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Use and Awareness of Green Building Programs and Environmentally Certified Wood Products in the US Residential Construction Industry
Authors: Daisuke Sasatani, Indroneil Ganguly, Ivan Eastin, Cindy X. Chen and C. Tait Bowers
The overall goal of this study was to develop a better understanding of US residential homebuilders’ and remodelers’ perceptions and use of Green Building Programs (GBPs), Environmentally Certified Wood Products (ECWPs), construction materials (i.e., wood, steel and concrete), and other innovative green technology and products.
Green building refers to a structure built using a process that is environmentally responsible and resource efficient throughout its life-cycle: from design and siting, to construction, operation, maintenance, renovation, and demolition. Since it is difficult to assess the sustainability of houses, a number of organizations have developed standards, codes and rating systems that let regulators, building professionals and consumers embrace green building concepts and practices with confidence. Collectively, these rating systems and standards are known as green building programs (GBPs). In the US, the National Association of Homebuilders’ National Green Building Standard (NGBS) and the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) for Homes have become the two major competing GBPs at the national level.
Each GBP employs a different rating system to award compliance for the use of sustainable materials, building products, and technology. As green building practices in residential housing become more popular in the US, the influence of LEED for Homes and NGBS on the choice of materials by construction professionals is of fundamental interest for forest resource professionals. Since a large volume of wood is consumed by the US building industry, it is important to understand the adoption of green products and technologies by US homebuilders and remodelers.
A survey targeting US homebuilders and remodelers was developed and the probability sampling frame was carefully designed in order to ensure reliable and valid statistical inferences. The results of the survey suggest that a great majority of homebuilding professionals are aware of GBPs in the US. Although less than a quarter of homebuilders had actually used either LEED for Homes or/and NGBS, many non-users were planning to use one of the programs in the future. The main reasons why homebuilders adopted GBPs were: to differentiate their homes in the market, the home buyer specified that they wanted a green house, and there is strong demand for homes built using a GBP. Those builders who have used a GBP favored the NGBS program over the LEED for Homes program, because they perceived NGBS as being less expensive and easier to use than LEED for Homes, although LEED for Homes was rated as being superior in terms of brand recognition and effectiveness in helping to sell homes.
Wood is a renewable natural resource with a smaller carbon footprint than other construction materials, such as steel or concrete. Wood products from responsibly managed forests should be an ideal fit for most GBPs. In order to communicate to consumers that a wood product comes from forests managed in accordance with environmental and social standards, some organizations have launched forest certification systems.
Environmentally certified wood products (ECWPs) are usually associated with eco-labeling and chain-of- custody programs that are designed to ensure that wood products are harvested from sustainably managed certified forests. There are a number of forest certification programs around the world, but several major certification programs in the US have become the de facto standard, including the Forest Steward Council (FSC) and the programs endorsed by PEFC (the Sustainable Forestry Initiative (SFI) and the American Tree Farm System (ATFS)). ECWPs certified by FSC and SFI are considered rival products in the market place. The LEED for Homes GBP has accepted FSC for the forest certification credit, but has not recognized SFI or ATFS. In contrast, the NGBS GBP allows the use of any third party certified wood. Consequently, forestry
experts, government officials and environmental NGOs are interested in how the two major GBPs might influence the demand for certified wood.
The survey results show that only about 10% of homebuilders used environmentally certified wood products (ECWPs) on a regular basis while another quarter of homebuilders used ECWPs occasionally. When asked to compare the two major certification programs, a great majority of ECWP users did not differentiate between FSC and SFI. Roughly 30% of homebuilders were still unaware of major wood certification programs.
As a result of increased interest in green building practices and GBPs, companies continually evaluate a wide variety of new green building products and technologies, including ECWPs. However, the US residential construction industry has long been criticized for being slow to adopt new products and technologies. A variety of attributes can influence a builder’s adoption of green building products and technology. The survey results show that the most important attributes for influencing product specification are the economic or technical performance of the products including, price, availability, durability, low maintenance, ease of installation, energy efficiency and consumer demand. On the other hand, the less important attributes tend to be those related to the environmental performance of the product. Finally, the survey shows that wood is clearly viewed by residential construction professionals as being the most environmentally friendly building material when compared to either steel or concrete across a wide range of performance attributes.
This study offers the first detailed look at residential construction professionals’ perceptions and use of a variety of environmentally oriented building programs and products in the US. It establishes a baseline for the use of GBPs and ECWPs by US homebuilders and remodelers. While the current awareness and use of these programs and products is often low, the results suggest that their use will increase in the future as the awareness of both construction professionals and consumers increases.
