How China’s Pulp Overcapacity Is Impacting the Australian Wood Chips Market

From Peak to Pullback: The Decline in Export Volumes

Australia’s hardwood chip exports hit a peak of 6.8 million bdmt in 2018. Since then, exports have dropped significantly. By 2025, total hardwood chip volumes fell by 45% from the 2018 peak, and shipments to China decreased by 33%. Japan’s imports from Australia dropped even more dramatically – down 65% between 2018 and 2025.

However, these are not circular dips; instead, they indicate deeper structural shifts in the region’s pulp and paper industry, which are transforming fiber demand patterns throughout the Pacific Rim.

China’s Overcapacity Is Reshaping Fiber Trade

China has long been the anchor market for Australian hardwood chips. However, rapid and ongoing expansion in China’s pulp and paper industry has created overcapacity and structural imbalance. As mills ramped up production, fiber procurement strategies evolved.

At the same time, China has increased the availability of domestic wood fiber — including woodchips — reducing dependence on imports. The result is a measurable shift in trade flows. Demand for imported hardwood chips from Australia has softened, and pricing has come under pressure.

In the second half of 2025, the average export price for Australian hardwood chips was 5% lower year-over-year, with prices to China down 3% compared to the prior year. For exporters already grappling with declining volumes, pricing weakness compounds the challenge.

A Market in Transition

The factors influencing the market—such as overcapacity in China, increased domestic fiber supplies, price competition, rising demand in Southeast Asia, and heightened regional rivalry—indicate more than just short-term fluctuations. They suggest a fundamental shift in the structure of Asia’s wood fiber trade.

For producers, exporters, traders, and investors, understanding these shifts is critical. Where will sustainable demand growth come from? How durable is China’s structural surplus? Can emerging markets offset North Asian declines? And what do pricing trends signal for 2026 and beyond?