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Authors: John Perez-GarciaExecutive Summary The possibility of global warming within the next several decades has prompted the U.S. Environmental Protection Agency to examine climatic change mitigation options within the forest sector. Among several options, an expansion in the forest land base and recycling are viewed as two potential programs that will increase the storage of carbon in biomass form. Current restrictions on timber harvest on public forests in the Pacific Northwest impact the forest economy regionally, nationally and internationally. Any programs directed at climate change mitigation will need to address the changes the U.S. forest sector is currently undergoing. The present study analyzes the impacts of planting and recycling programs on the global forest sector using an economic model of world forest products markets. The CINTRAFOR Global Trade Model (CGTM) Is employed to assess the impacts on prices, production, consumption and trade of forest products of increased land area plantings and recycling programs in the U.S.. The results of a recent analysis on the impacts of timber supply reductions in the Pacific Northwest and their implications for climate change mitigation are also discussed in this report. Two major conclusions are drawn from the study. 1) The impacts from an expanded forest land base on U.S. forest products trade are felt mostly in Canada-the major exporter of lumber to the U.S.--since public planting program funding is directed largely towards the southern U.S. states where the majority of the productive marginal crop and pasture lands exists. A larger forest land base expands the production of forest products in the U.S. South by lowering log costs. This allows the region to substitute southern forest products for Canadian forest products in northern U.S. markets. As a result, lumber prices are also lower for U.S. consumers. The impacts from tree planting programs on the forest land base in the U.S. North and U.S. West regions are relatively small, where fewer acres of potentially program-acceptable crop and pasture land exist. There is no perceivable impact on U.S. forest products trade with countries around the Pacific Rim. There is no perceivable impact on U.S. trade with European markets. 2) Impacts from the recycling program are distributed across all U.S. regions. The largest impacts, however, occur in the U.S. South. Again, because of the trading position of Canada with respect to the U.S., the recycling program impacts the Canadian forest sector. The recycling program allows greater harvests of sawtimber in the South due to the decrease in pulpwood demand. These two conclusions are sensitive to assumptions regarding the projected level of Canadian log harvest, particularly in British Columbia. Because of large inventories of accessible timber, harvests from the coastal and interior regions of British Columbia may expand during the 50 year period from 1990 to 2040, according to model projections. The harvest expansion produces a downward pressure on lumber prices in the U.S., a major consumer of Canadian lumber. As a result real lumber price projections show only modest growth in the U.S. after 2000. There is growing evidence that the projected allowable cuts for Canada as forecast by the model are too optimistic. When Canadian harvests are constrained to decline slightly over the next ten years, additional timber production occurs in the U.S. South in the base scenario. However, the U.S. South offsets only 18 percent of the Canadian production. The reduction in Canadian harvest levels results in a permanent shut down of Canadian mill capacity, since log imports would not offset the decline in log production in Canada. Mill processing capacity expands in the U.S. South to offset previously-imported Canadian lumber. Timberland withdrawal from the western percent forest land base adds additional harvesting pressure in the U.S. South. A 33 percent reduction in harvest levels in the western U.S. and Canada promotes greater harvests from regions around the globe. Since the harvest to offset the decline in timber production comes from less productive lands, larger areas are harvested in other regions to meet a lower timber demand. Timber demand declines 38 percent of the total reduction in harvests. The 38 percent reduction implies a decline of over 11 million cubic meters in mill processing capacity in the western U.S. and Canadian regions. Planting program impacts will occur after much of the current restructuring in the forest sector takes place. Planting programs may help to alleviate the supply pressures for the U.S. southern regions in the future. However, only a small portion of the expanded inventory will enter the timber markets. The results suggest that carbon storage may increase as land enrollment programs expand. However, land management may decline if these areas do not enter the timber market. The implications for carbon storage in the long run are unclear. ![]()
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Authors: Charles A. Backman, Thomas R. WaggenerExecutive Summary While the Russian Republic represents one of the largest single holdings of forests and forest inventory, the potential of this resource is far from fully realized. In part, this is due to the huge size of the Republic, and the overall pressures that have taken priority over the development of the forestry and forest products sector historically. In more recent years, the ongoing political and economic disruptions associated with political and economic reforms have resulted in actual declines in output and production in the face of breakdowns in the routine processes of economic activity generally. The findings of this analysis clearly indicate, however, that there remain a number of fundamental problems of a long-term nature that will inhibit and slow the realization of the potential for the forestry and forest products sector beyond the immediate short run chaos. Timber Resources The economic availability of timber resources, in contrast to the physical presence of forests, brings into question the real potential for near term development. Primary harvest, from designated (Category III) forests under the administration of the forest administrative authorities, has been stated as approaching 833 million cubic meters annually as a sustainable yield (Annual Allowable cut). However, only a fraction of that potential is considered by the Russian authorities as either currently available or potentially available over the next twenty years through significant investments in infrastructure for accessibility. In the present analysis, it is suggested that of the 545 million cubic meters of current and potentially accessible AAC, that the near-term harvest will be restricted to the currently accessible forests. These forests have an AAC "realistic" AAC of only 426 million cubic meters, or about 51 percent of the aggregate physical total. Of the currently accessible AAC, some 248 million cubic meters are from conifer forests, and 178 million cubic meters from deciduous forests. Further, this analysis finds that some 88 million cubic meters of the "currently accessible" AAC is in fact not realistically accessible due to access, reservation for alternative uses, environmental restrictions etc. Timber supplies from other sources include intermediate harvests (primarily from silvicultural operations), harvests from "other" forests not administered• by forestry organizations, and secondary resources from waste and recycling. While important, these sources do not constitute more than 125 million cubic meters in the aggregate, and at present is mainly derived from secondary sources (primarily sawmill waste). Economic Reforms and Forestry The future outlook for the forestry and forest products sector is highly uncertain in today's political climate. As Russia struggles to install "market economy" mechanisms, it finds itself trapped in many economic and political issues of transition. Reforms are far from complete, particularly as it relates to the former administered cost/price system and the physical nature of decision-making for the forestry sector. Further, the overall decline in economic performance throughout the Russian economy has led to declines in almost all indicators for the sector relative to the previous "normal" levels as of 1989. It is expected that in the near term that domestic prices and costs will continue to be distorted, and hence of limited value in guiding normal economic decision-making about the allocation of resources. Further, the forestry sector is compelled to approach reforms from the vantage point of the existing industry structure and resource conditions. This will mean that structural adjustments will come slowly. This is only part political. The lack of capital investment to modernize and restructure the sector will be a major constraint. The reinvestment of present hard currency earnings within the sector for restructuring are meager, as these earnings are diverted to other purposes. Foreign investment is likewise discouraged by the economic and political uncertainties, as well as the unknown parameters of future policies. It can be expected that the imperfect corrections to the price/cost structure will have an immediate impact on the forestry sector, since the freedom from central control also means that enterprises must become "profitable" - measured by the covering of primary operating costs (variable costs) from their own sources of income. In the short term, the installed industrial capacity (including logging) can be further depreciated, with the appearance of avoiding the significant capital (fixed) costs of operations. Although beyond the period of analysis incorporated in this analysis, the deferral of capital investment will have serious consequences for the sector after the turn of the century. It is also clear that Russia will be torn between two conflicting policies with respect to domestic use of. available forest resources. On the one hand, the large standing inventories of timber represent a "bank account" that can be liquidated as needed to generate desperately needed hard currency. The potential for exploiting the significantly higher valued export markets is a great temptation under the pressing needs of the country at present. However, this factor is offset by the rapidly declining levels of domestic consumption since 1990, and the potentially growing need for forest products to aid in the eventual economic recovery process and future economic development. This means restricting the export of timber in lieu of meeting current and anticipated future domestic requirements. Future Timber Harvests In terms of harvest, the need to recover variable costs by forest enterprises means that not all "currently accessible" timber can be economically harvested under prevailing (and distorted) prices and costs. The relatively low domestic price for timber means that the ability to cover rising domestic costs is difficult, imposing a constraint on harvest. The scenarios developed in this analysis attempt to mirror the "most likely" conditions through the end of the century, and bracket the most significant potential uncertainties. For the baseline conditions, the economic harvest rate declines to a delivered volume of industrial timber of approximately 250 million cubic meters for Period 1 (1990-1995), in contrast to a 1989 level of some 338 million cubic meters. Due to the presence of existing infrastructure for accessing the forest and the installed production capacity, the share of delivered timber increases for the European-west Siberian region, from 68 percent of the 1989 total to over 76 percent of the projected Period One timber supply. In Period 2 (1996-2000), the delivered supply is projected to decline further, to approximately 244 million cubic meters, with 178 million cubic meters (73 percent) derived from the European-West Siberia region. This slight decline in regional share is due to the continuing depletion of mature timber inventory in the Russian west. Under the Pessimistic scenario, the delivered supply would decline to only 214 million cubic meters, while the most Optimistic forecast for Period 2 would lead to a supply of 338 million cubic meters, just restoring the previous levels of 1989. If firewood is excluded from the delivered commercial supply, but secondary sources (waste, chips and recycled fiber) are included, the total available wood/fiber supply projected from Period 1 is 230 million cubic meters, which includes 185 million cubic meters of roundwood. By region, this supply includes 175 million cubic meters from the European-west Siberian region (76 percent roundwood) and 56 million cubic meters from the Asian-Pacific region (86 percent roundwood). For Period 2, the total wood/fiber supply is 229 million cubic meters under the baseline scenario. with the decline in capital investment, the pessimistic outlook for Period 2 is for a supply of only 203 million cubic meters. Under the optimistic case, Period 2 supply would increase to 341 million cubic meters. The gain over the baseline case represents an increase of 112 million cubic meters, which includes 65 million cubic meters of roundwood, with 40 million cubic meters of this derived from the Asian Pacific region as the inventories in the European-west Siberian region continue to decline. The most important gain under the Optimistic case would be for greater waste paper recovery in the European region, with the equivalent of 37 million cubic meters of waste fiber recovered. The analysis also sought to approximate the likely supply response to long term price/cost reforms based on 1992 international levels. Although higher international prices are an incentive, the reform of domestic costs would clearly discourage production. The results were perhaps surprising, indicating that full price/cost reforms to international levels for Period 2 would result in <an economic timber/fiber supply of only 216 million cubic meters, very close to the Pessimistic case outlook. However, supply would shift slightly to the Asian-Pacific region, where the more abundant timber would offset the higher costs, while the European-west Siberian region would continue to face declining competitiveness due to aging capital structure. If sufficient investment was made in infrastructure to access the "potentially accessible" forest (a factor not assured) the overall supply would increase to 265 million cubic meters, well below the 338 million cubic meters attained in the "pre-reform" period (1989). As an illustrative example, it was further assumed that world real prices would increase by 10 percent in response to growing global timber scarcity. This assumption, with constant (1992) world real costs, lead to an estimate of Russian supply of only 350 million cubic meters, close to the realized volume of 338 million cubic meters for 1989. Conifer supply would approximate 248 million cubic meters, with deciduous supply would be 102 million cubic meters. Full economic reform (to global competitive levels) thus does not significantly improve the comparative advantage of Russia in the absence of increased prices, and only then with substantial capital investment. Russia will continue to struggle to recover to the harvest levels and delivered wood/fiber supply of the centrally planned system (338 million cubic meters) during this century. Allocation of Available Timber/Fiber Supply The allocation of the available wood/fiber supply will reflect the dual objectives of assuring an "adequate" domestic consumption consistent with overall economic performance (GOP) and internal price/cost reforms and the opposing need for critical foreign hard currency earnings. Assuring domestic consumption (relative to the declining GOP) results in a domestic use of timber of 207 million cubic meters in Period 1, leaving some 22 million cubic meters available as "surplus" for export. In Period 2, domestic consumption (baseline) is estimated as declining to 204 million cubic meters, leaving a slight increase available for export (25 million cubic meters). Under pessimistic assumptions for Period 2, domestic consumption would absorb the entire supply of 203 million cubic meters. However, the analysis suggests that Russian central authorities would sacrifice domestic consumption in order to maintain exports at near present levels of 13 million cubic meters, resulting in a decline in domestic consumption to 190 million cubic meters. Optimistic conditions would lead to a Period 2 domestic consumption of 256 million cubic meters, reflecting recovery of GOP. This growth, together with increased capital investment would allow for total supply to reach 341 million cubic meters, giving an export potential of almost 85 million cubic meters. Domestic Use of Timber/Fiber Domestic processing of wood/fiber is primarily related to conifer lumber. In 1989, output was 83 million cubic meters, with two-thirds of this in the European region. Projections for Period 1 indicate a significant decline, to approximately 54 million cubic meters of lumber, with conifer lumber accounting for 44 million (mainly non-larch species or 37 million cubic meters). Under optimistic assumptions, lumber production would increase over the baseline, but only to about 68 million cubic meters, still below the 1989 level of 83 million cubic meters. Wood panel production in 1989 was approximately 12 million cubic meters. This is estimated to drop to only 6 million cubic meters in Period 1, and to a maximum of 7.7 million cubic meters in Period 2 under the optimistic case. Pulp and paper production was some 11.4 million metric tons in 1989, with 8.6 