SAN MATEO, CA - Armco Metals Holdings, Inc. says its China subsidiary may buy up to $63 million in Chilean Eucalyptus woodchips, after results of a trial shipment of 50,000 Green Metric Tons of Eucalyptus Nitens wood chips deliverable in October 2014 is evaluated.
If the deal works, the supplier could deliver a one year total importation of 550,000 to 600,000 tons. Based on the current market price in China, the market value for 600,000 GMT woodchip is approximately $63 million.
"We estimate and aim to realize 10 percent gross margin on potential sales of the product," says Armco, which has been working to expand from metals into wood chip transactions.
The wood chips would go to paper and paperboard. China is the world's biggest producer of paper and paperboard, but lacks sufficient high quality domestic wood fiber supply. So new pulp mills in China are looking to expand importation of wood chips from plantation-rich countries to meet their growing needs.
China's area of eucalyptus plantations doubled between 2006 and 2012, but still will not be sufficient to meet demands due to problems with frost, and may also have problems with pests and disease due to very narrow genetic base. With the growing domestic pulp production, importation of woodchips by China surges during the past few years and the country has been the world's largest importer of hardwood chips since the second quarter of 2013.
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