Tuesday, December 9, 2014

Focus group on timber Industry in China

Focus group on timber Industry in China

Background-PEST analysis

With the development of economic, acceleration of civilization and improvement of infrastructure, the relative timber industry in China is going through its prosperity. Wood is essential for the development of national economy and people’s life. Timber is widely-used in construction industry, furniture industry, paper-making industry and energy industry etc. However, since China joint WTO and carried out the policies of natural forests protection, the timber resource is extremely scarce. At the same time, the price of raw material is incessantly rising, the processing technology is undeveloped while the remarkable steady growth of people’s living standard and resident disposable income is present. The sharp conflict between supply and demand is inevitable. Obviously, timber industry is facing both development obstacles and new opportunities in recent years.

Current Situation of Timber Market in China

Timber industry is a general name, which refers to take the wood for the main processing objectby using of physical, chemical processing means, and then processing wood into various wooden forest products manufacturing. Wood is green and renewable, environment-friendly materials, wood industry based on wood material have become the development of social economy in the national economy, which occupies the irreplaceable position in evergreen industry. Since with the development of reforming and opening up, Chinese timber industry has achieved rapid development, China has become the world literally timber industry superpower. On the account of low forest coverage rate and the protection of forest district, businesses are gradually banned logging in virgin forests to maintain harmonious ecological environment, especially the Xing'an Mountains region. The timber field is significantly reduced and hard to satisfy the demand of the market. Under the circumstances, China strengthens the efforts to import timber. Data shows that the total import volume reached 45.159 million cubic meters with the amount of $9.32 billion. As the increasing volume of timber import and the fluctuation of the demand forms, timber industry is gradually changing as well. China imports timber 11.5 million cubic meters from New Zealand, about 25.47% of the total. New Zealand becomes the biggest timber import state in China.

Influencing Factors on Demand and Supply of Timber Market in China

Objective Factor
Over recent decades, China’s per capita disposable income goes up with year-on-year growth of about 9 percent. It means the people’s life mode transfer from subsistence mode to enjoyable mode. People are pursuing the high quality living standard which will immensely promote the timber demand.
Subjective Factor
Besides the objective factor, customer preference is also a significant aspect. People can choose their wanted product as their wishes. Consumer demand for the goods is positively correlated with the degree of preference. Chinese would like to purchase the timber if their degree of preference is high.

Timber Industry SWOT Analysis

focus group China timber industry

In order to give more detailed information about china timber industry, there is a SWOT analysis according to the strengths, weaknesses, opportunities and treats.
In China, endogenous financing ability of wood industry in light industry is weak. In 2008, the cost profit margin of the rankings in 14 light industries of China, wood processing industry ranks the fifth, while papermaking and paper products industry rank the seventh, furniture manufacturing ranks eleventh. Among them, except wood processing cost slightly is higher than the national industrial average profit margins, the costs of profit margins furniture of manufacturing, papermaking and paper manufacturing are below the average of national industry.
Due to the imperfect of capital market, debt financing China timber industry is one of the main channels to raise funds. But China timber industry liability structure is unreasonable, which cause industry facing larger financing risk, therefore, optimizing liability structure is the important problems must be solved for industry. Enterprise should reduce the proportion of current liabilities into a reasonable range, in order to reduce the financing risk. In determining the proportion of current liabilities, enterprises should take cash flow as the criterion. Enterprise's short-term debt should pay eventually by producing in the enterprise management, based on cash flow of current liabilities, it is reasonable to ensure the level of current liabilities. In determining the enterprise debt structure, enterprise should repay the debt within one year less than or equal to the period of the business cash flow, So, even in the difficulty time of financing enterprise, it also can ensure the cash flow generated with business to return due debts, that is to say to ensure adequate solvency.
China's imports of logs, lumber, woodchips and pulp hit record levels in 2011, when its timber supply deficit surged more than 30% to an estimated 152 million m3. Similarly, demand for timber in other wood deficit countriesis also on the rise. While some countries clamber for wood resources, concerns about deforestation have caused an increasing share of the world's native forests to be set aside for conservation.

These global trends are increasing the market's dependence on man-made forest plantations. Not surprisingly, an increasing number of players in the timber industry are interested in developing tree farms - often in new regions and with relatively unproven species. This type of investment requires analysis that incorporates political and economic factors, as well as, direct costs and biological growth rates.

Conclusions of the focus group

This report focuses on the background-pest analysis, current situation of timber market in china, influencing factors on demand and supply of timber market in china, timber industry SWOT analysis. It aims at providing a better understanding about China timber industry. 

By Daxue Consulting
See also:

No comments:

Post a Comment