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An Assessment of the Competitive Impact of Japanese Domestic Wood Programs on the Future Demand for US Wood Products in Japan
Authors: Ivan Eastin and Daisuke Sasatani
Since 1970, Japan has increasing relied on imports to meet its domestic demand for wood products. This reliance on imported wood has always caused a certain tension in Japan where forests cover two-thirds of the country. This tension is caused by the fact that along with the plentiful supply of wood, there is an extensive sawmill industry in Japan. Despite the closure of more than 13,000 sawmills over the past twenty five years (from 20,256 in 1983 to 5,927 in 2012), the Japanese sawmill industry remains uncompetitive and plagued by small, inefficient sawmills located in rural areas far from the main demand markets. High production and transportation costs have made both domestic logs and lumber uncompetitive within the domestic market and, as a result, lower cost imported wood products have become the primary source of supply within Japan.
Over the years, the Japanese government and the forest products industry have proposed a number of subsidies and policies designed to improve the competitive position of domestic wood products as well as the forestry and sawmill sectors. A recent regulatory initiative, the Forest and Forestry Revitalization Plan, proposes to develop an extensive system of subsidies and regulations designed to increase the volume of timber harvested from domestic forests while promoting the expanded use of domestic wood over imported wood in the construction of both public buildings and residential homes. Clearly any program designed to raise the market share of domestic wood in Japan will adversely impact the competitiveness of imported wood and would have serious implications for forest products manufacturers in the Pacific Northwest, many of whom are located in rural, timber-dependent communities which were particularly hard hit by the recent economic crisis. With the US economy still feeling the effects of the housing crisis, and housing starts remaining at historically low levels, export markets have been the one bright spot in an otherwise dismal economic landscape for the forest products industry. Total US forest products exports have increased by 46% since 2009, rising from $5.2 billion in 2009 to $7.5 billion in 2012. Japan is the third largest destination for US wood exports, with exports of wood products increasing from $517 million in 2010 to approximately $730 million in 2012. With the introduction of the new Forest and Forestry Revitalization Plan in Japan it is critical that the US undertake research to better understand the potential implications of the subsidy programs on the competitiveness of US wood products in Japan.
This research project was designed to gain a better understanding of how the newly implemented Forest and Forestry Revitalization Plan would impact the overall demand for wood products in Japan in general and the competitiveness of US wood products specifically. The objectives of the proposed research include the following: 1) describe the forest resource in Japan and assess the factors that influence the supply and demand of domestic wood products in Japan; 2) provide an overview of the major wood industries in Japan (lumber, plywood and glue laminated lumber); 3) provide an overview of the housing sector; 4) assess the changing demographics in Japan; 5) assess the broad range of forestry and wood subsidies and support programs in Japan and 6) assess the potential impact of the domestic wood policies and programs on wood use in Japan and the demand for imported wood products from the US.
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Authors: Indroneil Ganguly, Ivan Eastin, Pablo Crespell and Chris Gaston
OverviewThe demand for decking and fencing materials is driven by several factors, including the macroeconomic environment, demographics, construction expenditures, and the repair and remodel sector. In addition, competition within the decking and fencing markets has recently been significantly altered by regulatory constraints on the forest products industry that have restricted harvest levels, by increasing imports of softwood lumber and by expanding competition from non-wood substitute materials. These last two factors are likely to have the greatest impact on the specification and use of decking and fencing materials in the mid to long term as the markets adjust to the changing regulatory environment and changing consumer perceptions and preferences. This report will explore the extant literature related to the demand for decking and fencing materials in the residential, non-residential, public and non-building segments of the construction industry.
US Decking MarketThe demand for decking products is projected to increase from 4.7 billion board feet (bbf) in 2000 to 5.6 bbf in 2010, a 19.3% increase over the ten year period. This market expansion will not be distributed evenly across the three major types of deck materials, however. Whereas wood-plastic composite decking (WPC) is expected to increase by an astronomical 491% and plastic decking by a healthy 152%, the demand for wood decking is expected to decline by 8.5%. Further, the demand for redwood is projected to decline by over 15% between 2000-2010, although the decline in the demand for redwood lumber is attributed to supply constraints rather than declining demand. These demand outlooks are driven by two fundamental end-user attributes: durability (long-deck life) and low maintenance. Very little consideration was paid to price and price sensitivity of either new home builders or home owners. As a result, these demand estimates are more heavily weighted towards the higher priced substitute materials than the actual market situation might otherwise justify, particularly in the 2005-2010 period.
The primary construction application for decking is repair and remodel (approximately 86%) followed by new home construction (approximately 14%). While the demand for decking products in new construction is expected to experience strong growth between 2000 and 2010, the sheer size of the repair and remodel market make it a much more attractive market segment for producers. In addition, new home builders are a much more price sensitive set of buyers compared to home owners given the nature of the project expenditures. In addition, decks on new homes tend to be smaller than repair and replacement deck projects.
