The supply of plywood from China is currently being stopped due to draconian measures to curb the spread of the MERS corona virus. The Chinese government had closed all companies in the region. Until further notice, production and logistics have not started up yet except for medical and other priority supplies. The first plywood mills will resume production end this week, early next week.
This is if they fulfill a number of safety requirements and checks by government officials and provided the factory owner is willing to sign a letter that he or she takes full responsibility for the safety of their workers. Any case of infection will lead to a complete shut down and quarantine of the factory for at least 2 weeks.
Important to understand is that some of the major supply regions such as Linyi (for face veneers, for glue and for filmfaced paper) are still completely locked down. meaning that even if mills resume as early as next week, it’s unlikely that they can actually run at full production capacity for the next couple of weeks given the fact that they are all very low on stocks for raw material. The more realistic prediction is that mills’ production will be normalized by end March.
Logistics and shipments on the other hand are widely disturbed as a result of this massive lack of cargoes and road blockades. All major container lines have announced blank sailings therefor it’s not sure how bookings will be affected once productions resume. What is to be expected though is an increased demand for containers from end March / April onwards with a possible upward pressure on prices. That has already a deep impact for other regions of the world, due to that lack of containers, e.g. containers addressed to China are stopped in Vietnam or they are needed in Africa, as one of our importers reported to us.
This extraordinary situation comes on top of supply problems following earlier forced plant closures in certain regions under the “clean air policy” (December 2019 – January 2020) and the annual delays due to the Chinese new Year.
The consequences are already being felt in the market and the effect will only grow over the next weeks and months; many items are in short supply and scarcity is growing day by day, a situation which is not expect to normalize estimated before May.
The increased demand is not limited to typical Chinese products, but also applies for birch productions and the Indonesian/Malay variants. The production of birch plywood is hampered by the difficulties in log harvesting due to the relatively mild Russian winter and the skyrocketing demand from the middle East (due to lack of supply from China + World Champship Qatar + Expo UAE).
I trust the above give a clear picture on the problems to be expected for our business over the next months.
The text ahead is the assessment of one member of our board, others from Italy, Belgium, Germany confirm the situation. Additionally the production of parquet floorings/deckings in this part of China is affected, operators expect a scarcity also in this range of products– one popular fair and flooring exhibition organized by a German fair operator – the DOMOTEX Shanghai – is delayed due to the current situation.
To summarize it in a nutshell, the virus has a severe impact on our sector, additionally due to world wide chain of custody, containers/logistics, dependency of components and a competition due to scarcity of the products. Main affected products are plywood, parquet floorings/deckings.
If you have any further questions, do not hesitate to ask us.