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Weyerhaeuser sounds alert at China housing market

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Weyerhaeuser added to the clouds over China's housing market, which some analysts have identified as key to the world economic outlook, by blaming faltering demand for logs from the country for a dip in timberland profits.

The US wood and pulp group, which has a portfolio of more than 20m acres of timberland, mostly in North America, said that all its divisions "faced challenging markets in the third quarter", as a slowdown in Chinese trade added to softness from the continued downturn in US housing.

"The US housing market languished and we experienced a slowdown in demand from China," Dan Fulton, the Weyerhaeuser chief executive., said.

However, its timberland division was the most affecting, with "weakening" Chinese demand hastening a fall in log prices.

The comments follow a warning from German-listed Asian Bamboo two weeks ago that a slowdown in Chinese demand for bamboo, used largely in construction, meant it would miss its sales targets, and had left some rivals in "serious difficulties".

And they come amid growing reports of hiccups in the China's property price surge, with reports of property groups being forced into discounts to sell homes, leading to price falls which official news agency Xinhua on Friday reported at up to 30%.

'Treadmill to hell'

China's handling of its real estate market is viewed by many observers as crucial to the country's, and therefore the world's, economic outlook.

Jim Chanos, the short-betting investor seen as one of the first to foresee problems at Enron, which collapsed 10 years ago, has said that China in on a "treadmill to hell" because of its reliance on property price growth.

However, that analysis is disputed by many other commentators, including influential economic Stephen Roach, at Morgan Stanley, who believes China has had some success in engineering a soft landing for the market.

China hopes

Weyerhaeuser only last month termed China, its second-biggest export market after Japan, "an increasingly large and attractive opportunity".

It added it that had been expecting in the July-to-September period "some improvement in log export demand, particularly in Japan and China", while noting "continued high inventories in China".

The group's pre-tax from its timberlands division, the most exposed to the Chinese market, slumped 45%, quarter on quarter, to $62m, with the group forecasting "lower earnings" in the October-to-December period.

However, takings from the cellulose fibres division, which supplies processed timber products such as pulp, jumped 69% to $135m, helping the group report a doubling to $66m in group earnings, excluding one-off charges.

On a per share basis, underlying earnings came in at $0.12, in line with Wall Street forecasts.

Weyerhaeuser shares closed 2.o% higher at $18.30 in New York.


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