Residential construction is the primary market for decking materials, followed by non-building projects (docks, marinas, park structures, etc.) and non-residential construction. The demand for decking materials in the residential market is expected to grow by 24.3% between 2000 and 2010 while demand is expected to grow by just 6.9% in the non-building market. Again, contractors in the non-building segment are much more price sensitive given the nature of the bidding process in these types of projects.
Almost 80% of decking material is installed by professionals as opposed to homeowners (DIY). While demand is expected to grow substantially in both segments, the highest growth is projected to occur within the DIY segment (27.7%) rather than the professional segment (15.9%). Given the profit constraints facing most professional installers, this segment of the market tends to be more price sensitive than the DIY segment.
Finally, the deck market can be segmented into deck platforms versus rails and accessories (benches, stairs, planters, etc). It is important to note that only 59% of the total demand for decking materials is derived from the construction of deck platforms. The remaining demand can be attributed to deck rails and accessories, suggesting that overall demand for a specific product may be influenced to a substantial degree by the availability of rails and accessory products manufactured from the same material. Growth in both of these market segments is expected to be strong.
The projections indicate that the largest demand region for decking products is the US south while the US west is the smallest demand region. Interestingly, the largest growth in demand for decking materials is expected to come from these two regions.
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Authors: Indroneil Ganguly, Ivan Eastin, Pablo Crespell and Chris Gaston
OverviewThe demand for decking materials is driven by several factors, including the macroeconomic environment, demographics, construction expenditures, and the repair and remodel sector. In addition, competition within the decking market has recently been significantly altered by regulatory constraints on the forest products industry that have restricted harvest levels, by increasing imports of softwood lumber and by expanding competition from non-wood substitute materials. These last two factors are likely to have the greatest impact on the specification and use of decking materials in the mid to long term as the markets adjust to the changing regulatory environment and changing consumer perceptions and preferences. CINTRAFOR has been collecting market information on the material usage trend in the U.S. deck building industry since 1995. This report will present an analysis of the material usage trends and practices in the decking materials market.
Further this report will provide a comprehensive product positioning and marketing analysis of the major decking materials in the US.
An interactive web-based survey was used to collect the data and information presented in the report. Sufficient care was given to ensure that the respondents of the survey had significant deck building experience, hence, only those deck builders who had built more that 5 decks over the past two years were allowed to take the survey. A total of 372 qualified respondents completed the survey, representing 44 states and providing representation across all regions of the US. The number of residential decks built by the respondents in 2008 ranged from 1 to 250, with more than 60% of the respondents building between 3 to 8 decks. A substantial number of respondents (12% of the respondents) indicated that they built more than 20 decks in 2008.
US Decking MarketWith the decline in US housing starts in 2007 and 2008 the focus of the deck building industry has shifted away from new decks for new houses. This study shows that the primary revenue generator for the US decking industry in 2008 was repair and remodel (approximately 44%) closely followed by building new decks on existing houses (approximately 42%). Under the present scenario, constructing new decks in new homes only marginally contributes (approximately 14%) to the overall revenue of the US decking industry. This trend is more or less consistent across all the regions of the country with the repair and remodeling projects and deck construction in existing houses strongly dominating the industry’s revenue generation. This result confirms that when homeowners live in their houses longer they tend to invest in remodeling their houses; remodeling existing decks or installing new decks has traditionally been important aspects of renovating and remodeling houses. Moreover, such a trend also indicates that the deck building industry is at least partially insulated from the housing downturn.
The survey results reveal that the size of the decks built in the US have not changed significantly since a previous survey conducted by CINTRAFOR in 2003, averaging 438 square feet. However, the average unit construction cost of decks built in the US has increased substantially from $13.50 per square feet in 2003 to
$18.62 in 2008. Regional differences in the unit construction cost were also observed in the study. The average unit construction costs of decks built in the Northeastern and Western regions were approximately $20 per square feet, whereas, the average unit construction costs of decks built in the Southern region of the country were approximately $16 per square feet. Finally, the average cost of decks built in the Western region (approximately $9,533) was significantly higher than the national average ($7,319).
Decking Material Usage TrendsThe market for residential decking materials in North America has become increasingly competitive over the past decade. Past studies have indicated that wood plastic composite decking (WPC) and plastic lumber (PVC) are increasingly replacing treated softwood lumber and naturally durable timber species (i.e., redwood, western red cedar and tropical hardwoods) in deck building applications. Our 2009 survey results indicate that this trend of gradual market displacement of naturally durable timber species and treated softwood lumber decking materials has continued. Over 66% of the respondents surveyed indicated that they have increased their usage of WPC and 37% of the respondents increased their usage of PVC between 2006 and 2008, with less than 10% reporting that they had decreased their use of WPC and PVC. In contrast, a high percentage of respondents indicated that they have decreased their usage of pressure treated lumber (31%), western red cedar (36%) and redwood (35%) while less than 20% reported increasing their use of these materials.
