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Business / Industries

Planting the seeds for future growth

By ZHONG NAN (China Daily) Updated: 2015-07-14 08:17

"These new ecological requirements, such as adhesives and varnish coatings in furniture products, have increased costs," Yin, of Jinmaoda, said.

Shunde Empire Group, a major furniture retail chain based in Guangdong province, is now operating in a more difficult economic environment.

Cen Zhijiang, a company director, stressed that a number of furniture manufacturers are facing increased costs as wood prices rise and overseas orders shrink.

Typically, the price of timber from India, Nigeria and Brazil jumped between 11 percent and 13 percent in the first quarter compared to the same period in 2014. "Several of our suppliers have shifted their production from wood to bamboo furniture as well as related products such as green building materials," Cen said.

"But the market hasn't responded enthusiastically because many customers question the durability of bamboo furniture. It also doesn't look very expensive."

Increasing domestic timber supplies is the next logical step. In 1998, the government moved to save the country's forests after facing timber shortages of about 60 million cu m per year by launching a protection program.

Now there are 198 million hectares of natural forests, with 127 million hectares protected by the Natural Forest Program.

During the past five years, annual timber consumption has reached nearly 500 million cu m.

To help feed demand, 14 million hectares of new forests have sprung up in Northeast China since 2010 as part of a government-backed program. In the next five to eight years, these forests could supply up to 95 million cu m.

But that will only solve part of the problem. Another reason for fluctuating timber prices is that China lacks international influence in the global market.

Deng Huafeng, a professor at the Beijing Forestry University, pointed to the lack of a prestigious commodity exchange such as the Chicago Board of Trade.

The world's biggest futures and options exchange in the US sets the global benchmark price for timber.

"Reports by the Shanghai Timber Trading Center and Chengdu-based China International Timber and Wood Product Exchange lack authority on the global market," Deng said.

"That has resulted in China lowering its voice when negotiating timber prices with international sellers."

The country will need to find a stronger voice in the future as demand for timber accelerates.

Under the government's plan, at least 30 percent of new buildings will have to be environmentally friendly by 2020.

By the end of this year, 20 percent of new urban construction will have to be eco-friendly.

"Even though future demand in China's furniture market continues to depend on the domestic housing sector, the country has entered the second phase of urbanization," Deng said.

"That will lead to another wave in demand for timber."

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