On the day China confirmed it had lifted its ban on Australian timber imports, the share price of Australia's largest woodchip exporter was starting to fall.
Shares in Midway Limited dropped 11 per cent on Thursday and fell a further 7.5 per cent on Friday to finish the week at $0.74 a share.
The reason was China, but not because of any trade frictions, but because of supply and demand.
China's paper pile
China initially suspended the trade of timber logs in 2020, citing quarantine risks.
The ban never included Australia's woodchip exports and China, being the world's largest producer of paper, has long been a major customer of Australia's woodfibre.
But in its update to the ASX, Midway disclosed there had been an increasing backlog of pulp and paper stocks at Chinese ports due to "depressed global trading activity".
"As a result, pulp prices have continued to fall and Chinese pulp producers have further slowed woodfibre purchases," it said.
"Hardwood pulp is currently trading at around $US465 a tonne, down from a peak of more than $US855 a tonne earlier in the calendar year."
Midway said one of its major customers in China had advised the company that it did not intend to take volume from Midway "in accordance with the mutually agreed shipping schedule for the second half of financial year 2023".
"Four vessels that were in the agreed schedule may be impacted and the timing of these vessels remains uncertain," it said.
Midway said the market slowdown could result in its export volumes falling in the second half of FY23 by 35 per cent.
"The slowdown is also likely to lead to higher-than-normal inventory levels at the end of the financial year," it said.
The company runs timber projects in Queensland, Victoria, Tasmania and the Northern Territory.
Midway's major customers have long been China and Japan, but this year it has resumed woodchip exports to Indonesia.
According to data from the Federal Department of Agriculture, Australia exported $1.3 billion worth of woodchips in 2022.
