policy whereby for every 1 metric ton of wood chips exported, 2 cubic meters of the planned transportation volume for commercial timber are deducted. After half a year of governance and rectification, significant results have been achieved. At present, the forestry bureaus in Inner Mongolia and Heilongjiang have basically stopped producing and exporting wood chips. The main reasons for this are as follows: 1. Restricted by the forest logging quota policy, these forestry bureaus allocate their limited logging quotas to the felling of high-quality, large-diameter logs ； 2. Currently, the international price of wood chips is low. The export wood chip production plants owned by the forestry bureaus in Inner Mongolia and Heilongjiang are located far from the ports of shipment, resulting in high transportation costs. The Liaoning Provincial People’s Congress recently passed a resolution to halt logging of natural forests; aside from existing raw materials, Liaoning will cease the production of wood chips. Hebei is also expected to see a 50% reduction in production this year, with the amount of wood chips available for export throughout the year falling short of 15,000 metric tons on a dry basis. Affected by the natural forest protection program, the volume of wood chips exported from Jilin Province will also decrease significantly. It is estimated that the export volume of northern hard mixed wood chips in 2001 will not exceed 150,000 metric tons on a dry weight basis. By 2002, due to international market prices and **relevant forestry industry policies, the export volume of such chips will drop to around 100,000 metric tons on a dry weight basis, with prices remaining at the same level as in 2000 or slightly higher than those in that year. The price for export to Japan is $100 to $105 per metric ton on a dry basis, while the price for export to South Korea is $95 to $100 per metric ton on a dry basis. Relatively speaking, the production and export of wood chips in southern China are relatively stable. The characteristics of wood chips produced and exported in the south are as follows: 1. All such wood chips are manufactured from plantations, and compared to those made from natural forests, they have the advantages of containing no decayed wood and a relatively higher pulp yield. 2. The wood chip industry is not large in scale; the level of mechanization in processing and production is relatively low, making it labor-intensive. Therefore, the yield is quite elastic, and the quality of the wood chips is not very stable during production and loading. 3. The transportation distance to the countries (regions) that import wood chips is short, resulting in lower transportation costs. It only takes 5–6 days for a wooden ship to travel from Hainan to Japan, while it takes 23 days from Australia to Japan. It also takes a month to get from the United States to Japan, and even longer from Brazil and Chile. Therefore, from an export perspective, it is more competitive. After more than 10 years of development, eucalyptus has been widely planted in regions such as Guangdong, Guangxi, and Hainan, where local farmers show great enthusiasm for cultivating this fast-growing and high-yield economic tree species. In the long term, there is great potential for development. Since 1995, the annual export volume of southern wood chips has been around 800,000 metric tons on a dry basis, of which 500,000–600,000 metric tons are exported to Japan, while the rest is exported to South Korea, Taiwan Province, and other places. Whether it is hardwood chips from the north or eucalyptus chips from the south, their export is influenced by market supply and demand as well as market prices. Our analysis suggests that, from an overall trend perspective, the volume of China’s wood chip exports will decline ； From the perspective of the relationship between exports and production, export factors will not further stimulate domestic chip production. III. The relationship between wood chip production and the pulp and paper industry in China at the current stage, along with relevant recommendations: Based on the analysis of the above investigations, China’s export volume of wood chips is now being brought under control, as it is influenced by international market conditions as well as changes in domestic policies. The export of wood chips in our country is an inevitable economic activity that has emerged with the development of our economy and the implementation of reform and opening-up policies. Based on the successful experiences of major international pulp producers, the development of the pulp and paper industry and that of the wood chips industry are complementary and mutually reinforcing. As the material and cultural standards of life of the people in our country improve, the demand for high-quality paper products is also increasing. Therefore, it is an inevitable requirement to accelerate the development of China’s paper industry. Considering the actual resource situation in our country: on the one hand, it is necessary to further strengthen the implementation of natural forest