Red Alder Export from the US Dr. Ivan Eastin Director, CINTRAFOR College of Forest Resources, UW Presented at the: Western Hardwood Association Annual

Red Alder Export from the US

Dr. Ivan EastinDirector, CINTRAFOR

College of Forest Resources, UW

Presented at the:Western Hardwood Association Annual Meeting

Whistler, British Columbia13-14 July, 2008

Center for International Trade in Forest Products

Weak US Dollar helps exports

The weak dollar has significantly improved the competitiveness of US wood exports, particularly with respect to Europe and Canada products

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$Can

adia

n/Eur

o pe

r $

US

.

0

20

40

60

80

100

120

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160

Yen

per

$U

S .

$Canadian per $US

¥ per $US

Euro per $US

Since 2002

$US has weakened 24.1% against the ¥

$US has weakened 37.3% against the $C

$US has weakened 43.1% against the €


-$30,000,000

-$25,000,000

-$20,000,000

-$15,000,000

-$10,000,000

-$5,000,000

$0

$5,000,000

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Tra

de

Bal

ance

($

1,000)

US Wood Products Trade Deficit

The US trade deficit has declined by 21.8% since 2005


US Red Alder Log and Lumber Exports

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Red

Ald

er E

xpor

ts (

$)

.

Logs

Total

Lumber


Red Alder Log Export Markets

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

2007 2008

Red

Ald

er L

og E

xpor

ts (

$)

.

Spain

Italy

Mexico

Germany

China

+63.9


Red Alder Lumber Markets

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

2007 2008

Red

Ald

er L

umbe

r E

xpor

ts (

$)

.

SpainGermanyVietnamMexicoItalyChina

-30.90%


Unit Values of Log and Lumber Exports

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Uni

t V

alue

s ($

/m3)

.

Logs

Lumber

44.5%

112.3%111.1%

89.8%

70.7%

91.5%

82.4%76%

79.4%

54.5%

31.2%


Vietnam is a Rapidly Emerging Market

$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

2001 2002 2003 2004 2005 2006

Fur

nitu

re E

xpo

rts

(US

D)

.China Growth Rate 2001-2006: 252%

Vietnam Growth Rate 2001-2006: 478%


Recent Trends of Interest Russian announcement of log export tariffs aimed to encourage investment in wood processing industry

Initially 6.5% 20% on July 2007 (but not less than €10/m3) Currently 25% in April 2008 (but not less than €15/m3) 80% by January 2009 (but not less than €50/m3)

Japanese and European public procurement policies require certification of legality for wood used in public projects (expected that private companies will comply eventually)


44.1%42.3%

42.4%

37.3%34.4%

37.3%

0

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90,000,000

2001 2002 2003 2004 2005 2006

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xpo

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(m3)

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Rus

sian

Rat

io o

f W

orld

Tot

al (

%)

.

Russian SW Log Exports

World SW Log Exports

Russian Ratio

Russian Exports to China

Russian Exports to J apan

Russian Softwood Logs Exports

Russia supplies over 80% of China’s SW logs and over 50% of Japan’s SW log imports. The loss of Russian logs provides opportunities for the US.


27.6%26.8%

20.8%

10.2%

4.3%4.1%

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

2001 2002 2003 2004 2005 2006

Har

dw

ood L

og E

xpo

rts

(m3)

.

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30%

Rus

sian

Rat

io o

f W

orld

Tot

al (

%)

.

World HW Log Exports

Russia HW Log Exports

Russian Ratio

Russian Exports to China

Russian Hardwood Logs Exports


Results of a Survey of Chinese Companies with Chain of Custody Certification

200 companies with CoC certification as of November 2006 Surveys were faxed in December 2006 / January 2007 to all CoC firms Completed surveys received from 41 companies Response rate of 20.5%

Public Procurement Policies Drive Chinese Demand for Certified Wood


Number of Chinese Firms with CoC Certification

1 7 1225 32

52

78

127

200

376

0

50

100

150

200

250

300

350

400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Num

ber

of

CoC

Fir

ms

.

As of yesterday, there were 408 companies certified in China


Location of Chinese Firms with CoC Certification

Most CoC companies are located along the coast


52

42 41

32

25

2018

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9 9

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60

Product Mix (Population)

Fre

quen

cy

Number 52 42 41 32 25 20 18 14 9 9

I ndoor

f urniture &

Accessories

Craf t

products &

Stationeries

Outdoor

f urniture &

Accessories

Wood

material

Garden &

BBQ toolsFlooring

Doors &

WindowsLogs Pulp & Paper Others

Product Mix of Chinese Firms with CoC Certification

Furniture manufacturers represent the largest segment of certified companies


RMB USD

Evaluation fee ¥66,980 $8,404

Audit fee (per year) ¥33,721 $4,231

China CoC Survey Results

Average Cost of Gaining CoC Certification for a manufacturer or Trading Company

Acquiring CoC certification is costly and may be a problem for the smaller companies.


End markets

Frequency Percentage

Proportion of sales for each end market

Europe 35 38.4% 54.6%

United States 30 33.0% 29.8%

Canada 11 12.1% 8.4%

Australia 5 5.5% 1.6%

Japan 4 4.4% 0.6%

China 3 3.3% 2.8%

Other 3 3.3% 2.2%

Total 91 100% 100%


Over 90% of total sales for CoC companies go to North America and Europe


2.8%

1.5%

5.1%

6.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Europe United States Canada China

Pric

e Pr

emiu

m .


Price premiums for certified wood products vary by market but can be substantial in the US and EU


Observations

• Weak US dollar has improved the competitiveness of US wood products in foreign markets, especially in relation to European and Canadian suppliers• Slowing US housing market should encourage exports• Domestic US recession has reduced demand for wood furniture, flooring and cabinets which has translated into reduced demand for US hardwood species in foreign production markets• Harmonized codes for red alder lumber changed in 2007 from dry and green to a single product dry+green• Trade data appears skewed since change in harmonized codes


Observations (2)

• Reduced logging in PNW resulting from steep drop in softwood lumber production has reduced volume of red alder logs available• Main log markets are China and Germany• Main lumber markets are China, Italy, Mexico and Vietnam• Unit value of logs has always been below lumber but in 2007 the trend reverses• Emergence of Vietnam and loss of Russian logs presents strong export growth opportunity for US hardwood industry


Questions?

Documents

Red Alder Export from the US Dr. Ivan Eastin Director, CINTRAFOR College of Forest Resources, UW Presented at the: Western Hardwood Association Annual