The deck market can be segmented into the three main end-use applications; deck substructure, deck surface, and rails/accessories (benches, stairs, planters, etc). It is important to note that only 59% of the total demand for decking materials (based on value) is derived from the construction of the primary substructure and deck surface. The remaining demand can be attributed to deck rails and accessories, suggesting that overall demand for a specific decking material may be influenced to a substantial degree by the availability of rails and accessory products manufactured from the same material. Growth in both of these market segments is expected to be strong. While pressure treated lumber (PTL) remains the dominant material used in substructure applications, with a market share over 80%, PTL only has a 30% share of the national deck surface market.
WPC is now the market leader in deck surface applications across all regions of the US, with the exception of the South where almost 40% of deck surfaces were still built using PTL. In contrast, only about 10% of the deck surfaces built in the western US used PTL and WPC has emerged as the market leader with a 34% market share. The western US is also the region with the greatest use of naturally durable wood decking, perhaps reflecting the greater availability of these products. Plastic decking made its greatest inroad in the northeast where almost 18% of deck builders reported using this product.
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A Comparative Assessment of the North American and Japanese 2x4 Residential Construction Systems: Opportunities for US Building Materials
Authors: Ivan Eastin and Rose Braden
The purpose of this project was to perform a comparative assessment of the US and Japanese 2x4 construction technologies, evaluate Japanese builders perceptions of US value-added wood building materials and identify opportunities to increase the use of US wood building materials within the Japanese 2x4 construction sector.
In 2008, housing starts in the US and Japan totaled 906,200 and 1.05 million units, respectively. Two by four housing starts in Japan totaled 107,747 (up 9.3% from 2007) and reached a record market share of 21.3% of total wooden housing starts and 9.8% of total housing starts. Approximately half of the prefectures in Japan had a ratio of 2x4 housing starts above the national average of 20.8%. However, in many of these prefectures, the total number of 2x4 housing starts is relatively small. The prefectures where the adoption of the 2x4 construction technology is well established, as well as where the housing market is relatively large, include Saitama, Tokyo, Hyogo, Kanagawa, Chiba, Hokkaido, Fukuoka and Aichi. These 8 prefectures represented 51.7% of 2x4 housing starts in Japan in 2008.
While the global economy performed poorly in 2008, exports of wood products from the US to Japan increased substantially. Total wood exports from both the US and Washington to Japan, which had been declining since 2004, recorded increases in 2008, with US wood exports growing by 6.6% while Washington exports rose by 5.2%. Softwood logs and lumber remain the primary wood products exported to Japan, although exports of OSB and veneer sheets increased significantly in 2008. Exports of value-added wood products from Washington to Japan were dominated by prefabricated buildings (25.3% of total value-added wood exports), builder’s joinery (44.8%), wooden windows (16.9%) and wooden doors (6.4%).
Despite the success of the 2x4 construction system in Japan, imports of US wooden building materials are constrained due to the fact that there is a Japanese version of the 2x4 construction technology that co-exists with the North American-style. The primary difference between the two systems relates to the size of the basic construction module used in the construction process. The Japanese-style 2x4 system utilizes a 3’x6’ panel size which is based on the size of a traditional tatami mat, whereas the North American-style 2x4 system employs 4’x8’ panels in the construction process. Another difference between the two construction systems is the spacing of studs and joists; 17.9 inches (455 mm) on center in the Japanese system versus 16 inches (405 mm) on center in the North American system. In addition, the Japanese system tends to use more wood in the construction process (particularly in the structural framing) and thus tends to have higher material and labor costs, making the Japanese system less cost effective. Finally there is less labor specialization and efficient scheduling of construction tasks with specialist crews; significantly slowing down the construction process, reducing housing quality and increasing labor costs.
Despite the fact that most builders interviewed in this project recognize the cost effectiveness of the North American-style 2x4 construction system, relatively few Japanese builders have adopted it. Discussions with Japanese 2x4 home builders point to a broad range of factors that influence this decision. Perhaps the most important factor is that home builders in Japan are not customer-oriented in the sense that they work closely
with their customers to maximize customer satisfaction and reduce overall cost. Another factor which contributes to the widespread use of the 3x6 module relates to the strong relationship that exists between Japanese 2x4 builders and Japanese manufacturers of wooden building materials, particularly commodity wood products. Home builders interviewed during this study universally emphasized that reliability of supply and just-in-time delivery of building materials to the construction site are very important to them. Domestic manufacturers of structural panels and wood products are willing to provide this service for them whereas few foreign suppliers will.