million metric tons produced in the European region. Baseline estimates are for a decline to 5.9 million metric tons in Period 1, with 3.5 million metric tons in the European region. For Period 2, production is estimated to range from 3.8 million metric tons (pessimistic) to 7.8 million metric tons (optimistic), with the majority being produced in European region. Export of Roundwood and Wood Products Export trade by Russia as typically involved the export of unprocessed logs to both the former soviet Republics and China (soft trade), the Pacific Rim (Japan) and Europe for hard currency. While the Pacific Rim trade has been primarily higher quality sawlogs, the hard currency trade with Europe has been primarily lower grade sawlogs and pulpwood. Export trade with the former Soviet Republics was approximately 20 million cubic meters in 1989. Due to economic declines in the Republics (as with Russia), domestic consumption has fallen and hence the need to import conifer logs. Period 1 estimates are that unprocessed exports will decline to 8 million cubic meters, reflecting the Russian desire to maintain the traditional trade relationship with these Republics that are the source of critically needed Russian imports of other goods. In Period 2, exports to the former Republics are estimated to range from 8 million cubic meters to an optimistic level of 17 million cubic meters, a level still below that of 1989. Exports to hard currency markets in Europe and the Pacific Rim were about 16 million cubic meters in 1989. Period 1 estimates are for exports of 13 million cubic meters, with 7 million going to European markets and 6 million to the Pacific Rim. While only 30 percent of European exports are sawlog quality, it is expected that over two-thirds of Pacific Rim exports will be higher grade sawlogs. In Period 2, hard currency exports are estimated to range from a low of 7 million cubic meters (pessimistic) to a high of 29 million cubic meters. The baseline projection for Period 2 is for exports of 13 million cubic meters, representing the Central Government concern for maintaining hard currency sales in spite of the implied shortfall for domestic consumption. European exports would range from 2 to 17 million cubic meters, while Pacific Rim exports range from 5 to 12 million cubic meters. Exports of manufactured wood products are anticipated to remain modest in contrast to unprocessed timber exports. Lumber exports are almost entirely to Europe, with the total estimated at 4.5 million cubic meters total for Period 1 (4.1 million cubic meters to Europe), and ranging from 3.3 to 5.8 million cubic meters for Period 2. Panel exports are likewise modest, estimated at only 0.4 million cubic meters in Period 1 and ranging from 0.3 to 1.9 million cubic meters in Period 2. The majority of panel exports will be to the Former Asian Republics of the Soviet Union rather than to hard currency markets. Future Outlook Although Russia seeks to utilize the forestry and forest products sector to promote regional economic development and desires to encourage value added production (both for domestic consumption and exports), the current state of industry capacity and the near term problems of gaining hard currency for capital investments will continue to constrain the achievement of these objectives. If (and when) incentives emerge for the reinvestment. of hard currency export earnings and/or a favorable climate for foreign investment is created, it can be expected that the more optimistic outlook described here will be more realistic. However, it remains that even the optimistic outlook barely allows Russia to reach the levels of harvest, production and trade achieved under non-economic central planning in the last half of the 1980 IS. Further development will require Substantial capital investments beyond the levels assumed in the optimistic scenarios in order to develop a competitive sector with an international comparative advantage. Trade of forest products with hard currency trading regions can be expected to continue at levels evident 1n the late 1980's and early 1990's through 1995 (subject to short term cyclic variations). The prospects for wood fiber exports between 1995 and 2000 depend on levels of invested capital, alacrity with which domestic costs and prices rise to world levels, and levels of domestic demand. Exports during 1995 and 2000 will fluctuate between 17 million cubic meters to European markets and 12 million cubic meters to Pacific Asian markets, and 2 million cubic meters to European markets and 5 million cubic meters to Pacific Rim markets. Higher exports are potentially possible should the ties binding Russia to other republics of the former Soviet Union not be as strong as those existing before the break-up of the USSR. Employing the Russian Forest Sector Model, the reasonable bounds for this important sector of the Russian economy have been estimated. The implications are that restructuring and reform have had significant negative impacts to date, but that modest recovery can be anticipated during the balance of this century. However, no major expansions of the sector, or external trade, can be anticipated in the near to medium term. In fact, recovery to the pre-reform levels of the late 1989 will be a substantial challenge as Russia struggles to put reforms in place, and to substitute more market-like resource allocation decision-making for the previous noneconomic central planning approaches. The longer-term outlook for the volume of wood raw material exports to trading regions not belonging to the former Soviet Union is clouded in uncertainty. Rising domestic consumption levels interacting with the physical limits imposed by the forest resource may effectively limit the contribution which Russia could be expected to make to consumption in regions outside of Russia. Longer-term outlook for the volume of wood raw material exports to trading regions not belonging to the former Soviet Union is clouded in uncertainty. Rising domestic consumption levels interacting with the physical limits imposed by the forest resource may effectively limit the contribution which Russia could be expected to make to consumption in regions outside of Russia. ![]()
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Authors: David G. Briggs, Lee Bialoznski and Steve ShookExecutive Summary According to U.S. Department of Commerce census data:
windows 27% mouldings 12% other 29% 100%
production and non-production workers 25% energy, contracts and additional expenses 5% 100%
softwood 72%, hardwood 15% hardwood veneer 6%, plywood 4% softwood 1% hardwood 3% particleboard 2%, medium density fiberboard 1%. 100%
repair and remodel 47% public construction 3% prefabricated housing 2% 100% According to U.S. Department of Commerce trade statistics for 1989-1992; Exports as a percent of value of shipments have grown from 1.1% in 1989 to 2.4% in 1991:
doors and components 44.6 increasing softwood moldings 28.3 increasing windows and frames 18.1 decreasing hardwood moldings 7.0 decreasing blinds, shutters & other 2.1 decreasing 100%
softwood moldings 41.4 increasing doors and components 27.2 stable hardwood molding 19.4 decreasing windows and frames 6.7 increasing blinds, shutters, & other 5.2 decreasing 100%
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The Challenge of Change, the Inertia of Tradition: A View of Opportunities in European wood Markets1/1/1993 Authors: Jay A. Johnson, Christine E. DinsdaleExecutive Summary The objectives of this study were to identify and characterize high-value wood products manufacturers in Europe, to search for opportunities for possible delivery of North American wood to Europe, and to obtain a basic understanding of the legal resources utilized in typical agreements for US wood exports to Central Europe and Italy. Five successful European manufacturing firms are briefly characterized as examples of European firms which provide high-quality wood products. All firms profiled used design--structural and aesthetic--as an important way to distinguish theft products. Each firm adhered to exacting technical specifications. Several companies were vertically integrated to a greater degree than many North American wood manufacturers. One market segment, European wood windows, was also examined. This is part of a larger joinery market which is in need of high-quality raw material. While there appear to be opportunities for semi-finished wood products in this area, particularly for laminated frame stock, contacts between European manufacturers and U.S. suppliers are apparently infrequent. The technical specifications required in Europe are demanding and are not necessarily North American. A mechanism for insuring compliance with such specifications is needed to assure that these seemingly mundane, but crucial, aspects of the export transaction are executed. The European technical education system necessary to support high European technical manufacturing standards is discussed and several schools visited are described. This system appears to be providing a well-trained work force for the high-value wood manufacturing firms in Europe. Currently there appears to be no equivalent training available in the U.S. A new waterway for transportation of bulk goods from the North Sea to the Black Sea has just opened in 1992: the Rhine-Main-Danube waterway. This system may offer the possibility of sending containerized semi-finished North American wood products deep into Central Europe. Since Austria appears to be the emerging legal center for Central European trade, an overview of the Austrian legal system is provided. Profile interviews with legal and trade professionals in Austria, Hungary, and Italy provide more detailed information about doing business in these countries, and illustrate some socio-cultural requirements for successful legal transactions with European entities. The Europeans' successful use of a form contract developed for wood import-export transactions between Italy, Austria, and Scandinavia is explored, including the possibility for development of such a contract for use in US-European transactions. At the present time, there is great social, political, and economic upheaval and reform in Europe. Undoubtedly, there are a number of opportunities for North American wood export; European markets are greatly affected by cultural and economic legacies, and these must be considered when searching for business opportunities. The most important lesson learned in this investigation was that Americans who want to do business in. Europe must view Europe through European eyes. ![]()
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Author: John Perez-GarciaExecutive Summary The reduction in timber supply in the U.S. Pacific Northwest region to protect the northern spotted owl is just one of a number of similar, ongoing adjustments in timber supply globally. The rapid rise in wood product prices experienced within the last 12 months -- an increase of 100 percent--is suggestive of a substantial supply reduction rather than a cyclical housing recovery impacting demand. As such, the price adjustment in the wood products markets is forcing a permanent change in wood flow, rather than the cyclical changes associated with demand fluctuations. The reductions in timber supply will continue to impact market prices until adjustments of wood flow in world markets are complete. Many global producers will expand their production with higher wood prices. One result is that international producers benefit while consumers must pay the higher prices. Supply reductions are not limited to U.S. Pacific Northwest regional production but also include hardwoods from the tropics, and, prospectively British Colombian products. Tropical hardwood producers are reducing their harvests to meet sustainable timber harvest targets evolving from International Tropical Timber Organization (ITTO) negotiations. These reductions do cause reactions in markets. We can expect the substitution of softwood plywood for hardwood plywood in Asian markets since there are relatively fewer alternative hardwood suppliers than softwood. Specification differences in plywood manufacturing are not easily met by North American producers, leading to a pre-disposition of this demand shift to be in logs rather thin panels, although manufacturing specifications could also change over time with investments in panel plants dedicated for export markets. As for British Columbia, a provincial "fast track" study is currently underway for each forest planning unit. These studies are expected to recommend lower harvest levels in favor of changing environmental policies of the same magnitude as the spotted owl related reductions in the U.S. Pacific Northwest region. We have utilized the CINTRAFOR Global Trade Model (CGTM) to analyze the global impacts of these supply reductions. The CGTM is a global forest sector model developed over the last decade at the International Institute for Applied Systems Analysis in Austria and the University of Washington. This model has been used most recently to understand the impacts of constraining tropical timber production in Asia in studies commissioned by the World Bank and the London Environmental Economics Center for ITTO. This report analyzes the supply impacts on prices, who pays, who benefits, and what may be the broader environmental implications of new supplies replacing previous supply patterns through changes in international trade flows. The study also examines the implications of greater exports from Russia, the only country with a substantial inventory of mature softwoods. Major conclusions from the analysis are:
Environmental tradeoffs may be counterproductive through increased harvest acreage. While timberland is preserved in the U.S. Pacific Northwest Westside region and British Columbia, greater areas in other producing regions are harvested to offset only 60 percent of the timber production decline. The shift from high to low productive areas may well result in new environmental problems. Non-wood substitution will increase carbon dioxide emissions, for example. While current short-term market conditions show U.S. prices well above those implied in this analysis, economic theory and the CGTM would suggest these prices will come down as international markets adjust and international consumers absorb a portion of the cost. However, there are many reservations as to the desirability of increasing harvests in other regions, which may result in. institutional constraints around the world. The process of globalization of timber shortages may become more difficult to address than is evident from historical experience. ![]()
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Author: Hakan EkstromHighlights:
The objectives of this study have been 1) to investigate how industrial end-users of lumber, importers and agents in Germany, Italy and the Netherlands, define quality, and -2) to present factors that may contribute to the success of American lumber exporters in the European market. U.S. Export of Wood Products to Europe There was a slight increase in the export of wood products from the United States to Europe during the 1980’s. The European Community (EC) is a very important export market for U.S. sawmills, having imported $1.1 billion of wood products from the U.S. in 1991. Approximately 41 percent of U.S. hardwood lumber exports and 22 percent of softwood lumber exports were shipped to the European Community in 1991. Distribution Channels - The trend at many-European manufacturers of furniture, cabinets, windows and doors is for fewer, closer wood suppliers. This results in more direct sales and reduced involvement of -intermediaries. Today approximately 10 percent of softwood lumber and 30 percent of hardwood lumber is imported directly to the industrial end-users, who are primarily larger manufacturers of furniture and windows. Even if direct sales are a preferred sales strategy, there may be advantages, particularly for small -and mid-size firms in the U.S., in contacting a European intermediary. Agents and importers have an understanding of the culture and the traditions dictating how business is done. They can also help small producers find customers, follow design trends, and deal with complaints. The Swedish Sawmilling Industry In this project, U.S. export strategies are compared to the strategies practiced by Swedish exporters. Sweden has for many years exported large quantities of lumber to the countries in the European Community and therefore has extensive experience in trading in these markets. The European Community (EC) imports almost 22 percent of its softwood lumber from Sweden compared to four percent from the U.S. Closeness to the market is an advantage Swedish lumber producers have over North American producers. In today's fast-changing market and with importers and end-users interested in minimizing their inventory, it is crucial to be able to meet orders with short notice, arrange fast shipments and offer just in-time deliveries. Knowledge of the market and a better understanding of the business culture are often mentioned as major differences between Swedish and North American exporters. Perhaps the most important advantage the Swedes enjoy is the long-term relationship they have shared with many of their customers. These old relationships result in loyalty, reliable business relations, and relatively stable prices over business cycles. Opportunities for U.S. Wood Exporters There is an increased interest in Europe for buying more finished wood products from the United States. European industrial end-users want to be less involved in the primary wood process and spend more time and effort on developing new products, marketing