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Authors: Ivan L. Eastin, Steven R. Shook and Wendy Sammarco
Currently, less than one percent of the private and industrial timberlands in the Pacific Northwest (PNW) are managed for hardwood production. In order to provide an incentive to manage the hardwood resource actively, hardwood stumpage prices must be consistently competitive with conifer stumpage prices, although this has generally not been the case in the PNW. A variety of factors could contribute to hardwoods being more actively promoted in the timberland manager’s portfolio. For example, species diversity provides stability in a cyclical market, improves soil fertility, and promotes biodiversity in forest stands.
The hardwood industry in the PNW, largely red alder, has experienced surprising success over the past decade in both domestic and international markets. This success is of interest considering that commercial hardwood species in the PNW have traditionally been considered a low value by-product of the softwood inventory. While PNW hardwoods have enjoyed increased market acceptance, little market research has been done to characterize the hardwood industry or identify the factors that have contributed to its success. The objectives of this research were to: 1) explore the competitive conditions of the hardwood industry, 2) identify the range of products currently manufactured from hardwoods, 3) analyze current hardwood markets (domestic and international), 4) identify the factors that are perceived to restrict the growth of the hardwood industry in the PNW, and 5) assess future market and product opportunities for PNW hardwood products.
Since the number of firms involved in hardwood lumber production in the PNW is relatively small (less than 15), a census of the hardwood industry was conducted. The PNW region, for the purpose of this research, consists of western Washington, western Oregon, and northern California. The survey was administered via fax to each firm in the sample frame. Thirteen hardwood manufacturers were contacted. Of the firms contacted, 10 completed and returned the survey, an effective response rate of 76.9%.
ResultsThe PNW hardwood lumber industry directly employs approximately 2,000 workers. Collectively, the hardwood lumber manufacturers surveyed in this study produced approximately 450 mmbf of lumber, with exports totaling approximately 126 mmbf or 28% of total production. The range of products manufactured included kiln dried and green lumber, pallet stock, veneer, plywood, agricultural boxes and crates, and chips. Hardwood chips represent the primary by-product and all of the chips produced are sold to pulp and paper manufacturers. Approximately half of the slabs and sawdust generated are sold (as chips and mulch, respectively) with the remainder being burned as hog fuel. Similarly, approximately one-third of the planer shavings and bark are sold for livestock bedding and landscaping bark, respectively, with the remainder being burned as hog fuel.
While both large and small hardwood lumber manufacturers sell a substantial percentage of their production direct to the end-user, large manufacturers tend to rely on wholesalers to the exclusion of brokers. In the case of small manufacturers, the opposite is true and they tend to favor brokers while minimizing their use of wholesalers.
Problems and Threats to the Hardwood Industry: The problems confronting manufacturers in the hardwood industry were categorized into three areas: domestic regulatory issues, domestic resource issues, and international regulatory issues. Survey respondents were asked to indicate the impact of each factor on
the competitiveness of their firm. Respondents utilized a seven-point scale ranging from a value of 1 (Strong Negative Impact) to 7 (Strong Positive Impact).
Domestic Regulatory Factors: The range of domestic regulatory factors identified in the survey included: federal harvest regulations, state forest practice regulations, and state taxes. Survey respondents indicated that all three domestic regulatory factors had a negative impact on the competitiveness of their firms. The mean scores for the three factors (state taxes, federal regulations, and state forest practice regulations) were 2.6, 2.8, and 2.9, respectively.
Domestic Resource Factors: The specific hardwood resource factors examined in the survey included rising raw material prices, rapid price fluctuations (i.e., price volatility), labor quality, resource availability, and resource quality. Rapid price fluctuations and increasing raw material prices were perceived as having the most negative impact on competitiveness, receiving an average score of 2.8 and 3.1 respectively.
Quality of labor (4.1) and resource quality (4.3) were each generally perceived to have relatively little impact on the overall competitiveness of the respondents’ firms. It is interesting to note that resource availability, with a mean score of 4.6, had a slightly positive impact on overall competitiveness.
International Regulatory Factors: The international regulatory factors included in the survey were: regional trade agreements, tariff barriers, non-tariff barriers, and sustainable forest certification. The survey results suggest that environmental certification of wood products (3.4) and tariff barriers (3.4) were perceived to have a more negative impact on the competitiveness of hardwood manufacturers than were non-tariff barriers (3.6) and regional trade agreements (3.7), although the difference in score was small.
Further analysis of the survey data showed that hardwood firms exporting to Europe perceived environmental certification as having a more adverse effect on their competitiveness than did firms exporting to Asia and North America.
Marketing Variables: Survey respondents were asked to evaluate the importance of each variable to the competitiveness of their firm using a seven-point scale ranging from 1 (Not Important) to 7 (Very Important). The importance ratings for the individual marketing variables indicate that a firm’s reputation within the hardwood industry was identified as the single most important marketing variable, receiving a mean score of 6.7. Communicating regularly with customers, product quality control, and providing on time delivery all received relatively high mean scores of 6.3, suggesting that these variables are also very important. Efficient operation of production facilities, with a mean score of 6.1, and procuring raw material, with a mean score of 5.7, were also perceived to be highly important.