This same bias is somewhat less evident in the use of value-added wood products such as wood windows, door and cabinets. In this case, we found that 2x4 home builders were much more willing to use imported building materials. However, the biggest concern for them when specifying these products is that they should be readily available in Japan and they must be able to obtain spare parts and installation support in a timely manner. For example, some home builders indicated that they do not use US wood windows because they have difficulty obtaining spare parts and replacement windows in a timely manner and because technical support in Japan is generally not available (although some US wood window manufacturers do have representatives in Japan to handle product and installation issues quickly).
Another issue that affects the use of US wood building materials is Japanese home builders’ perception that US manufacturers and exporters are not committed to the Japanese market for the long-term. The perception that US exporters are ‘inners and outers’ is problematic and must be overcome in order to make greater inroads in Japan.
This project included a survey of Japanese 2x4 builders, with survey respondents representing 62.1% of total 2x4 housing starts in 2007. Not surprisingly, given the design of the sample frame, almost 85% of the houses built by respondents were 2x4 houses with the remaining houses being post and beam. Virtually all of the P&B builders reported that they used the 3’x6’ module. While over a third of the 2x4 builders reported that they have used the 4’x8’ module, the number of houses that they build using the 4x8 module was less than 5% of the total houses they built in 2008.
With respect to the specification and sourcing of value-added wooden building materials, the survey found that home owners specified these products between 17% and 30% of the time, depending on the type of product.
The survey also found that 2x4 homebuilders are quite willing to use imported value-added wood building materials, with their use of these products ranging from 20% in the case of kitchen and bathroom cabinets to almost 50% for hardwood flooring and wood windows. Japanese 2x4 builder’s use of US value-added wood products was highest for hardwood flooring (18.4% of total use), interior doors (16%), wood windows (16%) and exterior doors (14%). It was lowest for kitchen cabinets (4%), bathroom cabinets (6%) and softwood flooring (7%).
Survey respondents reported that the most important product attributes for them were high quality (6.6 rating out of 7), reliability of supply (6.4) and low price (6.2). In terms of product quality, they reported that US value-added wood products were perceived as having only average quality. Interestingly, small builders rated the quality of US value-added building materials much higher than did large builders. Respondents also reported that US suppliers provide below average levels of products support, although small builders again reported substantially higher ratings than did large builders.
The survey results clearly show that the large, national 2x4 builders have a poor perception of US value-added wooden building materials, both in terms of quality and service, relative to small and medium-sized local builders. This suggests that US manufacturers and exporters should focus their marketing efforts on small and medium-sized 2x4 builders in the short-term. However, long-term success in Japan will require that US manufacturers and exporters understand and address those factors that adversely affect large builder’s perceptions of US value-added wood building materials. This should provide the basis for additional research in the future.
One product for which there is strong market potential is dimension lumber. Many of the 2x4 home builders reported that they were having trouble sourcing 2x8 and 2x10 joist material, as well as most other sizes of dimension lumber. More 2x4 home builders are now willing to accept a “home center” grade of lumber rather than the traditional higher quality J grade. This suggests that now may be a good time for dimension sawmills in Washington to reenter the Japanese market.
In summary, the struggling domestic housing market in the US combined with the relatively weak US dollar and strong Japanese yen provide a unique for manufacturers and exporters of wood building materials increase their presence in Japan. However, they must demonstrate a long-term commitment to the Japanese market in order to be successful.
The Japanese 2x4 market continues to represent a good opportunity for US manufacturers and exporters of wood products who are confronted with the worst US housing market since 1945. However, re-establishing US wood products in the Japanese market will require substantial effort on the part of manufacturers and exporters, especially those who abandoned the market during the period 1996-2006. US manufacturers and exporters who are returning to the Japanese market or who are new to this market will need to demonstrate a long-term commitment to their Japanese customers if they are going to be successful. They also need to develop a strategy for providing after sales support for their products in a variety of areas, including: timely claims evaluations, assistance with installation questions and providing spare parts and replace
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Authors: Indroneil Ganguly and Ivan Eastin
The economic liberalization policies initiated in 1991 have led India along the path of increased economic growth and greater macroeconomic stability. Real GDP growth averaged 6% over the period 1997-2001, exceeded 8% from 2002-2005 and is projected to be about 9.2% in 2006. This rapid economic growth has been supported by a loosening of trade restrictions which have contributed to a rapid increase in both imports and exports. Between 2000 and 2005, imports increased from $US50 billion to $US149 billion while exports increased from $US36 billion to $US103 billion. Future economic growth may be tempered by rising inflation, which is projected to be almost 7% in 2006, and rapidly increasing wage rates for skilled labor. For example, food price inflation rose by 10% in 2006. In addition, poor infrastructure (especially roads, ports and electrical power distribution), restrictive labor laws and poor quality public services (especially in education and health) also pose serious challenges to continued high levels of economic growth in India . It is estimated that almost 40% of India 's fruit and vegetable harvest rots before reaching market due to inadequacies in the transportation and electrical distribution infrastructure. India will continue the process of opening its economy due to the fact that it must create on the order of 15 million new jobs every year simply to provide employment for young people entering the job market. However, future economic growth is dependent on reducing (and eventually eliminating) subsidies and providing improvements in the road and electrical distribution infrastructure, particularly in the rural areas of India .
