China produces 70% of the world's plywood

China produces 70% of the world's plywood. He is now ramping up production in South Africa.

    Chinese companies, which already control more than 70% of global plywood production through 13,000 domestic plants and expansion abroad (Vietnam, Indonesia, Malaysia), are now actively invading the South African market. With the support of the state forestry company Safcol, a production expansion program is underway in Kwazulu-Natal province with the participation of the Chinese operator MSFU Wood (a Zoeyol subsidiary). This is changing the structure of the regional market by moving the eucalyptus wood processing center from Asia directly to Africa.

Chinese operator launches large-scale production in South Africa

    Safcol (a South African forestry company, a state-owned forestry enterprise established in 1992) has appointed MSFU Wood (a subsidiary of China's Zoeyol) as the operator of the flagship plywood manufacturing plant in Pietermaritzburg.

Key parameters of the project:

•     - Production capacity: about 3,000 plywood slabs per day, or 150,000 slabs per month.
•     - The scale of the program: 8 production sites in the province of Kwazulu-Natal.
•     - Job creation: 1000 new jobs when the project is fully loaded.
•     - Regional context: Historically, there have been no large veneer or plywood factories in Kwazulu-Natal, despite extensive plantations.

    Safcol describes this project as a "qualitative leap" for the region.

Strategic shift: from importing raw materials to processing in Africa

    Key Takeaway from Safcol's Annual Plan:

"China is shifting from an import model from South Africa to a product processing model in South Africa"

    Previously, Chinese factories imported South African timber (primarily eucalyptus) and processed it in Asia. Now, production is being transferred directly to the sources of raw materials.

    Chinese plywood imports to South Africa have already increased by 59 million rand in 2023-2024, making China the fastest growing plywood supplier to the country. With the launch of local production, this dependence will only increase.

Why is this beneficial for China?

1. Access to raw materials (eucalyptus)
    South Africa has extensive plantations of fast—growing eucalyptus wood, an ideal raw material for plywood production. By locating factories directly in the region, Chinese companies gain direct and cheap access to raw materials, bypassing import logistics.

2. Aggressive pricing policy
    Chinese operators, as Safcol notes, "tend to use inexpensive equipment" combined with aggressive pricing. This allows them to dump on the local market, displacing traditional producers (for example, York Timber, a company listed on the Johannesburg Stock Exchange and operating since 1916).

3. Circumventing trade barriers
    The location of production in South Africa allows Chinese companies to circumvent existing restrictions. For example, the United States imposed a 474 percent duty on Chinese plywood. Plywood exports from South Africa (subject to local content) may be subject to other tariff conditions.

4. Support for the "One Belt, One Road" initiative
    The expansion of Chinese manufacturing abroad, supported by the Belt and Road Initiative, is part of a global strategy to invest in infrastructure and industry in partner countries, gaining access to markets and resources in return.

5. Global dominance in plywood
    The demand for Chinese plywood has grown from 8 million m3 per year in the mid-1990s to 80 million m3 by 2013. Today, Chinese factories (domestic and foreign) produce more than 70% of the world's plywood. Expansion into South Africa is another step towards the global monopolization of the segment.

Key project indicators in South Africa:

Impact on South African producers

1. Profit reduction
    Safcol recognizes that local manufacturers of plywood, furniture and wood boards are facing declining profits. Chinese products displace domestic processors and reduce the ability of buyers to absorb local wood.

2. Changing the structure of demand for eucalyptus
    The tightening conditions in the wood fiber market and the price pressure on eucalyptus are putting pressure on Safcol's customer base. Replacing pine with eucalyptus is seen as a potential risk for subsequent production phases if Chinese plywood takes a price-sensitive market share.

3. Risk for traditional suppliers
    York Timber, the dominant local supplier, is forced to compete with Chinese factories that use inexpensive equipment and aggressive pricing policies.

Impact on the region: Eswatini and Mozambique

    The threat of Chinese expansion extends not only to South Africa, but also to neighboring countries.

Eswatini (former Swaziland):
    - Chinese firms turned to local eucalyptus producers, despite the country's diplomatic relations with Taiwan (which is usually an obstacle to Chinese investment).

Mozambique:
    - Beijing has agreed to finance the timber processing plants directly.

    According to Safcol, the Kwazulu-Natal and Eswatini region is at risk of turning from a raw wood supply area into a plywood export corridor. In other words, the raw materials will be processed locally by Chinese factories, and the finished products will be exported (including to other African countries and beyond).

Safcol strategy: diversification amid internal instability

    Safcol's five-year strategy is aimed at diversifying income sources and increasing competitiveness. However, the company is experiencing internal difficulties: the interim positions are CEO, CFO and Chief Operating Officer.

    This weakens Safcol's position in negotiations with Chinese partners and reduces its ability to protect the interests of local producers.

Importance for the global forest market

1. China is moving from exporting finished products to placing production abroad
       This is not just the sale of plywood from China, but the transfer of capacities to the source countries of raw materials (Africa, Southeast Asia). This strategy ensures control over the supply chain "from wood to plywood" and minimizes logistical costs.
2. Pressure on local producers around the world
       Chinese factories have already squeezed out plywood manufacturers in Europe, the USA and Asia. Now it's Africa's turn. Local companies (like York Timber in South Africa) are forced to either reduce prices (and profits) or withdraw from the market.
3. Changing the structure of the timber trade
       South Africa used to export eucalyptus logs to China. Now the same logs are recycled on site, and the finished plywood is exported (perhaps even back to China). This changes trade flows and capacity balances.
4. Job growth in Africa (but not necessarily for Africans)
       The creation of 1,000 jobs is positive, but the question is who will hold qualified positions: local specialists or invited Chinese workers. The experience of other countries (Angola, Zambia) shows that large Chinese projects often attract Chinese labor.
5.  
6. An example for other regions
       If the "Chinese investment + local raw materials + export of finished products" model proves successful in South Africa, it can be scaled up to other African countries (Gabon, Republic of Congo, Cameroon), where there are also plantations of fast-growing breeds.
7.  

Forecast

    South Africa is becoming a new site for Chinese timber processing expansion. 1,000 jobs and 8 production sites are just the beginning. If the MSFU Wood project proves to be profitable, we can expect:

•     - Further growth of Chinese investments in the forestry industry of South Africa.
•     - Launching similar projects in neighboring countries (Eswatini, Mozambique, Botswana).
•     - Increased pressure on local manufacturers and, probably, market consolidation (York Timber takeover or its withdrawal from the plywood segment).
•     - Changes in South Africa's trade policy (possibly the introduction of protective duties on Chinese plywood, but this may contradict investment agreements).

    For Chinese investors, South Africa is a window of opportunity: access to raw materials, access to African markets, circumventing tariff barriers, and support for the Belt and Road Initiative. For local manufacturers, this is a signal for immediate modernization or the search for niches inaccessible to mass Chinese production.

China produces 70% of the world's plywood. Now he is ramping up production in South Africa — at the source of raw materials. The global plywood market is changing right before our eyes.

Tags: #China #South Africa #plywood #investment #supply chain #eucalyptus #global expansion #One_one_way