and distribution. United States hardwood species like cherry, walnut, red alder, oak and ash can be promoted as substitutes for tropical hardwoods in furniture, cabinets, paneling and flooring. U.S. manufacturers also should promote some species and products that are unique to North America, for example, thick and wide dimensions with clear wood from species such as Douglas-fir, red cedar and hemlock. A preferred strategy is to promote products that are less sensitive to price and encourage end-user loyalty to suppliers. Germany The unification of East and West Germany has increased investment in the repair and remodeling sector. This has resulted in strong demand for wood products such as construction lumber, windows and doors. Although clear solid wood is preferred, glued and finger-jointed products are becoming increasingly accepted due to decline in the quality of lumber imported from both North America and Northern Europe. Preferred North American species are hemlock, Douglas-fir, lodgepole pine, spruce and oak. The increased activity in the renovation sector has resulted in a higher frequency of special orders and demand for custom-cut components. The do-it-yourself market, which is already the largest in Europe, has also seen an expansion, particularly in eastern Germany. Opportunities also exist for hardwood lumber and components for furniture and flooring. Italy Imports of semi-finished and customized wood products to Italy are expected to increase, particularly for use in windows and furniture. Italy is one of the largest producers of furniture in the world. Opportunities exist for lumber and components of red oak, red alder, yellow-poplar. walnut, white ash and black cherry. Old-growth Douglas-fir is the species preferred by many window manufacturers in Italy. However, there is an increased interest in alternative species since the wood quality of Douglas-fir has declined and the price has increased in recent years. Two alternative species of interest are hemlock and red cedar. There is also an increased market for three-layer laminated window stock made from second-generation Douglas Fir and southern yellow pine. The Netherlands The Dutch Timber Information Centre promotes U.S. species such as Douglas-fir, hemlock, southern yellow pine, red oak and white oak for increased use in such areas as construction, furniture and windows. Because 0.1 bans on use of tropical hardwoods for certain products, U.S. ash, white oak and red oak are increasingly substituted. With the increasing price for clear wood; acceptance of laminated window stock is growing. Opportunities exist for use of three-layer components from Douglas Fir, western red cedar and hemlock. QUALITY IN EUROPE "Quality" is a buzzword often used by marketers of forest products today, especially if there are plans for expanding sales to the European market. It is important to remember that customers in Europe do not have the same preferences as U.S. customers. Before spending too much time and effort on advertising and promotion overseas, it is crucial for U.S. wood suppliers to understand how Europeans define quality': For European wood users; quality stands for a synergism between wood quality, manufacturing quality and quality of service. German customers of lumber and wood components are very concerned about consistent dimensions, rapid delivery and consistency in pricing. Germans also desire that imported wood originates from sustainably-managed forests. Italians are particularly interested in long-term relationships with their suppliers, consistent supply, and close customer relations; Industrial end-users in the Netherlands value quality of wood drying, long-term commitments, and close contacts with their suppliers. The large fluctuations in exchange rates between. the guilder and the dollar are a major Dutch concern. ADVANTAGES FOR PACIFIC NORTHWEST MANUFACTURERS Manufacturers in the U.S. have higher labor costs than many other countries now producing commodity lumber. In order to be more competitive, U.S. manufacturers should therefore concentrate on manufacturing value-added products of high quality. Low-quality products and bulk-type producti6n can be made less expensively in other countries with lower salaries. Today, Pacific Northwest wood manufacturers have some advantages over their Scandinavian counterparts. These include lower labor costs1 lower raw-material costs, larger logs, larger components of 6lear wood and a greater variety of species. ENTERING THE EUROPEAN MARKET U.S. wood manufacturers can change their image in Europe by learning more about the market, meeting the customers' specific demands, and understanding the cultural differences dictating how business is conducted. It will take some time and effort in traveling to meet the customers and determine their specific needs. lt rnay also be necessary to invest in new equipment. Some important key issues U.S. manufacturers should consider when exporting to Europe are: Try to develop a strong relationship with the industrial end-user. Look to the European market as a long-term investment, not a market to turn to when the U.S. economy is down. Develop a long-term strategy to seek loyal customers rather than always trying to sell at highest price. Promote products that are less sensitive to price and encourage end-users to be loyal to their supplier. Concentrate on a few markets and customers, create a healthy niche, then try to service them well. Ensure a high quality of drying, as this is very important to European customers. Sort the lumber according to customer demands. Better sorting requires relatively tittle extra effort. EXPORTING TO EURQPE Even though Europe will be a single market ft would be a mistake to adhere to a single "European" marketing strategy. To be successful in this large market, ft is necessary to have a country-specific marketing strategy. Each country will continue to have specific product demands, design trends, and cultural differences dictating how business is conducted. These differences will not be significantly altered by the European integration. To be more successful in the European market, U.S. manufacturers can change strategy from traditional production-oriented manufacturing of industrial commodity products to more market oriented production of specific products. There will be a large demand for wood components in Europe in the future. Increased export opportunities exist for U.S. manufacturers if they can define quality and adjust to new market conditions.
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Authors: Juha Niemela, Heikki Julin, Paul Smith, David CohenExecutive Summary Background and Purpose This research is based on the following strategic issues facing the softwood lumber industry in Western North America: 1) the economic importance of the lumber industry for Western North America; 2) factors affecting the operating environment of the industry; 3) changes in customer needs; and 4) the need for information in the area of strategic planning. The main purpose of this study is to provide information regarding the marketing strategies employed by Western North American sawmills. The results of this study will aid strategic planning in the Western North American lumber industry, and its purpose will be achieved by describing the marketing strategies used in the Western North American lumber industry and by comparing and contrasting the marketing strategies employed by U.S. and Canadian lumber producers. Research Methodology The theoretical background for this research is based on extensive research work reported by several authors in the area of strategic planning and marketing strategies. The concept of marketing strategy, especially that used in operationalization, has its theoretical and methodological base in the work by professor H. J. Juslin at the Department of Forest Products Marketing in University of Helsinki in Finland. This concept examines marketing strategy based on strategic decisions concerning: products, customers, market areas and competitive advantages. The generic competitive strategies are assessed based on Porter's (1980) model. The data for this study were collected via personal interviews during the first half of 1991. A purposive sample of 79 companies was selected and a personal interview was conducted with 81.0 percent of the companies that were contacted. The data were analyzed using univariate methods of analysis. The results are presented mainly in two categories, namely the Western U.S. and British Columbia, Canada. Profile of Respondent Companies The production of respondent companies represented 65.4 percent of the total lumber production in the targeted area in 1990. Over two-thirds of the production was commodity products in both countries. British Columbia firms exported a much higher proportion of theft production (6.5 times) than the responding firms in. the Western percent. However, 92 percent of the commodity products produced in British Columbia were exported to the U.S. According to annual gross sales, responding firms were represented by relatively more small and big companies in British Columbia than in the Western U.S. In both countries, the companies interviewed concentrate on serving just a few types of customers. The five major customer types identified buy 92 percent of the production in both countries. Marketing Strategies The present production of companies reflects strategic decisions they made in the past This might explain the differences found between production figures and product strategies. The present product strategies should be actualized in the future. The product strategies give a clear indication that 9ompanies in British Columbia are moving from commodity products to spe¬cialty and custom-made products. in the Western U.S., commodity products are still being emphasized quite heavily; however, some indication of a move toward specialty and custom-made products can be observed. According to customer strategies, companies in both countries are rather selective when choosing the customers to be targeted. Western U.S. companies are more selective versus responding firms in British Columbia. That is somewhat surprising, because Western U.S. companies continue to emphasize a commodity product strategy. Regarding market area strategies, companies in both countries are very selective in choosing their market area. Western U.S. companies are perhaps more selective compared to responding firms in British Columbia, according to the interview results. Connections Between Marketing Strategies And Marketing Functions The marketing strategies are realized through marketing structures and functions. Marketing structures are marketing organization, planning and information systems, contact channels, and channels of physical distribution. Marketing functions can be divided into contact functions (personal contacts, marketing communication and market information) and product functions (product planning, pricing and physical distribution). The functional levels are presented in this study through the measurement of export marketing channels, product development and collection of market information. Exports of products were divided into 12 different export marketing channels. British Columbia exports 85 percent of its production (most to the U.S.) compared with only 13 percent of responding U.S. firms' production going to international markets. In general, British Columbia companies seem to be using somewhat more direct contacts with end-users and they also use more domestic agents than companies in the Western U.S. Over half of the companies in the Western U.S. and over two-thirds in British Columbia are pursuing continuous and systematic product development The companies with no product development (less than 15 percent of all responding firms) are found among the companies that are applying a commodity products strategy, a specialty products strategy or a combination of these two., The most important stating point for product development in both countries was to more effectively utilize raw materials and adapt production to raw material possibilities. For companies applying a specialty products strategy, raw materials seem to be an even more important stating point than for companies applying other product strategies. In general, responding firms did not perceive a great deal of difficulty in connection with research and development. The largest problems in the Western U.S. appear to be the economic resources and the organization of research and development In British Columbia the largest problems are technological and economic resources. In both countries, most of the companies are collecting market information either continuously or occasionally. Also in both countries, companies applying a commodity product strategy or a specialty product strategy appear to be more occasional and casual in their collection of market information. Connections Between Marketing Strategies and Profitability of the Companies In the Western U.S., over 70 percent of the responding companies were profitable, whereas in British Columbia under half of the companies were profitable in 1990. Only 37 of the 64 responding firms in both countries provided information on their profitability. The connections between marketing strategies and profitability were not found to be statistically significant ![]()
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Authors: Jeffrey L. Moffett and Thomas R. WaggenerAbstract This paper examines Japanese forest products production, consumption and net trade trends, and the factors that have influenced these trends, from 1879 to the present. Prior to 1964, only industrial wood products are considered. After 1964, sawnwood and plywood are included. The reasons for the development of Japan’s dependence on foreign forest resources are explained. Domestic wholesale and imported industrial wood prices are considered key factors. Rapidly rising prices following World War I and during the 1950’s let to the promotion of imports. During the 1960’s, Japan’s economy outgrew the potential of its forest resource supply. Foreign competition and high domestic costs caused Japan’s domestic production to stagnate during the 1970’s and 1980’s. Japan’s major trading partners are also outlined. Executive Summary Historical Background Early Developments: 1879-1921 Japan entered the global forest products market as a net exporter of industrial wood during the 1860's. The introduction of modern pulp and paper technology during the 1890's caused domestic woo4 prices to rise. As a result, many tree plantations were established at the turn of the By 1907, net exports of industrial wood reached a peak of 1.0 million cubic meters. Japan's rapid economic development placed a constantly increasing demand on the nation's forest resources. New sources of energy allowed fuelwood production to decline, while industrial wood production increased. Until World War I, prices remained stable as net exports declined. century. Earthquakes: 1921-1930 During World War I, domestic industrial wood prices increased significantly. In 1920, a large earthquake hit Tokyo. This increased the demand for wood and added further upward pressure on prices. In 1921, the Japanese government responded by lowering the tariffs levied on imported wood and Japan became a net importer of industrial wood for the first time. In 1923, the Kanto Earthquake and Fire devastated the Tokyo-Yokohama region. So much wood flowed into the Tokyo port that by 1924 Japan was importing 29 percent of the wood it consumed. The price of imported wood was falling as a result of the increased supply, causing domestic production to stagnate. In response, the Japanese government raised the import duty on imported timber five times between 1926 and 1933. The Depression and Recovery: 1931-1 939 During the 1930's, Japanese production of industrial wood reached new peak levels. By 1938, Japan was again a net exporter. Throughout this time Japanese colonial expansion increased its forest resource base. In 1940, production reached a peak of 34.0 million cm The War Era: 1940-1954 As a result of World War II, Japan lost its colonial resources and a significant portion of its wood processing capacity. In 'addition, the lack of foreign exchange forced Japan to depend entirely on its own forests during the. first ten years of reconstruction. Thus, by the mid-1950's Japan's forests were degraded and prices were rising. At this time many tree plantations were established. In order to help generate foreign currency at this time, Japan began importing logs from the Philippines and manufacturing plywood to be exported to the United States. Era of Increased Trade: 1955-1973 By 1961 Japan's economy was demanding more wood than domestic resources could supply. In response, the government adopted a policy of promoting imports. Throughout the 1960's, Japan's GNP grew 10 percent per year on average. The volume of imported wood grew substantially as a result. Domestic production of industrial wood grew steadily until reaching a peak of 51.8 million cm in 1967. By this time Japan's forests had been exhausted. In 1973, imports accounted for 58 percent of consumption which reached a peak level of 99.6 million cm. Fuelwood and other industrial wood production was reduced to the 1.0 million cm level in favor of producing pulpwood and sawlogs. Sawlogs and wood chips accounted for most of the imports. With these resources, Japan produced almost all of the lumber, plywood and pulp it consumed during this period. The increased consumption of imported wood stabilized prices, while the costs associated with forest management in Japan increased. As a result, the annual area of forested land has declined