Where is the Chinese wood-frame construction sector heading too? Are there any opportunities for Australia and New Zealand wood-frame manufacturers?
China’s decade long construction binge (as described by some industry observers) went through a correction in 2014-15. This binge resulted in a surplus of housing stock – particularly in the 3rd and 4th tier cities. This surplus has now largely dissipated and strong construction growth has resumed. Margules Groome believes that the long-term fundamentals supporting Chinese wood demand remain positive. The strong urbanisation trend remains the core driver requiring an additional 7-8 million new homes needed by 2020. Another 50 million new homes are needed by 2030 as the Chinese government seeks to reach a 60% urbanisation rate by 2020 and 70% by 2030. GDP per capita is at 6.9%/a increasing spending capacity and demand for larger, better quality housing, especially in the tier 1 cities such as Shanghai and Beijing.
Figure 1: China softwood log imports vs. construction sector development
Currently, wood frame construction represents a minor segment of the Chinese residential construction industry at less than 0.05% (approximately 10 000 units/a). Traditional brick and mortar construction dominates the market.
Most of the timber and wood products consumption (95%) is used for concrete forming, packaging, furniture manufacturing, mouldings and other home decoration purposes. Could the new code be a game-changer for the structural and prefabricated timber components?
Notably, several wooden building demonstration projects have been developed as the growth potential of this market is now recognised. For example, proof of concept construction projects such as the recent proposal by Dingchi Wood Industry Co. Ltd, shows that a six story wooden building (with a height of 23.55m and a floor area of 4 831.92m2) is to be finalised later this year. When finished, it will be the tallest contemporary wooden frame building in China.
Even though timber construction is still at the initial development stage, Chinese demand for structural timber as well as engineered wood products has significant potential for growth.
It is yet to be seen however, if the current proof of concept developments, supported by the latest code changes, will be the spark that ignites demand for structural timber elements in the world’s second largest economy. ANZ industry participants with decades of experience of manufacturing timber-framed houses and more recently mass timber and prefabricated timber systems, are well positioned in quality and geographic terms, to take advantage of this new market.
New Zealand Radiata Pine
The NZ sawmillers now have direct access to this significant sized market through the inclusion of the New Zealand radiata pine in the new building code.
Will these developments create export opportunities or challenges for APAC structural timber markets and prefabricated timber systems producers? Will the ANZ domestic timber processors feel more pressure on their log supply as China’s demand for logs continues to grow?