South Korean Markets for U.S. Wood Products Shifting Towards Processed Products
Fact Sheet #15
The Republic of Korea is the fourth largest export market for U.S. wood products, importing over $375 million of logs and processed wood products in 1993. While over 55% of the value of U.S. wood product exports were unprocessed logs, this number is down from 84% in 1983. Given the improved standard of living enjoyed by most Koreans, expenditures on housing and value-added wood products are expected to increase.
The Korean Forest Products Sector
Forests cover approximately two-thirds of South Korea, the result of a vigorous tree planting program initiated in the early 1960's. Protective rather than productive in nature, Korean forests produced 1.1 million m3 of logs in 1993, just 13.6% of total domestic demand. While domestic production of logs in Korea is low, total consumption of logs has increased from 4.0 million m3 in 1970 to 8.7 million m3 in 1993.
Korea relies on log imports as the raw material input for its domestic wood processing industry, importing 7.6 million m3 of logs in 1993. The Korean forest products industry has traditionally relied on tropical hardwood species, however, log export restrictions in S.E. Asia have reduced tropical hardwood log imports and forced the restructuring of the wood processing industry. This process has contributed to the substitution of temperate species for tropical species. During the period 1980-1993 softwood log imports increased from 1.5 million m3 to 5.4 million m3 while tropical hardwood log imports declined from 4.5 million m3 to 2.1 million m3. The majority of tropical hardwood logs are used to produce plywood while most softwood logs are sawn into lumber for use as construction lumber.
The U.S. (primarily the Pacific Northwest) has traditionally been the principal supplier of softwood logs to Korea. However, rising log prices due to public harvest restrictions have provided other countries with an opportunity to increase their share of the Korean market. As a result, while log imports from the U.S. declined from 3.4 million m3 in 1989 to 1.3 million m3 in 1993, log imports from New Zealand have increased from 579,127 m3 to 2.1 million m3.
Even as Korean log imports have declined by 13.9% since 1991, lumber imports have increased by 45.8%, totaling 1.3 million m3 in 1993. Most of this rise can be attributed to increased imports of tropical hardwood species. U.S. lumber exports to Korea have increased from 23,000 m3 in 1985 to 120,000 m3 in 1993 and were almost equally split between softwood and hardwood species. Traditionally, U.S. lumber imports have been used in the production of high quality furniture and musical instruments, however, due to the restructuring of the forest products industry, 71.3% of U.S. softwood lumber is now used by the construction industry.
While it is impossible to quantify total U.S. exports of value-added wood products to Korea, export trends for some individual product categories can be identified. For example, during the period 1989-1993, exports of wooden doors increased from $761,092 to $5,106,515 while wood panel exports increased from $58,306 to $13,447,000.
End-Use Markets
Residential Construction
The construction industry in Korea is growing in response to high levels of economic growth, increasing standards of living and urbanization which have increased the demand for affordable housing. There is currently estimated to be a shortage of 2.9 million housing units, primarily in urban areas. To alleviate this situation, the government has implemented a program to build 2.5 million housing units from 1992-1996, the majority of which will be multi-family units where the use of wood as a structural material has been severely restricted. However, given the shortage of affordable housing, the Korean Ministry of Construction has indicated an interest in evaluating timber frame construction techniques in multi-family housing units. Currently wood can be used as a structural material in single family homes, although deficiencies in the building codes, high material costs, a scarcity of qualified carpenters, unfamiliarity with timber frame construction, and the perception of wood as a poor quality building material have restricted its use. Despite this, a strong potential for increased wood use does exist for interior appearance applications, such as flooring, doors, windows and mouldings, as well as in the construction of vacation homes.
Furniture
The Korean furniture industry is a $2 billion industry and the domestic demand for solid wood furniture is estimated to be increasing at a 30% annual rate. While Korean manufacturers focus primarily on the domestic market, the share of furniture exports has been steadily increasing and the Korean government has identified the furniture industry as an important growth sector. While the furniture industry has traditionally relied upon tropical species as a source of raw materials, opportunities for the increased use of temperate species have resulted from tropical hardwood supply constraints and changing preferences among younger consumers.
Musical Instruments
The musical instrument industry is the third largest end-use market for wood in Korea. In 1990, musical instrument production was estimated to be $475 million, with approximately 50% being exported. While Japan is Korea's primary competitor in the export of musical instruments, the strengthening yen should increase the international competitiveness of Korean musical instruments. As a result, it is expected that the demand for high quality lumber and veneer from the U.S., both hardwoods and softwoods, will increase.
Tariff and Non-Tariff Barriers
While access to the Korean market has improved, U.S. exporters still face many problems. While some trade barriers are specific to wood products (i.e. restrictive building codes, phytosanitary requirements for larch and pine products, and high tariffs), others are more generic (i.e. complicated customs procedures, limited port facilities, and export financing restrictions).
Market Outlook
In response to a shortage of affordable housing in urban areas, the government has implemented a five-year program with the objective of building 500,000 housing units per year. As a result, the housing market is expected to remain strong, providing export opportunities for value-added wood products such as flooring, doors, windows and mouldings. Similarly, demand for wood products within the furniture, cabinet and musical instrument industries is expected to grow.