since 1960. The most noticeable drops in afforestation occurred between 1970 and 1975. Post Oil Crisis Stagnation: 1974-1990 The Oil Crisis in 1973 brought about a global recession. By 1975, Japanese forest production had declined to 34.2 million cm. Although the Japanese economy recovered from 1976 to 1979, domestic production remained practically constant while imports increased to meet consumption. In 1979, imports accounted for 64 percent of Japan's industrial roundwood consumption. in fact, Japanese industrial roundwood production has remained consistently near the 33 million dm level since 1975. Therefore, it appears that Japanese forest production is comparatively insensitive to market fluctuations. Following a recession during the early 1980's the Japanese economy resumed expansion. Housing starts peaked In 1990 at 1.7 million units. Forest products imports increased as well, however the import profile has shown signs of change during this period. Imports of manufactured products such as conifer sawnwood and plywood have increased significantly. On the other hand, hardwood sawlog imports declined and softwood sawlog imports increased only slightly. Thus, Japan has increased its imports of value-added products. The primary factors influencing this change have been supply constraints within exporting nations and the stagnation of Japan's forest sector. Foreign Suppliers Japan has imported most of its conifer wood from the United States, Canada and the Soviet Union. The U.S. and USSR have supplied most of the imported sawlogs since the 1960's. Recently, U.S. exports have remained stable, while Soviet exports have declined. Canada has historically banned most log exports. Japan has imported most of its conifer lumber from Canada and the U.S., with Canada holding the largest market share. Japan's hardwood Imports have come from Indonesia, Malaysia and the Philippines. By the mid-1970's Philippine exports dropped significantly as resources were reduced. Through the 1970's Indonesia supplied about halt of Japan's hardwood Imports. However, by the 1980's Indonesia had successfully banned log exports. As a result, Malaysia has held more than a 90 percent share of the hardwood import market since the early 1980's. Conclusion Recent trends are likely to continue. During the 1990's many Japanese houses, that were poorly built 20 to 30 years ago, are expected to be rebuilt with higher quality materials and more wood. Thus, demand Is expected to remain stable. Foreign log supplies are expected to remain tight, although New Zealand and Chile have increased exports recently. Producers in supplying countries are likely to continue competing for larger shares in the Japanese lumber and plywood markets. Wood chip demand is also expected to remain strong. Given the current state of the Japanese economy, forestry costs will remain high. Unless prices rise substantially, Japan's forests will remain uneconomic to harvest. Therefore, Japan's foreign dependence on forest products is not likely to change. ![]()
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Abstract Wood product markets are subject to substitution by lower cost non-wood materials. Alternative materials such as aluminum and vinyl are generally more fossil fuel intensive and have different environmental impacts from renewable wood resources. Increased attention to environmental impacts has drawn increased attention to substitution of wood by non-wood products. This study surveys the available research on explanations for substitution related to economic and technological change, then models substitution within a particular end-product market. The question of whether substitution can be explained by prices of technological change almost independent of prices is an important factor in analyzing the impacts of policies on the environment. This report uses as a case study the United States residential window market, where wood and aluminum windows have been competing for the past five decades. Prior to World War II, wood windows dominated the window market. Since then aluminum windows have increased market share. By 1982, wood windows held only 26 percent of the market. Throughout much of this period, not only were wood windows more expensive than aluminum windows, but the price differential steadily increased. Substitution models based on distributed lags of relative p4ces appear to provide more accurate and detailed information on market share changes than models that rely on arbitrary technological innovation formulations. While the short-run own-price and cross-price market share elasticities may be low, the long-run elasticities suggest that direct substitution between competitive products, such as wood and aluminum windows, can exceed 1.0. The case study shows a 1.7 percent change in wood window market share in the long-run for every one percent change in relative price. This high long-run price elasticity of substitution may have significant implications for carbon mitigation analysis and other environmental policy issues. The primary differences between wood and non-wood alternatives used in residential and light commercial construction are the energy requirements involved and carbon emissions related to fossil fuel consumption in production. When all of the aspects of extraction, transportation, processing and production were considered, wood products were found to require less energy in manufacture (CORRIM, 1976). The exact amounts differed for each end-product. Several studies have examined the environmental impacts arising from the production of wood, plastics, aluminum, steel and concrete. Each of these industries has substantial extraction impacts. The manufacturing of steel, aluminum and plastics was judged to create more significant problems than sawn-wood and cement (Alexander and Greber, 1991). Furthermore, wood has the unique attribute of being a renewable resource which can be managed over many rotations. The most significant effect of forest management on the level of carbon dioxide in the atmosphere will come from the substitution of wood materials for more energy-intensive materials. New approaches to forest production and more intensive forest management practices requiring forest investment would be necessary to increase the production of higher-quality logs needed in order to increase the substitution of wood for non-wood products. While shortages of wood products due to forest preservation constraints may reduce wood demand and forest investment on one hand, carbon taxes on fossil fuels could have the impact of increasing demand and forest investment resulting in the substitution of wood for non-wood products on the other. In effect, environmental policies need to consider substitution issues which are likely to show a strong advantage for the use of renewable resources. ![]()
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Authors: Guy C. Robertson and Thomas R. WaggenerAbstract This paper presents a reassessment of the productive potential of Japan's forest resources along with a qualified refutation of several recent studies in which Japanese domestic timber production is predicted to rise in the medium to long term. After an examination of the biological dimensions of Japan's forest resources and their relation to the studies being questioned, the main argument of the paper is made, concentrating upon economic and political factors surrounding the Japanese timber industry, factors which we see as presenting a substantial barrier to increased production. Of these, three are examined in depth: 1) rising labor costs which, in conjunction with low labor productivity, have seriously eroded profitability in the forestry sector, 2) the Japanese wood products market which we see as being unable to support increased consumption of domestic wood products at prices which Japanese timber production currently demands, and 3) Changing attitudes within the Japanese populace at large which emphasize alternative forest uses and ecological values over and against timber production. It is concluded that, barring major changes in the world market for wood products, Japanese timber production will most likely continue to decline in spite of a growing stock of harvestable timber. This conclusion has direct implications for timber producers in the U.S. Pacific Northwest and bears heavily upon the environmental and economic aspects of Japan's participation in the global wood products market. ![]()
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Authors: Charles A. Backman and Thomas R. WaggenerThis working paper contains an executive summary within the document. Click on the PDF below to access the full article. ![]()
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Author: John M. Perez-GarciaSummary The Pacific Northwest has traditionally been a strong participant in international forest products markets in the Pacific Rim. The combination of a substantial resource base, processing capabilities to manufacture high quality timber products and export facilities have contributed to a comparative advantage in the export of wood and wood products. The region has been able to maintain its comparative advantage, and hence its market share in the Pacific Rim at a time when other U.S. regions, notably the South, have successfully increased domestic market share. Recent environmental legislation has reduced the timber resource base substantially and will impact the management of additional areas. A 44 percent decline in timber sales volume in 1989 will result in an annual 9.7 million cubic meters (2.0 billion board feet) reduction by 1995 in public timber harvest. As a consequence, public timber revenues will deadline and there will be higher relative sawlog cost to both domestic and foreign purchasers of timber produced in the region. The 75 percent log export restriction by the state of Washington will lower these costs for domestic mills, but increase them further log foreign purchasers. The reduced timber harvest and trade restriction will also diminish the export value of logs and finished products originating from the region. Hence, the region's comparative advantage and market share will decline as other regions will become more competitive with the Pacific Northwest in forest products trade. Specific measures of these impacts associated with a 2 billion board feet reduction in public timber harvests are: 1) The decline in timber sales volume from public lands reduces public timber receipts by$176 million (in 1988 dollars) in 1995 and reaches $188 million in 2000. The total revenue decline for the public sector amounts to $1.9 billion d6llars for the 11 year period (1989-2000). 2) The reduction in timber sales volume from public lands in the PNW region leads to increased log production from overseas producers. Other producers offset nearly 90 percent of the timber reduction in the public sector. Over half of the harvest reduction is made up overseas in only two years. The private sector in the PNW region is unable to effectively increase the share of the log market. Harvests from the private sector in the region begin to decline in 1993. By 2000 timber harvest from the private sector in the PNW is only ten percent of the contribution by other regions. 3) The impact on sawlog costs for the sawnwood and plywood sectors is substantial. A 9.7 million cubic meter reduction in public timber harvest will increase annual log costs by $1 billion in 1995 and 2000 on a global basis. Log costs in 1995 in the PNW region will increase $211 million compared to $63 million for the South and $34 million for Canada. A similar pattern is observed in 2000. In Japan, the impact of reduced timber supply increases log cost by $131 million in 1995 and $90 million in 2000. Log cost impacts in 2000 are lower as Japan adjusts to the decrease in public timber harvests. The price increase for sawlog will allow marginal softwood log producers to harvest more logs. The substitution of hardwood logs for softwoods can also be expected in regions where technological and economic constraints are not binding. 4) The impacts on profits for sawmills and plywood mills are also substantial and regionally distributed. Profits in the U.S. West decline in 1995 by $79 million. There are only modest gains in profits in the South: $7.4 million. In 1995, Canada increases its profit in the sawmill industry by $84 million. The decline in profits in 2000 for the U.S. West is $60 million, while the South's profit increase by $1 .3 million. Canada, by 2000 increases its profits in the sawmill industry by $90 million. Japan's sawmill industry sees a decline in profits of $77 million in 1995 and $32 million in 2000. 5) In the export markets, the value of U.S. log exports declines by $152 million in 1995 and$168 million in 2000. Globally, the value of log exports decreases by $75 and $83 million in 1995 and 2000 respectively. Nearly one quarter of 'the decline in U.S. log export value is recovered by Chile and New Zealand during this period. In the sawnwood markets, the decline in value of coniferous sawnwood is matched by an increase in export value from Canada. The value sawnwood exports by U.S. West is reduced $135 million and $246 million in 1995 and 2000, respectively. Canada increases its export value of sawnwood by $152 and $205 million in 1995 and 2000 respectively. In the plywood sector, the U.S. West experiences a decline in export value of $45 million in 1995 and 2000, while the U.S. South increases its export value by $57 and $58 million in 1995 and 2000 respectively. 6) The diminished supply of timber in the region will reduce lumber and plywood production globally and increase the prices of finished product. Globally the cost to consumers in increased lumber and plywood prices is $849 million in 1995 and $904 million in 2000. For the U.S., the consumer costs are $161 million in 1995 and $198 million in 2000. The price increase for lumber and plywood will promote greater non-wood substitution as end users will prefer new technologies that incorporate less wood inputs on the basis of factor cost. While policies that promote the conservation of forest resources for non-timber outputs are likely to be successful within the regions in which they are implemented, allowing the region to achieve a higher environmental standard, the impacts of reduced timber harvests will increase timber output pressure on forest resources in other regions and other forests within the region and allow non-wood resources potentially more damaging to the environment to substitute for the wood-based items. The overseas regions that increase their timber outputs do not maintain their forest resources under a sustainable management regime, forest productivity and forest area will decline bringing into question the overall environmental gains achieved with conservation efforts in the Pacific Northwest. In effect, imposing a single regional environmental policy only shifts the environmental benefits from one region to another -- old growth forest area will stabilize in the Pacific Northwest, but forest area and productivity in other regions will fall. When evaluated globally, the environmental benefits of such a trade-off may be negative: restricting the use of renewable forest resources in one region may produce a negative environmental impact globally. The study demonstrates the globalization of specific Pacific Northwest harvest constraints and illustrates the need for a better understanding of the environmental benefits which the forest products industry can provide on a global level. Allowing timber production to take place in regions where sustainable management is more likely to be successful will increase the comparative advantage of forest products versus non-wood substitutes, as well as maximizing environmental benefits within a global context. The present study is a first step in demonstrating these benefits. An extension of the present analysis will quantify the environmental effects with the appropriate linkages between forest products production and trade and the production of environmental by-products. ![]()
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The Future Supply of Timber from Public Lands: Recent Sales Will Not Support Competitive Processing1/1/1991 Authors: John Perez-Garcia and Bruce LippkeSummary Starting in late 1988, environmental litigation had a major impact on US Forest Service's timber sales from Westside Region 6 (the Pacific Northwest). Currently, the prices for most of the timber sold but not yet cut are above the price level that can be expected to be competitive in the market for the foreseeable future. In combination with a declining trend in softwood lumber demand, Pacific Northwest mills are facing a period of negative growth and restructuring. The reduction in forest industry output and the negative regional economic impact will be considerably greater than that being caused by the reduced harvest from spotted owl conservation. The quantity of uncompetitive timber is substantial. Between 1.5 and 3 billion board feet of the US Forest Service (USFS) inventory from Westside Region 6 is currently uncompetitive. Related problems exist on Bureau of Land Management (BLM) and state sales that will add to this volume. Even though changes in contract terms were introduced after the timber buyout legislation in 1984, a setting for massive defaults on contracts has occurred again for the second time in just ten years. The social and economic costs associated with these problems are substantial, including lost revenue for the public sellers, bankruptcy losses by the processors and customers of the public sellers, substantial litigation costs, regional tax revenue losses, increased public assistance costs, and substantial costs to final consumers. The current mechanisms in the timber sale contracts--stumpage adjustment clauses and early harvest discounts--have not prevented harvest price speculation and the occurrence of uncompetitive timber sales. Speculative or desperation bidding, as a result of the environmental litigation, has resulted in contracts for timber that will generate economic losses U the timber is harvested. Substantial increases in product prices would be needed to make these contracts competitive, which does not seem likely in the near future. A quick resolution of the current problems can reduce the magnitude of these negative impacts. More fundamentally, it needs to be recognized that the mechanics of current contracts are not conducive to making regional suppliers competitive or to allow stable marketing relationships with their customers, fundamental parameters in fostering a healthy and sustainable economic environment. Policy changes are required both for relief of the current problem and for the long term benefit of public sellers, producers and consumers. ![]()