protection projects and ecological environment improvement efforts ； Controlling resource loss while increasing efforts in afforestation is a correct approach. Therefore, the issue of exporting wood chips requires careful consideration, with the following situations needing attention. Firstly, at the current stage, although there is a downward trend in the production of hardwood chips in northern China, a certain amount of such chips is still produced from the residues resulting from the processing of trees harvested within the limits set for selective logging. The yield of wood chips produced by fast-growing eucalyptus trees in the south (which belong to the broad-leaved tree category) remains relatively stable. This means these wood chips still need to be put on the market. In our country, the existing pulp and paper industry has a weak foundation, outdated technology and equipment, as well as limited production capacity. Only a few factories use wood chips to produce pulp, and they can only utilize coniferous and poplar wood chips; there is no demand for chips from hard mixed woods or eucalyptus. Therefore, these wood chips primarily generate benefits through exports. Secondly, the development of China’s pulp industry still requires some time, and during this period, the demand for wood chips will remain limited. It is understood that our country plans to build two large-scale pulp mills in Rizhao, Shandong, and Zhanjiang, Guangdong, with annual production capacities of 350,000 tons and 500,000 tons respectively. The projects have been approved for several years, but due to a lack of funding, they have not yet been launched. Building a pulp mill with a capacity of 500,000 tons requires an investment of $1.2 billion, and it takes at least 5 years to bring it online; it consumes around 1 million metric tons of wood chips per year. It is also understood that the Indonesian Golden Light Group plans to build a large pulp factory with a capacity of 600,000 tons in Hainan Province. A cooperation agreement was signed with Hainan Province in 1997, and the foundation of the factory was laid in December 1998; it was originally planned to begin operations in 2002. If the factory goes into operation, it will require approximately 1.2 million metric tons of wood chips as raw material per year. To this end, Kinglight Group has invested in the establishment of a raw material base covering 700,000 mu in Hainan, with plans to expand it to 3.5 million mu within 5 years to ensure a steady supply of raw materials. However, after the cooperation agreement was signed, Kinglight Group faced a severe economic crisis, and the funds could not be made available on schedule. Construction at the factory has been halted, and afforestation projects as well as the pulp production project may be postponed indefinitely. Before signing a cooperation agreement with Indonesia’s Golden Light Group, Hainan Province had a contract with Japan for the supply of 120,000 tons of wood chips per year, which expired by 1998 ； A long-term supply contract with South Korea has been established, stipulating an annual supply volume of no less than 50,000 tons over a period of 30 years, valid until 2027. The agreement between Hainan Province ** and the Jinguang Group stipulates that, starting from the year 2000, Hainan Province will cease exporting eucalyptus chips to Japan. But it is now reported that, as the project cannot proceed, Hainan Province has begun negotiations with the Japanese side over a long-term supply contract. Based on this, we believe that until wood chip pulping production in our country reaches a certain scale, the current limited exports of wood chips still have some time and room for continuation. Due to the impact of the international market and domestic forestry policies on the export of wood chips in northern China, export volumes have decreased significantly. Moreover, the forestry authorities have strengthened supervision and inspection over various stages such as wood chip production and transportation, which will help to effectively control resource depletion ； Southern wood chips are primarily produced from fast-growing, high-yield forests that have been cultivated in a targeted manner. Moreover, the types of wood chips exported by China do not match the raw materials required by the domestic pulp industry. Therefore, we recommend: 1. In order to facilitate every possible effort to increase exports and ensure a smooth transition in policies, there should be no restrictions on the export of wood chips for now. 2. As large pulp manufacturing enterprises such as the Rizhao Pulp Mill in Shandong and the Zhanjiang Pulp Mill in Guangdong come online, and as the production capacity and technology of China’s papermaking industry improve significantly, the country’s demand for wood chips will gradually increase. Under such circumstances, it would be more reasonable to impose restrictions on wood chip exports, even going so far as to ban them. The above report is for reference only. China Food, Animal Products, Import and Export Chamber of Commerce, March 14, 2001