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The Challenge of Change, the Inertia of Tradition: A View of Opportunities in European wood Markets
Authors: Jay A. Johnson, Christine E. Dinsdale
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: Hakan Ekstrom
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.
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.
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 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
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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Author: Ivan Eastin
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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The Implications for North American Exporters of Softwood Lumber Stress Grading in Europe with Particular Emphasis on British Stress Grades and the Economic Commission for Europe (ECE) Stress Grades
Authors: David G. Briggs and Nathan Dickens.
This report presents the results of an investigation into softwood lumber grading systems used in Europe with an emphasis on systems used, or proposed, for international trade transactions. The report also presents comparisons and approximate cross-references of these systems with North American grades. This involves the use of previously published comparisons as well as new material developed during the course of this study. The study also briefly examines the nature of the European softwood lumber market and its future prospects. The information presented in this study represents a step in the direction of improving the North American manufacturer’s understanding of Europe.
The information contained in this report relied principally on a search of available literature in the University of Washington Library system, reports sent in response to out letters to various European testing and research organizations, and conversations with representatives of the American Plywood Association and Western Wood Products Association. Consequently, interpretations regarding historical background and current status of lumber grading practices in Europe may be limited by not having the opportunity to observe practices first hand or to converse with firms heavily involved in European trade. It is believed that the information contained in this report is a fairly accurate description of major events and combined with the grade cross-reference will be useful to North American producers.