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This working paper contains an executive summary within the document. Click on the PDF below to access the full article.![]()
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Authors: James A. Stevens and Darius M. AdamsExecutive Summary The purpose of this study was to examine the prospects and opportunities for expansion of market pulp exports from Alaska. The focus was on opportunities for the addition or new capacity and expansion of exports in grades not now produced. We provide a brief overview of the existing industry in Alaska, its historical development, the characteristics of its facilities, sources of raw materials, and its financial problems. And we provide a view of the potential markets for expanded pulp exports by grade, the likely competition to be faced by Alaskan producers, and the comparative cost position of Alaskan mills vis a vis other regions. Certain conclusions emerge. It seems likely that expanded market pulp exports from Alaska will find their principal markets around the Pacific Rim and particularly in the developed or emerging countries of Asia. There is potential for continued growth in pulp demand in the region. Given constraints on domestic fiber supplies, environmental and cost considerations in domestic pulp production, and continued strong growth in domestic paper and board consumption, Asian demands for pulp imports will likely continue to grow similarly to recent historical trends. Japan will be the source of most of this growth. Both FAO and IIASA projections suggest for Asia as a whole that this increase by 2000 could be as much as twice the current pulp imports. For Asia this would amount to imports totaling some 2.0 million metric tons. A new Alaska mill will produce long-fiber pulp in direct competition with existing major producers in British Columbia and the U.S. Pacific Northwest. Current trends in capacity expansion and the projections of both FAO and IIASA indicate that these regions will continue to figure prominently in Pacific Rim and specifically Asian pulp markets. If the IIASA projections are correct, however, rising wood costs could push the U.S. Pacific Coast into the role of marginal producer, with the bulk of export growth going to British Columbia. It is also clear that Chile and, to a lesser extent, New Zealand are likely to capture growing shares of this trade. And Brazil will be mounting a major effort to substitute its short-fiber pulps for traditional coniferous grades. Both the IIASA and FAO projections suggest that Brazil will have some success in this venture. Cost competition will be keen in this market, particularly within light of the prospect of constant or only limited growth in real pulp prices. Given the substantial cost advantages of South American producers, a minimum condition for a successful Alaska expansion will be the ability to deliver its product in Asian markets at costs at least as low as those in the Pacific Northwest and British Columbia. We are unable, however, to identify any particular cost advantage for an Alaska mill relative to its closest potential competitors in western North America. Our analysis examined both a traditional bleached kraft mill and a smaller, high yield, thermo-mechanical pulp (TMP) mill. In either case, an Alaska mill seems to face cost problems across the full range of inputs, with major disadvantages in wood, labor, energy, and construction costs. The cost disadvantage is even greater when compared to the U.S. South or major Latin American producers. Thus, although a market may exist, it is not immediately obvious that Alaska is in a position to pursue some share of it. These results should he viewed only as broad indicators. Given the time and resource constraints of the present study, we have relied exclusively on secondary and published data to support our analysis. A far more detailed and specific study of both the market and cost sides is needed to reach a definitive conclusion on any particular project. Three items merit specific mention for further study: 1. There is a strong need for close attention to resource and capacity developments in the southern hemisphere. The rapid growth of plantation-based mills in South Africa, New Zealand, and South America has dramatically changed the nature of competition in the global market for pulp in the past two decades. In sharp contrast to the dependence in western North America on natural forests, this resource base was designed and grown to meet mill requirements. The mills operate with considerable advantages in wood costs relative to mills in the northern hemisphere using fiber from natural stands. 2. Previous studies note the potential attractiveness of a TMP mill on the basis of lower capital costs, lower environmental impacts, higher pulp yield, ability to tailor pulp characteristics to specific customer needs, and so forth. High-yield pulping technology has been developing rapidly and is characterized by considerable flexibility in its adaptation to specific resource and market conditions. Detailed analysis may reveal opportunities for targeting particularly high-valued markets, reducing energy and wood costs through technical adaptations, or lowering transport costs through pooled shipping arrangements with existing pulp facilities. As a consequence, this option would seem to warrant close and continuing evaluation. 3. A final key item relates to the cost and availability of wood fiber. In our analysis, we have identified Alaska as a region of pulp production that is relatively high in wood cost, owing in part to high costs of logging and transport of logs and chips. Though our estimates are admittedly crude, this is a crucial concern, because wood is the main variable input cost in production (outside Latin America). At the same time, it is evident that the bulk of wood supplies to a new mill in Alaska must come from the National Forest and that the Forest Service is under intense pressure to limit both current and future harvest levels. These circumstances seem to warrant a thorough analysis of prospective future wood supplies and costs under several assumptions about prospective Agency policies and levels of operation of existing log, lumber, and pulping facilities. This study was undertaken through a grant from the USDA, Forest Service, Pacific Northwest Research Station and the Center for International Trade in Forest Products at the University of Washington. The report, part of a larger study of Alaska forest resource opportunities, was completed in 1989. The trends noted in the study have continued and the conclusions, based on data available at the time, remain valid. ![]()
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Authors: David Briggs and Donald FloraSummary Log measurement systems vary widely among different countries and regions within a country, sometimes with large and Inconsistent differences. A lack of understanding of these systems and their differences can sour buyer-seller relationships and cause confusion far analysts who work with trade data. Historically, major log trade flows have been between Japan and other countries, primarily the US for softwoods and southeast Asia for hardwoods. Recently, Japan's log sources have diversified to include New Zealand, Chile, and the USSR. This paper describes Japan's log measurement systems and traditional (koku) and metric units of measure. It also presents information on log measurement systems in supplier countries and clarifies how these are treated and reported in Japan. ![]()
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A Technical Assessment of the North American-Style 2x4 Residential Construction System in Japan1/1/1991 Authors: Ivan L. Eastin, Tom C. Ossinger, Roger B. Williams, Steven R. Shook, Robert Hashizume and Joseph A. RoosExecutive Summary Anecdotal information from US architects and contractors with experience in residential construction projects in Japan indicates that Japanese construction professionals often do not fully understand the North American-style 2x4 construction system and often employ construction techniques that can compromise the structural integrity and/or long-term performance of these homes. A recent study by CINTRAFOR estimates that 2x4 construction costs in Japan range from 2 to 2.5 times higher than in the US (Eastin et al. 1995), partly due to differences in the way that the technology and construction management practices are implemented in Japan. The CINTRAFOR study suggested that Japanese construction professionals could improve their cost effectiveness and improve the quality of 2x4 homes built in Japan by increasing their understanding of North American-style 2x4 construction technology and construction management practices. This research project was designed to provide specific information about how North American-style 2x4 homes are built in Japan. The specific objectives of this research project were to:
Given the emphasis of this project, it is unavoidable that the tone of the discussion could easily be construed as being overly negative. However, it is important to emphasize that in many of the projects visited, particularly those being built by large construction companies, the technical team observed that the quality of construction was very good. While it is always dangerous to generalize, the technical team found that larger home builders, and the home builders with more experience with the 2x4 construction technology, generally were building good quality North American-style 2x4 homes. In contrast, the team observed that the projects with the lowest quality ratings were managed by smaller construction companies or companies with little or no experience in building North American-style 2x4 homes. The results of the construction cost assessment and the technical assessment indicate that technical training seminars should focus on the following areas:
Finally, some sort of independent certification of North American-style 2x4 homes built in Japan should be considered. The certification process could focus on the structural components of the home or could be extended to include the routine maintenance of the home as well. A certification program would not only ensure that North American-style 2x4 homes are built using the correct construction techniques but it could provide a forum to facilitate the provision of technical training programs in Japan. It is critically important, from the US perspective, that the structural integrity of North American-style 2x4 homes in Japan is not compromised by the incorrect application of North American-style 2x4 construction technology. From a long-term strategic market development perspective, it is imperative that Japanese builders and carpenters be properly trained in 2x4 construction technology in order that the growth of this important segment of the Japanese housing market not be jeopardized by substandard product performance. Given the Japanese expectation of high quality, the long-term growth potential of the 2x4 market is dependent on maintaining the quality of the North American-style 2x4 houses being built in Japan. From a marketing perspective, the role of quality is more important than low price in Japan and every effort should be made to ensure that the North American-style 2x4 construction technology is implemented correctly by Japanese contractors and carpenters. Failure to ensure the correct transfer of North American-style 2x4 construction technology would contribute to a perception by Japanese home buyers that 2x4 housing is poor quality, and would undermine efforts by North American companies and industry associations to further develop this growing segment of the Japanese housing market. Over the long-term it is equally important that US value-added manufacturers and exporters work to gain greater acceptance of US wooden building materials in the other segments of the Japanese housing industry: post-and-beam and pre-fabricated housing. This includes learning how building materials are specified, by whom, what factors affect the specification process, and how to influence the specification process effectively to increase the use of US building materials in these segments of the Japanese residential construction industry. Similarly, it is equally important that US exporters better understand the role of maintenance and product support factors (e.g., local inventory, product installation instructions and support services, and product maintenance literature) on the competitiveness of US building materials in Japan. Other factors such as product distribution and product support affect the overall success and acceptance of North American-style 2x4 projects, although these were not a part of the terms of reference of this project. ![]()
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Author: Rosemarie BradenExecutive Summary During 1997 South Korea (Korea) imported almost $300 million in primary and secondary wood products from the US, making it the third largest export market for US wood producers. While almost 41% of the value of wood product exports was derived from unprocessed logs, this number is down 85% since 1983. The standard of living for most South Koreans has improved phenomenally since the end of the Korean War, and expenditures on housing and secondary processed wood products imported from the US have increased. The value of wood frame homes and secondary wood products from the US increased 203% from $14.5 million in 1990 to $43.8 million in 1997. As a result, exports of secondary processed products to Korea, as a share of total solid wood exports, increased from 3.9% in 1990 to 14.6% in 1997. While access to the Korean market continues to improve and demand for wood products appears to increase, US exporters still face many challenges. While some barriers are specific to wood products (i.e., restrictive and inadequate building codes), others are more generic (i.e., complicated distribution system, cultural differences, a complex business permitting system). The challenge confronting US exporters is to develop a better understanding of the Korean residential construction industry; viable end-markets for US wood producers; the extent of repair and remodel activity in residential and commercial structures; Korean business practices; the competitive position of US wood products in Korea; consumer preferences; and marketing strategies that may provide US wooden building materials with a competitive advantage in this market. This report is based on information gathered during May 1998 through interviews of Korean industry analysts, importers and distributors, architects, construction companies, editors of trade publications, and manufacturers. US manufacturers were also interviewed in order to gather information about specific obstacles that US companies face and strategies they may employ. The result is a compilation of supply and demand trends, import statistics, primary competitors, competitive factors, information about the distribution system for wood materials within Korea, and analysis of risks involved with exporting to Korea. Finally, recommendations for companies either currently selling products to Korea or for those interested in entering the market are provided. The Korean Housing Market: Viable Markets and BarriersThe most promising sector for solid wood interior products appears to be the single-family and low-rise multi-family residential construction sector. Single-family and low-rise multi-family homes comprise approximately 20% of the housing units built in Korea in 1997. While the majority of consumers live in high-rise concrete apartments, more single-family homeowners are purchasing higher-priced, solid wood products. Among single family homeowners product appearance and quality are more important than price. Wood frame homes are becoming increasingly popular among upper income consumers. The number of homes built was rapidly increasing until the Korean economy took a downturn in late 1997. The number of western-style wooden housing starts increased from 97 units in 1994, to approximately 800 units in 1996, and an estimated 1,100 homes in 1997. Many importer/wholesalers and industry analysts in Korea expected the number of wood frame homes in 1998 to have reached 1,500 if Korea had not entered a recession. US manufacturers supply approximately 60% of the 2x4 wood frame construction sector. According to interviews of wood frame construction companies, consumers generally use interior wood products from the same country that produced their home. Therefore, while no statistics exist, it is estimated that