The forest cover in India is estimated to be 637,293 km 2 ; 19.4% of the total land area. India 's forests are mostly state owned; only 10% of the forests are classified as community or private forests. A recent survey by domestic and international organizations revealed a moderate increase in India 's forest cover. Forest plantations play a very important role as a source of raw material to the domestic wood-based industry. Since adopting the National Forest Policy of 1988 (NFP), there has been a ban on the felling of trees in all forests located above an altitude of 1,000 meters. In addition, high priority has been given for planting fuelwood and deciduous fodder producing trees in government forests. Finally, industrial wood production was restricted to farms and wastelands. As a result, there was a drastic reduction in timber harvest volumes as a number of states stopped timber harvesting and a ban was announced on all harvest operations in the national parks and protected sanctuaries.
The NFP emphasized meeting the fuelwood, fodder and small timber needs of local communities rather than the raw material requirements of the wood-based industry. It should be noted than even before the NFP was implemented in 1988, the existing forest policy was more conservation oriented than industry oriented. The raw material crisis for the wood-based industries became more acute following the adoption of the NFP. As a result, the forest-based industries have had to increase their dependence on private forests and bamboo from natural forests (bamboo harvesting from natural forests is permitted) for their raw material supply. Though large reforestation programs were proposed in conjunction with the NFP budget, constraints prevented the forestry department from meeting the reforestation targets. To meet the community demand for fuelwood, small timber plantations were designed which provided timber products that were less useful for industry. In order to improve the availability of raw materials, the NFP proposed the liberalization of log, chips and pulp imports.
The Indian forest products industry, both the wood products sector and the paper and paperboard sector, have been constrained by severe raw materials shortages. This raw material shortage for the forest products industry has been further accentuated as a result of a Supreme Court ruling limiting the felling and movement of timber within the country. In an effort to alleviate the raw material shortage, the forest products industry is increasingly relying on imported logs, chips, wood pulp and waste paper. Hence, for the wood-based industries, imports have become a very important component of their raw material mix.
The graduated structure of tariffs applied on wood product imports clearly indicates that the Indian government encourages the import of unprocessed lumber that can be used by the wood-based industries as raw material inputs. Higher tariff rates are imposed on imported finished and value added products to protect the less efficient domestic manufacturers from international competition. In addition to the basic import tariffs, India also imposes duties such as surcharges, additional customs duties and special additional duties. Other additional levies can be imposed on imported wood products depending on the nature of the product. These additional levies include countervailing duties, anti-dumping duties and safeguard duties. Other non-tariff barriers include state taxes, which can be as high as 18% of the value of imports and various port of entry restrictions which might add up to a large mark-up on imported items. Such tariff and non-tariff barriers by the government make imported products less competitive in India . Over the past decade the tariff rates and the non tariff barriers have been reduced dramatically and India has started importing large volumes of forest products.
Indian trade in forest products has increased tremendously over the period 1999-2005. This is in response to both the decline in the domestic timber harvest as well as the increased demand for wood products within the domestic wood processing industry. Over the period 2000-2005 Indian exports of wood products jumped from $US30 million to $US99 million, a 230% increase. In contrast, imports of wood products went from $US528 million to $US957 million, an 82% increase over the same period. As a result, India saw its balance of trade in wood products worsen from $US498 in 2000 to $US858 million in 2005. It is important to note that over 88% of India 's wood imports were logs, primarily from Malaysia and Myanmar .
Housing has long been neglected in India 's national 5-year plans. The unfulfilled demand for housing was estimated to be approximately 50 million units in 2001 and was projected to be increasing at a steady rate. This housing shortage stems from a lack of government funding and the inadequacy of financial institutions, coupled with an increase in building material, labor and land costs. In the tenth five-year plan, from 2002 – 2007 special emphasis has been given to the housing sector and some state governments have announced a target of achieving “shelter for all” by 2012. Efforts have also been made to reform the allied institutions in an attempt to provide support to the housing sector. The government is beginning to view the housing sector as a very important driver of economic expansion and increased employment. These new initiatives by the government and the huge latent demand for housing, coupled with an expanding economy, should result in higher housing starts in the country over the next decade.