It is interesting to note that virtually all of the marketing variables associated with innovation received relatively low importance ratings from survey respondents: developing new products (3.9), manufacturing specialty products (3.9), utilizing new marketing techniques (3.8), conducting market research (3.0), and performing promotional and advertising activities (2.5). Only a single marketing variable associated with innovation, product branding (5.2), was viewed as being relatively important. However, given the low level of importance attached to promotional activities, it remains problematic on how a company might successfully brand its products.
ConclusionsThe hardwood industry has experienced substantial and solid growth over the past ten years despite the timber regulations that have restricted the harvest levels from federal and state forests. This growth has occurred in both the domestic US market as well as in foreign markets which now account for almost 28% of red alder production. While survey respondents did not feel that harvest restrictions had adversely impacted their industry, riparian zone regulations related to endangered salmon populations could have a severe impact on the hardwood resource, particularly if those regulations are vigorously applied to private forests.
Respondents indicated that virtually none of the regulatory factors evaluated in the survey were viewed in a positive light, although few were perceived to have a strongly negative impact on the industry. Despite this, a variety of factors were perceived by respondents to have had a moderately negative impact on the hardwood industry. These factors included: state taxes, federal harvest restrictions, state forest practice regulations, hardwood log price volatility, and hardwood log price increases. It is interesting to note that
while federal and state harvest restrictions were perceived to have a moderately negative impact on the industry, respondents indicated that resource availability has not yet had an adverse impact on the hardwood industry.
Respondents indicated that those marketing variables that influenced a firm’s reputation and production efficiency were the most important in terms of positively impacting the firm’s performance. In contrast, virtually all of the marketing variables associated with acquiring market information and promoting innovation were perceived to have a negative impact on the firm’s performance. In general, these results seem to suggest that hardwood companies in the PNW are conservative and tend to place a low value on the marketing activities associated with innovation and product differentiation.
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Authors: Thomas R. Waggener, Gerard F. Schreuder and Ivan L. Eastin
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.
Central And South America
Papua New Guinea
* 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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Pacific Northwest Hardwoods Capture International Attention: An Analysis of the Washington State Hardwood Industry
Author: Hakan Ekstrom
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.
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.
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: 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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Authors: Craig Buhler, David G. Briggs
Although comprising a small fraction of the forest resource in the Pacific Northwest (PNS), the region’s hardwoods are becoming an increasingly important sector in terms of both domestic and overseas markets. This has occurred despite a generally negative attitude among foresters and the general public. This attitude has been fostered by a variety of factors. Perhaps foremost is the common situation in which lands logged of coniferous stands are invaded by light-seeded, pioneering, fast growing hardwoods, especially red alder. Because this invasion prevents natural restocking of conifers and frequently overwhelmed planted conifer seedlings, hardwoods became viewed as pests. Prior to the 1960’s and 70’s, vast areas of former conifer lands became covered by vigorous stands of hardwoods. Since that time, foresters have invested substantially in hardwood control programs. Young hardwoods were sprayed or manually removed during early thinnings to prevent competition with planted conifers. Older hardwood stands were converted to conifers by logging off the hardwoods, salvaging better material for lumber or chips, and replanting with conifers. These activities, combined with various statement in corporate and public agency reports of what was being done to eliminate the hardwood problem and get lands back into productive conifers, conveyed an impression to the public that hardwoods were worthless weeds. Furthermore, early use of red alder in hidden parts of furniture and as an inexpensive substitute that was often stained to imitate other woods reinforced its reputation as a lesser species. Unfortunately, these attitudes have persisted while alder has gained acclaim in both national and international markets for furniture lumber and for pulp chips. It is widely regarded for its many good properties and, in furniture, for its versatility to be used naturally or to imitate many other species. Interest has also grown in several other Northwest hardwood species. Indeed, during the recession of the early 1980’s , a Weyerhaeuser executive state “In the 1980’s, we suddenly found that our most consistently profitable lumber operations in the (Northwest) region were two small alder mills, which were developing customer ties in the Japanese and California furniture industries.” (Bingham,1986).
Although many are becoming aware of the increased value of the PNW hardwoods, there is little current information on the present size and scope of industries using the resource, developments in markets and the resource base and issues or problems that are confronting this industry.
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G. F. Schreuder, T. R. Waggener and M. P. Clasby.
This study was done to explore the possibility of exporting charcoal from the Seward, Alaska area. In investigating any product’s market feasibility, three general cost areas are examined: Production, Transportation, Marketing and Selling. While all three areas are of importance, the purpose of this marketing paper relates only to transportation and marketing. To give a clear picture of issues involved with charcoal marketing, this report is broken into four main sections.