US manufacturers maintain approximately 60% of the interior wood products market within the 2x4 wood frame home sector as well. US interior wood product manufacturers are significantly less competitive in the high-rise apartment sector, where solid wood and composite products manufactured by lower-cost domestic and Southeast Asian producers are popular. The Korean mortgage system requires consumers to pay approximately 80% of the home price up front, and pay the remaining loan in 5-20 years. Therefore, many consumers cannot afford to purchase expensive finishes when they initially buy their apartment. The system of awarding contracts to supply materials to construction projects in Korea can make it very difficult for small, particularly foreign, companies to succeed. About 30 large construction firms build approximately 70% of apartments. Small companies hired by condominium associations build the remaining apartments (CERIK 1998c). Large construction companies purchase not only products, but also product installation from the same company. In high-rise apartments, approximately half of all construction work is subcontracted in this manner. In addition, the subcontractor or supplier provides financing to the construction company. The key to winning a contract may not be subcontractor ability or low price, but the ability to extend financing. If a company is too small to be able to provide financing, they may partner with a product manufacturer. Problems may arise when subcontractors cannot purchase materials for upcoming jobs because they have not received payment from past contracts they financed. It is common for large construction companies to obtain financing from multiple companies, then pre-sell the apartment units and use the funds received from the financing for other construction projects or financial ventures. Prior to Korea’s economic crisis, many large corporations used financing from smaller suppliers to leverage other investments and business ventures. When these investments failed, many large firms declared bankruptcy and defaulted on debts, forcing many smaller companies who had provided financing into bankruptcy as well. Opportunities Created by the Korean RecessionWhile the Asian economic crisis sharply curtailed prior financial growth in Korea, it appears that the current economic crisis may have positive long-term impacts on future foreign investment and trade. President Kim Dae Jung and his cabinet launched one of the most aggressive economic restructuring campaigns in Asia. Many of the Korean government's reforms are supplementary to reforms required by the International Monetary Fund (IMF). In an effort to stimulate the domestic economy by attracting foreign capital, the Ministry of Finance and Economy (MOFE) instituted several economic reform policies that will relax real estate and foreign investment laws to attract foreign capital. First, the MOFE instituted a policy to increase the maximum allowable foreign ownership of domestic companies from 55% to 100%. The limit on government-run companies has been expanded from 25% to 30%. Second, new legislation called the "Law on Land Acquisition by Foreigners,” adopted in May 1998, allows foreign companies to purchase and develop land in Korea. Residential land development, which was strictly confined to government and public land development, is now open to both domestic and foreign private sector development and all land ownership restrictions imposed on foreigners have been removed. Fourth, administrative procedures for foreign investment in real estate are being streamlined. To facilitate land transactions of government-held debt properties, a series of asset-backed securities was issued starting in July 1998, after approval from industry experts and foreign investment banks. Fifth, the Korea Trade Investment Promotion Agency (KOTRA) was established as a one-stop office for processing and facilitating real estate transactions for foreign investors (Construction and Economy Research Institute of Korea (CERIK) 1998a). Finally, hostile mergers and acquisitions by foreign corporations of domestic firms are now allowed (Korea Trade and Investment 1998). While the Korean economy has not been restored to pre-recession conditions, economic reform measures are causing the economy to recover at a faster rate than projected. Economic recovery is in part a result of US $58.35 billion in relief funds from the IMF, the World Bank, and the Asian Development Bank. In an effort to restructure the banking system, the MOFE also announced that unstable banks will be merged with relatively healthy banks or will be obliged to transfer their assets and liabilities to viable banks. Financial institutions and large corporations were also required to establish cost accounting systems as a means of making their business operations more transparent (Korea Trade and Investment 1998a). The combination of foreign financial aid and domestic restructuring in the financial sectors has resulted in tangible changes in Korea's economy. Since first quarter 1998, the Korean government converted US $21.8 billion of outstanding foreign short-term debt to medium-term debt (AF&PA 1998b). By May 1999, the Korean stock market reached the 842 points, or 1.4 million won, the highest point in almost three years. The purchasing power of the won has also rebounded. The won-US dollar exchange rate increased from low of 1,960 won per US dollar in December 1997, to 1,184 won per US dollar in June 1999, Korea's strongest exchange rate since November 1997 (US Federal Reserve Board 1999). Market interest rates also dropped from a peak of 40% to 10-12% in July 1998. Projections for further economic recovery are also promising. The Organization for Economic Cooperation and Development (OECD) raised its growth forecast for the Korean economy from a 0.5% to 4.5%, while other official and private researchers also agreed on a 4% range of growth for Korea in 1999 (Korea Times 1999). J.P. Morgan, a US-based investment firm, forecasts 4% growth for the Korean economy for 1999, and 4.5% growth for 2000 (Korean Trade and Investment 1999). Foreign investment has also surged. According to Korean Ministry of Commerce, Industry, and Energy analysts, foreign investment is expected to reach US $15 billion by the end of 1999 after reaching a record US $8 million in 1998 (Korea Trade and Investment 1999). The consumer market is also starting to improve. Consumer prices increased 8.6% during first quarter 1998 compared to first quarter 1997. However, by March 1998 consumer price increases decelerated slightly due to the decline in domestic consumer demand and a gradual improvement in the stability of the won (Bank of Korea 1999). Despite a 0.05% decrease in the monthly average income per household, average urban household consumption rose 8.9% during the first three months of 1999 compared to 1998, according to the National Statistical Office. This was the first time since the onset of the economic crisis in late 1997 that urban household consumption recorded positive growth (MOFE 1999a). Imports have also increased. By the end of 1998, total imports declined almost 36% and imports of wood products declined almost 60%. During the first quarter 1999, however, imports of wood products increased from 30% to 200% (depending upon product) from year-end 1998 levels. Forecasts for housing starts predict that 460,000-500,000 will be constructed during 1999, an 80% increase from 1997. Industry analysts expect the demand for wood products from the US to follow the upward trend in the housing sector (AF&PA 1999). Despite improvement in consumer prices and spending, the unemployment rate continues to increase. Unemployment reached 1.88 million or 8.6% by first quarter 1999, the highest since July 1982 when Korea started to record employment statistics (MOFE 1999). Analysts state that the increase is the result of the aftermath of the economic slump combined with the impacts of business restructuring (Digital Chosun 1999). Government officials expect that the unemployment rate will begin to contract following the overall strengthening of the economy starting during the second quarter 1999 (MOFE 1999a). ResultsKorea's economy is undergoing a dramatic transition that promises to restructure the financial system, construction sector, and business environment comprehensively. Banks and chaebol, or large Korean conglomerates, are being required to make their accounting systems more transparent. Chaebol are also being forced to raise capital by divesting some of their business holdings. The government has also lifted limits on foreign investment and business partnerships. The result will likely be an open business market where consumers are given more products to choose from, and where international products will be more competitive with Korean-made products. This is an opportune time to begin educating consumers and advertising the benefits that consumers can get by using wood products. When housing was in short supply, construction companies were able to use low to moderate quality building materials and still sell units. Now that there is an oversupply of housing, consumers realize they have a choice and they expect higher quality alternatives. An open market is likely to have significant implications for product marketing. Korean consumers are very fashion conscious and are influenced by popular trends in advertising. Consumers tend to purchase products they see on television shows, in print advertising, or endorsed by celebrities. Journalists from major daily newspapers are also very influential in guiding consumer preferences. Therefore, newspapers can be very effective in terms of educating Korean consumers about products. After the Korean market is open, product literature, articles, and advertising should focus on the benefits that can be derived from using US products in general or a particular company's product. Advertising that highlights innovation is directly related to product success. Since individuals did not have a wide range of high-quality affordable products prior to the market restructuring, special features and benefits derived from the product should be highlighted. Since US suppliers cannot compete with many domestic and Southeast Asian producers on the basis of price, product marketing should focus on quality, durability, and design attributes. In general, US companies can increase sales if they market their products in Korea more aggressively. The market for solid wood interior products is far larger than the US market share. For example, according to Korean respondents, US manufacturers have not aggressively marketed kitchen cabinets. In 1997, US companies supplied only 0.02% of the $118,000 imported kitchen cabinet market. On the other hand, US manufacturers have actively marketed wood frame homes through advertising and trade shows. As such, they maintain 60% of the imported wood frame housing market and an estimated 60% of the interior products used in wood frame homes. US companies can take advantage of the recent economic downturn to educate Korean consumers and builders about the benefits of using US wood products. If US companies establish brand recognition in Korea now when the economy fully recovers Korean consumers may be primed to purchase US goods. Both Korean and US respondents agree that Europeans, and Italian manufacturers in particular, are more aggressive in their approach to the Korean market, which has translated directly into greater market share. Many trade magazine editors derive the content of the magazines from product literature and promotional articles from manufacturers. US manufacturers do not appear to be capitalizing on trade magazines as a means of advertising. The importance of architects in selling products also appears to be overlooked by US manufacturers. Architects most frequently specify materials. As high-income apartments become more prevalent, architects may be the best route to enter the apartment sector. They rely upon trade magazines, product literature, and trade shows to learn about products, yet based on interview response, US firms do not appear to be reaching this segment. According to architects interviewed, they find most information on US products by attending trade shows in the US. Foreign companies must also invest time and resources to learn about Korean consumer preferences and product needs. For example, Korean consumers do not like do-it-yourself projects. Instead, retailers provide full service with the goods they sell, often assembling break-down furniture as part of after-sales service. While the majority of consumers live in high-rise concrete apartments, this may not be the most viable sector for US solid wood products. It can be both complicated to understand the distribution system and to establish a contract with large companies. It can also be financially risky to try to sell materials to these firms. More viable markets include 2x4 wood frame homes, wood townhomes, non-wood single-family and low-rise multi-family homes, and the remodeling sector. While North American interior wood products dominate the single family 2x4 wood frame home market, a limited number of individuals are capable of affording single family homes and the larger lot size that a single family home requires. The desire to own a wood frame home, however, is widespread, particularly among the younger population. According to a survey conducted by the KyungHuan Daily Newspaper and LG Advertising, many young people indicate that they prefer wooden homes in a suburban setting even if it means a long commute to their jobs (AF&PA 1999). Therefore, the market for American-made interior wood products may increase if US policy-makers and builders are able to increase the number of affordable townhomes. The current building code in Korea places height and construction restrictions on wood frame housing, which requires builders to modify their building plans to include more fire protection measures. However, a new building code that more closely resembles US codes is currently being reviewed by the Ministry of Construction and Transportation (MOCT; AF&PA 1999a). The Korean government has already made land available in outlying areas around Seoul to encourage the development of "Satellite Cities.” Builders might look to these areas for sites for townhome developments. The benefits of making wood frame housing affordable are two-fold. By building and marketing townhomes as an affordable alternative for wood frame homes, builders may not only reach a larger segment of the population, but since Korean consumers are heavily influenced by fashion trends and word of mouth advertising, townhomes may catch on as a popular new trend. Another aspect to consider is product presentation. Many US companies that sell products to Korea commonly sell materials to US exporters and consolidators who supply the wood frame home market. One US company found that exporters were not packaging their products with complementary goods, therefore, only components were being supplied to the Korean market, which added one more obstacle to winning Korean customers. If a consumer wants to use US made materials they may go through the extra work required to locate, purchase, and make them fit with Korean appliances. However, most consumers select their flooring, kitchen cabinets, moulding, appliances, and other home products from retail outlets that carry all of these goods in one place. US companies may stimulate local sales by using multiple product showrooms. Product showrooms offer a way to reach consumers, contractors and builders. Since architects specify materials used, and contractors make recommendations to customers, it is important to focus on reaching these individuals. Showrooms and trade shows allow these important customers to see products first hand. Showrooms may also help companies develop brand recognition. If consumers see products at showrooms they may be more likely to specify US products to their contractor when upgrading their homes. It may be useful for US firms to partner with Korean firms to open a showroom featuring products from the US and Korea that work together. For example, if a US kitchen cabinet manufacturer partnered with a Korean appliance and fixture supplier, customers could pair a variety of cabinet styles with appliances. A drawback of showrooms is capital investment. A stair manufacturer estimated a showroom would require approximately $80,000 in inventory for its product alone. The opportunity to realize far larger returns is great however. During 1996, the stair manufacturer sold $350,000-$400,000 without a showroom. Since product showrooms help manufacturers reach more consumers, the potential to increase sales further could be great. Further research is also needed to understand how North American building components such as doors and windows can be used in traditional post and beam construction. This research would require a greater understanding of the structural aspects of post and beam construction and the distribution system and selection process for materials within this sector. This type of endeavor would also require more interaction between US wood industry promotional associations and Korean architects in order to encourage architects to incorporate US products into homes of traditional design. There is a definite need to educate consumers and builders about US products and product attributes. As income has increased, the public knows that it wants wood homes and interiors. However, consumers base their decisions about quality primarily on appearance and are unaware of species differences. US firms should market their products to trade magazines, architects, builders, and