The middle class population in India , which is almost the size of the US population, is becoming more exposed to the western life-style and is showing an interest in western style doors, windows and kitchen cabinets. India has a centuries old tradition of wood use, particularly for interior design and furniture. Although structural wood is rarely used for construction, outside observers have noted that India uses more interior wood than Japan . Recent estimates suggest that the market for high end imported value-added wood products is increasing steadily as a result of continuing economic prosperity in India . This represents one of the largest emerging markets for value-added wood products in the world. New residential construction, primarily multifamily units, are increasingly going to standardized sizes for doors, windows, and interior fittings. This has led to an increased demand for imported doors, windows and cabinets. The total annual demand for furniture in India is estimated to be $US1.25 billion of which 90% is for wooden furniture. The market for branded (higher quality) wooden furniture is estimated to be $US37 million and growing at an annual rate of 15%.
Imports of wood products into India have been growing rapidly, although the demand for wood products is heavily skewed towards raw materials such as logs, chips and pulp. While the middle class in India is growing and becoming more open towards using imported value-added wood products, much work needs to be done to take advantage of this demand. For example, India must accelerate their rationalization of import tariffs and remove those non-tariff barriers designed to protect inefficient domestic manufacturers from international competition. This will not only ensure compliance with their WTO obligations but will also force the domestic processing industry to invest in more efficient processing technologies. In addition, there remain long-term opportunities to introduce North-American wood frame construction technology in India . The combination of a severe housing shortage and interest in developing energy efficient housing both provide impetus for working to gain acceptance for wood frame construction. However, in order to achieve the successful introduction and adoption of wood frame construction it is important that the US government and industry associations work with the Indian government to develop and adopt wood frame building codes. Finally, acceptance of wood frame construction technology is dependent on increasing the familiarity and understanding of this construction technology within the architect and construction communities. A key element to gaining this acceptance could be in educating architects and residential builders on the superior environmental performance and energy efficiency of North-American wood frame construction technology.
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Resource Inventory, Market Assessment and Analysis for Forest Products in Clallam and Jefferson Counties
Author: John Perez-Garcia
This project was established to examine current viable opportunities for the expansion of the wood products industry in Clallam and Jefferson counties. The study updated existing and future harvest level projections in Clallam and Jefferson counties, highlighting the potential new supplies. It also examined precommercial thinning volumes on state and federal lands. The harvest level findings are used to complete an analysis including the flow, species and size of the raw material supply required to manufacture value-added products. Three opportunities are explored: Oriented strand board production utilizing harvest and current manufacturing waste material, biomass-based energy production, and second tier value-added products from production of random length alder.
We projected harvest levels using timber harvest data by grade and species provided by the Department of Revenue Timber Tax Division and the Department of Natural Resources Marketing Division. These data provided a breakout of average volumes per acre by species and grade observed for timber sales in 2004. We applied the average volumes per acre to a projection of harvest acres constructed by Atterbury Consultants and published in their report for the council dated 2000. The analysis of the sales data indicated an average volume of nearly 40 thousand board feet (mbf) per acre. The majority of this volume is in #2 and #3 sawmill logs; over 15 mbf in each log class. The next highest volume is in the #4 sawmill log with 7.5 mbf. The greatest volume per acre is in western hemlock with over 15 mbf, followed by Douglas fir with 8.8 mbf. An estimated 8,070 acres are harvested annually during the projection period 2000 to 2004. Using the per acre averages calculated above we determined annual harvest levels to reach 322,265 mbf during this period. For the period 2015 to 2020, harvest acres are projected to reach 8,618 with an estimated annual harvest level of 344,148 mbf.
The majority of the annual harvest level during the period 2000-2004 is in #2 and #3 sawmill logs, over 300,000 mbf equally distributed. Western hemlock annual harvest levels are 124,236 mbf, followed by Douglas fir with 71,293 mbf. Red alder annual harvests are estimated at 22,849 mbf during the period 2000 to 2004.
Timber consumed by local mills amounted to 122,033 mbf for 2002, with an estimated slightly higher consumption for 2004. Total consumption of Clallam and Jefferson county timber by Washington sawmills reached nearly 230,000 mbf in 2002. Over 90,000 mbf of timber is exported to mills located in other Washington counties. The majority of this timber flow, about 77,000 mbf went across the Puget Sound to Whatcom, Skagit, Snohomish, King and Pierce county mills.