consumers based on cost competitiveness, product innovations and benefits derived from using a particular brand or species. US products are not generally cost competitive with Southeast Asian products on a volume basis, yet less wood can be used to deliver equivalent durability. Therefore, suppliers and manufacturers need to teach builders how to use US products efficiently. For example, instead of using a 1 9/16" thick door frame (40 mm), US suppliers and agents can teach Korean builders that 1 1/4" door jambs are structurally sound and cost competitive. The reluctance to extend credit also appears to hinder use of US products in Korea. Korean importers reported that it is easy to source a wide variety of wood products, but they are constrained by the fact that invoices must be paid in full upon delivery. Several Korean respondents stated that suppliers in other countries extended 90-180 day payment invoices, which has helped introduce their products to the Korean market. However, there can be significant risks involved with extending credit to firms that do not have an established credit history with the supplier. US suppliers reported both positive and negative experiences with extending financing to Korean firms. Some stated that it had "proved over the years to be a credit risk,” and that some Korean companies tried to re-negotiate the price of goods after they were received. Other companies reported that they had not had problems receiving payment. Most US firms were willing to extend credit to firms with which they had a long working relationship. In light of the Asian economic crisis and its impact on the construction industry, the risk of extending credit in hope of expanding sales may be excessive. The decision to select a particular country as a supplier seems to depend heavily upon the agent the Korean company interacts with. Some Korean builders base their opinions about finished products from the US on past experiences with lower grades of lumber that have been common in Korea. Thus, opinions about the quality of US products vary greatly from company to company. While most importers reported that producers in the US and Canada provide the highest quality temperate hardwood and softwood products, others cited other countries such as Switzerland, Germany, and Russia. These varying opinions may be a case of a supplier or agent failing to provide materials that are appropriate for the intended final use. It is important in an emerging market such as Korea where reputation is highly dependent upon word of mouth advertising, that agents and sales people take the time to understand what their customers' product needs are before supplying the product. Attentive after sales service is also vital. It is vital to understand if and why a customer is not satisfied with the product. Without an active customer satisfaction evaluation, customers are more likely to switch suppliers than voluntarily explain product problems. ![]()
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Authors: Laura E. Cottle, Gerard F. Schreuder and Antonio A.A. de BarrosIntroduction Brazil has one of the larger natural forest areas of the world yet, historically, the level of development of the forest industry lass been relatively low. More recently, however, there has been significant growth in the pulp and paper sector. This has been largely as a result of the government's positive support and emphasis on the development of this industry. Fiscal incentives have encouraged the establishment of large areas of plantation strategically located near industrial centers. Such programs have enabled Brazil, formerly a large importer of pulp and paper, to become close to self-sufficient in these products and moreover a major world exporter of pulp. Brazil is certainly in an interesting and increasingly significant position vis-à-vis the global forest industry situation. The objective of the present paper is to provide an in-depth review of the literature and data pertaining to the forest resource and forest industry of Brazil. The first chapter gives a general orientation to the country, then follows a detailed description of the forest resource and the three important sectors of the forest industry: the solid wood sector, the pulp and paper sector, and the energy wood sector. The numerous sources of both literature and data examined included: international symposia, current periodicals, trade journals, newspapers featuring business and economics, Brazilian papers and government documents, and United Nations' publications. Wherever possible, Brazilian sources were used to report the various statistics for production and trade of forest products. ![]()
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Authors: John M. Dirks and David BriggsExecutive Summary This report provides a descriptive account of the secondary wood products manufacturing industries in Washington State. Secondary industries are defined as those adding value to standardized commodity wood or wood-based materials through the production of specialty finished or semi-finished products. This study focuses upon six major product groupings--engineered building components, mill work remanufactured lumber products, pallets, cabinets, and furniture--based upon the number and types of firms responding to the questionnaire. Primary data for this study were collected using a mail questionnaire, administered during the summer of 1989. Questionnaires were returned by 33% of the firms receiving them. Additional employment and business income information used in this report was obtained through published state agency data. The Secondary Industries The industries assessed in this study contribute significantly to Washington State's economy, employing 13,200 people in the state and providing $1.2 billion in gross business income to the over 630 firms operating in this sector in 1988. Approximately one in five jobs in wood products and associated industries in Washington, including the paper and paper sector, are found in the secondary solid wood products industries, while about 1 in 8 gross business dollars we generated by this sector. Excluding the pulp and paper and logging industries, .39% of the employment and 28% of the income in wood products processing was generated by the secondary manufacturing industries in 1988. This collection of industries produced nearly the same amount of business income as the logging sector during that year, but directly employed nearly 25% more people. The firms in these industries are diverse, from small shops of highly skilled woodworkers crafting custom furniture or cabinetry, to larger facilities remanufacturing lumber into cutstock, resembling sawmills both in productive capacity and in size. Almost all of the secondary manufacturing firms produce specialty rather than standardized commodity products. Small business activity is critical in this sector. None of the firms returning questionnaires employed more than 500 people, and 86% of the business establishments in this sector have fewer than 50 employees. The secondary manufacturing industries are fragmented in terms of products manufactured and company size. Washington firms tend to be geographically concentrated, however, in or around the states urban areas. Ninety percent of the 150 largest secondary manufacturing companies are located in Washington’s manufacturing and finance counties. Raw Materials An evaluation was made of each manufacturing group's use of wood raw materials produced from Pacific Northwest tree species versus materials imported from other areas. Groups seemingly most dependent upon Pacific Northwest raw materials include, in decreasing order: pallet and container manufacturers, structural component manufacturers, remanufacturers, and millwork producers. Regional raw material supply problems were evident in the survey responses; of the 58 manufacturers responding from these four categories, one half of them (29 of 58) cited raw material supply or cost as a serious problem. The other two groups delineated in the study, cabinet and furniture manufacturers, were more dependent on exogenous wood sources, including composite materials such as particleboard as well as eastern hardwood veneers and hardwood component stock. Less than one fifth (13 of 67) of firms in these two groups regarded raw material supply or cost as a serious problem affecting their business. Regional wood supply problems may not be affecting these groups as much as they do other manufacturers. The price premiums paid for higher value added products such as furniture and cabinetry may also result in raw materials being a lower relative variable cost compared to labor costs incurred in manufacture, and thus partially explain why raw material supply or cost is generally considered a lesser problem in the cabinet and furniture industries. The furniture and cabinet producers reported the two lowest relative average monthly raw material costs of all manufacturing groups, while reporting the two highest relative labor costs. Technology Technology was perceived to be changing at a moderate rate by 70% of the survey respondents. Major constraints to new investment were the availability or cost of capital, the high risk of capital investment, and availability or cost of skilled labor. Over 70 percent of the respondents listed at least one important piece of equipment they were planning to purchase over the next two years. A surprisingly large amount of used equipment is bought and sold by firms in the secondary manufacturing industries; used equipment comprised over 33% of the equipment purchased during the two years preceding the survey. Marketing The customers targeted for sales by secondary wood products manufactures vary across the delineated groups. Remanufacturers of specialty lumber products tend to sell their products directly to other industrial manufacturers and to wholesalers or distributors who do not stock their products. Millwork manufacturers S primarily to stocking wholesalers or distributors, and to a lesser extent to building contractors. The cabinet industry, in contrast, relies upon direct flies to building contractors for most of its sales volume, and also up direct flies to retail customers. Furniture manufacturers sell through wholesalers or distributors who do not stock their products, and also directly to retail customers. Pallet and container sales are primarily to retail customers and to other industrial manufacturers, while manufacturers of wood structural components sell directly to building contractors and to non-stocking wholesalers or distributors. The secondary manufacturing industries in Washington can be described as relatively under-promoted personal selling efforts by sales staff and distribution channel members may be perceived as more important manufacturers than direct promotional efforts, evidenced by the frequent use of business cards and word-of-mouth promotional tools. Product brochures, trade shows, and the efforts of industry associations are lesser used means of promotion. Only about one-fifth of the respondents reported using media advertising, advertising in trade journals, or direct customer mailings. International Trade Fifty percent of the firms surveyed (81 firms) considered their principal target markets to be within the Pacific Northwest; 41% (67 firms) consider domestic US markets outside of the Northwest region to be important to them. International trade does not appear to be a key activity for many of the responding companies. While 38% of the survey respondents reported using imported wood raw materials and 24% exported products in 1988, only 14 firms, or 8%, considered export markets principal markets. No company exported more than half of its sales volume. Japan was the country purchasing products from the greatest number of companies in the sample; export volume and value levels were not measured in this study. Forty-seven firms (28%) purchased Canadian wood for production of their products, while only 12 firms (7%) reported 1988 exports to Canada. Problems and Concerns Problems and concerns facing the secondary wood products industries in Washington were evaluated through survey responses and open ended questions. Problems rated as the most serious include government taxation, raw material supply or cost, the high cost or limited availability of capital, labor supply or cost, ant government restrictions or policies. These problems may all be characterized as business environment factors existing outside of any one firm's control. Several company-internal factors such as quality control problem financial difficulties, the high cost of new product development, and possessing an outdated production facilities and sales and marketing problems were also rated relatively important, but by fewer respondents. Other company-internal problems rated as relatively unimportant by the majority of respondent companies include lack of computer skills, distribution problems, difficult labor relations, limited wood processing expertise, and being located too far from major markets. ![]()
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Authors: Thomas R. Waggener, Gerard F. Schreuder and Ivan L. EastinIntroduction This case study deals with the tropical hardwood producers of the Asian-Pacific region. But since these countries must also be seen within the broader context or global-especially Pacific Rim – patterns of production, trade, and consumption of wood products, a total of twenty-four countries were considered relevant to this review, and are grouped into five subregions as shown in the table below. The Asian countries were separated into Asian Exporters (those that have been major exporters of hardwood saw and veneer logs) and Asian Importers (those that typically have imported tropical hardwoods, perhaps in addition to significant domestic production). This distinction was thought desirable to help identify some of the important intraregional trade affecting tropical hardwoods. In this analysis, emphasis is placed on the role of the two Asian subregions, complemented by the Oceania subregion. While the scope of countries included is not comprehensive for any of the sub regions, it was felt that to provide a manageable data base the groupings are adequate in order to incorporate the significant trends in forest products trade. Increasing concerns over the exploitation of tropical forests have been expressed by both the forestry and environmental communities. At issue is the sustainability of the tropical hardwood forests given past and current levels of harvest, and the outlook for those countries where tropical hardwoods constitute a significant part of the economic base. More recently, the issue of competition in the world market, particularly with temperate zone hardwoods and conifers, has arisen. New markets are being sought in order to sustain production and ensure continued viability of the forest products sector. The thrist for "value added" and to upgrade production beyond the roundwood, or even basic commodity, level is increasingly the choice of traditional roundwood producer countries, as a means of ensuring regional development and jobs. Protectionism, usually expressed in terms of import barriers, is shifting toward greater use of export restrictions or taxes to discourage roundwood or unprocessed exports in favor of semiprocessed or finished goods. Countries Grouped by Subregion for the Pacific Rim Tropical Hardwood Trade. Asia (Exporters)* Burma Indonesia Malaysia Philippines Asia (Importers)* China (PRC) China (Taiwan) Hong Kong India Japan Singapore South Korea Thailand North America Canada United States Central And South America Chile Colombia Ecuador Mexico Peru Oceania Australia Fiji New Zealand Papua New Guinea Solomon Islands * Classification based on 1986 FAO Yearbook of ForesL Products (SITC 247.2 Sawlogs and Veneer Logs ~C)). Organization of the Study Chapter 1 of this study gives a summary overview of the production, exports, and imports of forest products, with a major focus on the Pacific Rim within a global context. A separate section deals with trends in the twelve countries of the Asian subregions; and the main Pacific Rim importers and exporters of hardwood products are compared for 1971 and 1987 in a brief section at the end of the chapter. Chapter 2 offers summary background and evaluation of trends related to hardwood trade and potential substitution by both temperate hardwoods and conifers. This review is mainly directed at identifying major issues, although general information from the recent literature is used whenever possible. The treatment is not exhaustive, but rather attempts to provide a sense of the complexity of the issues and to serve as a means for identifying areas for further research and analysis. Chapter 3 provides a brief summary of the data availability and needs for a comprehensive analysis of the tropical hardwood situation in the emerging global context. Chapter 4 brings together some of the available information on trends and forecasts, and summarizes issues and possible consequences. Chapter 5 concludes the review with suggestions on major areas for future research and analysis to assist in guiding tropical forest policies at national and international levels. These recommendations rest on the premise that a more complete and factual understanding of trends and development as well as the economic, social, and political issues behind them-is needed before responsible international policies can be developed and implemented. The long-term outlook for tropical hardwoods appears to be encouraging, from both an environmental and an economic perspective, once the dynamics of the global marketplace are better understood. ![]()
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Soviet Forests at the Crossroads: Emerging Trends at a Time of Economic and Political Reform1/1/1990 Authors: Charles A. Backman and Thomas R. WaggenerSummary Political, social, and economic changes occurring in the Soviet Union under policies of perestroika and glasnost are creating unprecedented interest, opportunities, and risk for the Soviet forest products industry, foreign investors, and competitive suppliers in other countries. The outcome of the changes is far from clear, not only for the forest products industry itself, but also for the country as a whole. As the USSR grapples for clear direction along the twin paths towards political pluralism and decentralized market driven economy, these changes will continue to create uncertainty as well as opportunity. ![]()
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Author: Hakan EkstromExecutive Summary Washington State Hardwood Sawmilling Industry 1990 Hardwood lumber production in Washington grew 93 percent over the period 1980-90. This compares with softwood lumber growth of 24 percent and a national growth rate for hardwood lumber production of just 21 percent over the same period. Hardwood species like red alder, which were until recent years considered undesirable weed species in the softwood forests of the Pacific Northwest, have increased remarkably in value and now provide financial returns as great as softwoods. The low level of historic interest in hardwoods has resulted in limited knowledge about the northwest hardwood resource and Washington state hardwood lumber producers. These facts together with a growing worldwide demand for hardwoods motivated a study by the Center for International Trade in Forest Products (CINTRAFOR) at the University of Washington to understand the changing capabilities of Washington hardwood lumber producers and their markets. Washington Hardwood Sawmilling Industry The Washingt6n hardwood sawmilling industry of 1990 was twice as large as in 1982, with direct employment of 850 people. The industry consumes approximately 340 million board feet of timber, of which 75 percent was manufactured into lumber and pallet stock. The remainder was utilized for pulp chips. Washington hardwood production represents almost eight percent of the total lumber production in the state and is over 2.5 times the hardwood production in Oregon. The nine major hardwood sawmills, representing about 98 percent of Washington's total hardwood production, are all located west of the Cascades in rural communities. The primary species used were western red alder (Alnus rubra Bong.) and big leaf maple (Acer macrophyllum Purch.). Since most of the raw material for the industry, about 74 percent, was purchased from private timber owners and only one percent from federal timber sales, preservation of northern spotted owl habitat--most prevalent on federal lands--should not substantially impact hardwood timber availability. Swedish Hardwood Sawmills The author has also carried out similar research in his home country, Sweden. With a 'mailer production, Sweden has ten times as many hardwood mills, most of which produce the higher-valued secondary manufactured products, used for furniture, parquet flooring, cabinets or mouldings. While the Washington state hardwood sawmills are more quality-oriented than many of their softwood counterparts, they are still far from the value-added manufacturing facilities observed in Sweden. Hardwood Markets for Washington Sawmills Hardwood markets do not share the characteristics of softwood commodity markets. Quality and customer service attributes are often more important than price. Mill owners and managers said that the most critical production features were the ability to produce kiln-dried, high quality, accurately graded planed or surfaced lumber. A mill's reputation, its ability to deliver on time, and its personal relationships with its customers were rated more important than competitive pricing and the ability to provide custom orders. Competitive pricing and custom orders were considered more important by a few of the mills, however. Hardwood markets, growing faster than softwood markets, have also shown greater stability with little change in demand with the boom and bust housing cycle. Alder has been discovered as a valuable species, and will play an increasing role in rural timber-dependent communities. While hardwood chips are also valuable for pulp and paper production, the higher-valued furniture, cabinet and interior applications, will set the pace for much of the future industry development. Only about seven percent of the Washington-produced hardwood lumber is utilized by local secondary manufacturers, with almost no secondary manufacturing in local lumber mills. California and Oregon firms consumed large amounts of the lumber, however, and exports take about 36 percent of the volume. The foreign market is very important for the industry, since export customers usually purchase the higher quality products. While Japan is the largest market, recent growth in European markets has been dramatic. The recognition of alder as an important commercial species has resulted from its increased worldwide use in higher- valued applications. Higher-grade lumber was used mainly for furniture where the wood was visible (21%), and for cabinets (22%). Upholstered furniture (17%) together with pallets (33%) were the principal end products for low-grade hardwood lumber. Small quantities were also used for mouldings, toys, and for the do-it-yourself market. The increased demand for red alder lumber has influenced its price, especially for the higher grades. Between 1988 and 1990, the price of kiln dried 4/4" lumber of the highest grade increased approximately 25%, from $766 per thousand board feet (MBF) to $955 per MBF. Red Alder Exports from the US In recent years, Pacific Northwest hardwood species, primarily red alder, have been elevated from positions of relatively low value into commercially important wood species in world trade. Red alder, only processed at Oregon and Washington sawmills, was the number three hardwood lumber export by volume from the United States in 1990, behind the species groups white oak and red oak. In log form alder was the number one hardwood species exported from the U.S. in 1990. There has been a substantial increase in the export of alder lumber during the last ten years. In 1981 the export trade of alder lumber totaled only two million board feet (MMBF), while ten years later in 1990, the trade had reached 56 MMBF. The most important single market for alder lumber during the last decade has been Japan, even though its share has been declining recently. The Japanese market accounted for 95 percent of the lumber exported 1981, while in 1990 its share had decreased to 55 percent. The new and growing market has been in Europe, which now purchases about 25 percent of the alder lumber exported. The main importing countries in Europe are Italy, Germany and France. The total alder export to Europe during 1990 was 13.8 MMBF. While the Washington hardwood sawmills have increased their lumber production by 50 percent since 1985, the export of alder lumber, which predominately originates from Washington State, has increased by almost 700 percent. Washington Hardwood Supply, Growth and Harvest The hardwood timber resource in Washington is growing, with the annual cut at about half the annual growth. In the region west of the Cascades, 15 percent of the growing stock on timberland is composed of hardwood species. Red alder was the most common species (67%) and, together with big leaf maple and black cottonwood, accounted for 95 percent of the hardwood volume. In the Southwest region of the state, the annual harvest of hardwoods was 7 MMBF on state lands, which is only ten percent of the total annual growth. This situation is in contrast to forest industry owned land in the same region, where the removal rate is 26 percent higher than the current growth rate. The potential for expansion exists. It may be possible for the Washington State Department of Natural Resources to increase the harvest of hardwoods from the land it administers and become a bigger and more important timber supplier for the hardwood sawmills. Management of Hardwood Stands Managing a hardwood stand, whether pure or mixed with conifers, can substantially improve the quality and increase dimension yield The alder regeneration cycle is shorter than that of softwood species. With intensive management of red alder, which is a fast growing species with good self-pruning, high quality sawlogs and peelers can probably be grown in 28 to 37 years. It is important to inform forest owners, loggers and contractors about the value of hardwood logs and about the hardwood industry that is prepared to pay for the sawlogs. If too many hardwood logs are cut and chipped today, the supply of sawlogs will be limited in the future. As this study found, the economics have been rapidly changing, making it pay to grow alder for higher-value markets. Key Factors for Future Success There is little doubt that Washington state hardwood sawmills can be successful in the future. It is the opinion of this author that it is necessary to address the following key areas to yield long-tam benefits for the companies in this industry: * Develop closer contacts with the end user * Increase value-added production. * Develop a skilled and loyal labor force. * Intensify quality control. * Increase research and development. * Build awareness among forest owners of the value of hardwood. * Maintain a secure and stable timber supply. Future hardwood products It is important for the sawmills to focus on quality control, to utilize the wood to a higher-degree and to produce a higher valued product than commodity lumber Lower-grade lumber products, No.1 Shop to No.3 Shop, comprise about 45 percent of the hardwood sawmills production; these grades should be further utilized. No.1 Shop lumber, together with No.2 Shop, which is the most difficult grade to sell today, could be remanufactured for cut stock, edge-glued panels, finger-jointed and edge-glued components. Most of the mill managers interviewed indicated that the future success of the industry would rely more heavily on value-added products. Another broad area mentioned was the production of more custom-cut products for the furniture and cabinet industries. Planned investment, however, generally fell in the area of upgrading primary log breakdown facilities, indicating that many mills must concentrate limited investment dollars in more efficiency at the headrig just to keep up with industry standards. With the cost of capital rated as the second largest production problem next to labor costs, mills will be constrained in their ability to invest in value-added production. Secondary manufacturing Most hardwood lumber produced in Washington is leaving the state. Only seven percent of the alder lumber produced is currently utilized by secondary manufacturers in the state (pallet production not included). The volume of hardwood lumber products flowing out of the state for further manufacture may suggest an opportunity for Washington remanufacturers and secondary manufacturers to expand their use of alder and other local hardwood species. The labor force To be more competitive, the United States, with higher labor costs than many other countries now producing commodity lumber, should concentrate on manufacturing high-quality products. Low-quality products and “bulk-type” production can be made less expensively in countries that have lower wage structures. By taking measures to develop a flexible and knowledgeable labor force, performance and recovery rates can be high. The skill level of the labor is particularly important when customers specifications may be more demanding and there are more custom-made products and value-added processes required. Future markets Japan is the largest export market for alder lumber today, and will probably continue as a large and important market, although its share of the total alder exports from the U.S. will decrease. The new and expanding market is in Europe, especially Germany, as producers substitute alder and other temperate species for tropical timber imports, mainly because of policies influenced by the European Green Movement. If sawmills in the Pacific Northwest can deliver high quality lumber and components and follow and analyze customer demand, the European market will be much more important in the future. Restrictions and Opportunities Hardwood sawmill managers said that their greatest concern for the future was the timber supply. While currently not a problem for most of the mills, timber quality and availability were foremost on the minds of those in the industry when asked about future critical issues. Availability of timber is a major concern of the purchasing mills, as much of the hardwood saw timber is a byproduct of softwood timber harvest, and the softwood harvest is expected to decline. State and federal regulations regarding timber supply as well as environmental issues were the top three overall concerns facing mill-owners. Actions by the Washington State Department of Natural Resources with respect to hardwood sales, timber availability, and environmental protection were of great importance to a majority of those interviewed. Besides the problem of limited investment dollars and the cost of capital, the issue for many local hardwood producers may become how to procure sufficient timber supply to maintain consistent quality and mill production. These are the main restrictions but there are also opportunities for the hardwood sawmills today. Red alder represents an under-utilized timber resource. It is a fast growing species, it has excellent wood characteristics, and it has a growing demand in domestic and international markets. This all contributes to making red alder a potentially important species for forest owners, for sawmills and for secondary manufacturers in the Pacific Northwest. ![]()
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Author: Thomas R. WaggenerSummary Forestry and forest products in the People’s Republic of China is a large and complex subject – just as China itself is large. The contemporary ties between the forestry and forest products community in China and the College of Forest Resources at the University of Washington formally began in 1980 with the April 24th visit to Seattle by a senior PRC forestry delegation led by Luo Yuchuan, then Minister of Forestry. This delegation included twelve senior officials of the Ministry of Forestry, leading Chinese forestry educational and research institutions, and professional forestry organizations in the People’s Republic of China. Five extended visits to the PRC, by the author, together with numerous return visits by foresters, educators, and officials to Washington State have contributed greatly to an understanding of the Chinese people and forestry sector. China’s longstanding forestry goal is to increase the commercial forest estate to 20 percent of the land base, or to approximately 192 million ha. of productive forest. Forestry, forest products sector, international trade, and consumption policies are all undergoing rapid and continuous change as China seeks to revamp its economy, and spur economic growth and development. Wood imports can be expected to play a growing role in balancing national domestic supply and consumption. ![]()
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Author: Ivan EastinExecutive Summary The vast majority of tropical hardwood timber reserves are located in the developing regions of Southeast Asia, West Africa and South America. Many of the countries in these regions, faced with a shortage of foreign exchange and a lack of capital for developing manufacturing facilities, regard their tropical forest reserves as a natural resource for exploitation to generate export revenues. In order to utilize these forest resources efficiently, long-term forest product export policies should be developed based on an understanding of the international timber market. Those responsible for developing national forest product export policies should:
Europe and West Africa share a unique relationship that includes the trade of tropical hardwood forest products. First of all, several European countries have maintained strong economic ties with many West African countries following their independence from colonial rule. Secondly, many West African timber species were first exploited and marketed by European timber companies. Finally, and perhaps most importantly, Europe is the primary market for West African forest products, importing over 70 percent of West African exports from 1977 to 1986. Although this paper focuses on European imports of West African tropical hardwood forest products, to provide a complete description of this market it is important to understand the relationship that exists between the major supply regions with respect to the European import market. The primary supply regions of tropical hardwoods to Europe are Southeast Asia, West Africa and South America. The paper begins by describing total European imports of hardwood forest products and presenting the share of this import market represented by tropical hardwoods. It next analyzes the share of the European import market held by each of the primary supply regions. It then examines the mix of forest products being exported from West Africa, as well as the nominal unit prices obtained for each type of forest product. Finally, the major importing and exporting countries for each category of forest product are presented. ![]()
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