The annual volume of precommercial thinning is estimated at 125,000 to 180,000 green tons from federal and state lands. The majority of this thinned material is on State lands involving 4,000 to 6,000 acres annually for the next decade. The majority of the thinning volume is not commercial due to restrictions imposed by terrain conditions that lead to prohibitive harvesting and extraction costs.
Oriented Strand Board (OSB) represents a product that utilizes low grade materials to produce a substitute for plywood. First generation OSB manufacturing plants were about 50 million square feet 3/8 inch basis in size. Newer generation plants (continuous flow) are much larger in size; the latest plant capable of producing 800 million square feet 3/8 inch basis. The majority of new plants have a capacity of 500 million square feet 3/8 inch basis. Resource availability converting the volume of #4 sawmill and utility grade logs into chip materials was estimated at 492,000 green tons, or about enough material to produce 313 million square feet 3/8 inch basis of OSB. At most the projections reached 335 million square feet by 2020. Since the volume of required materials is much smaller than what a competitive new facility would consume, the potential for a new OSB plant in the region was determined early on during the study to be non-existent. Other limitations were also evident including the lack of sufficient hardwood resources, and the fact that current uses of chip materials and lower-sized saw logs would decrease the availability of raw materials to the new plant.
Biomass-based energy can be produced by burning wood waste. To evaluate this option we first determined the fuel value of materials in the region. If a sufficient fuel value was present, we then estimated the competitiveness of the material for use in energy production. To determine the fuel value of the materials in the region we estimated the size of a potential power plant by converting the volume of #4 saw mill and utility logs into green tons. This conversion indicated that the power plant sizes could ranged from 37 to 45 megawatts, representing substantial amounts of energy production. We then calculated the competitiveness aspects of the material if it were used to produce energy. Plants of these sizes in Vermont purchased chips at a price that ranges from $12 to $21 per green ton, a price that is substantially lower than current chip prices paid by local pulp mills, and lower than estimated harvesting and delivery costs (about $35 per dry ton). In addition the low price per kilowatt hour (about $0.03) acts as a disincentive to utilize woody biomass as an energy source. These calculations indicate that wood as an energy source is uncompetitive with current energy pricing. Also, harvesting and delivery costs are still too high for woody biomass to be viable, even if supply is not a constraining factor.
The utilization of red alder has increased dramatically, and the projected start of a new alder mill in 2006 suggested analyzing potential value-added products such as cabinetry, furniture and door manufacturing. We conducted interviews with the new mill manager and regional end-users of alder and determined constraints associated with attracting a value-added facility to the region. The constraints identified during these interviews included the inability to diversify products should a new manufacturing plant focus exclusively on alder. Various wood species are used in cabinetry, door and furniture manufacture. Currently alder is well received, but demand is highly responsive to changes in consumer preferences. Diversification of various species is perceived to be an important aspect of a successful end-user. The success of a value-added manufacturer will depend on its ability to utilize various sources of lumber and other materials.
Our study findings included the following. The two county region is a net exporter of wood fiber. The recent announcement of plans for a new sawmill in the Everett area suggests that wood fiber from the area will continue to have demand outside of the region. Less than half of the volume harvested is utilized locally by saw mills, even with the projected new mill in Port Angeles. Biomass-based energy has the potential supply, but costs for woody biomass as an energy alternative are too high and energy prices are too low for it to be competitive. Other fiber using industries, such as OSB, would require more fiber than is available. Finally, an alder value-added manufacturing plant would require diversification for it to be successful.
We recommend that future work analyze the potential for expanding the existing softwood lumber sawmill capacity in the region. The volume of sawmill logs that are exported from the area is estimated at less than 100,000 mbf and is insufficient for a modern large mill, which can be twice as big. Expanding the sawmilling capacity of the existing mills may provide benefits for the local region and enhance their competitiveness with mills outside of the region that currently successfully bid for local timber. The announced plans for a new mill in the Everett area suggests an evaluation of timber values for the region and its competitiveness. An analysis currently underway to examine these values should be consulted when completed. While woody biomass is currently too costly, options should be explored for promoting “green energy” options. Finally, since the region is an excess supplier of timber, it should promote its position in order to attract potentially new manufacturing that can consume underutilized resources and compliment the existing milling infrastructure in the area.
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Authors: Ivan Eastin, Indroneil Ganguly, Steve Shook and Al Brackley
The deck building industry is going through a period of rapid growth and dramatic change with respect to the types of materials available to build decks. A 2001 study by the Freedonia Group estimates that the demand for decking materials will increase by almost 20% between 2000 and 2010. To better understand material use and contractor preferences within the deck building industry, CINTRAFOR, with funding support from the USDA Forest Service Wood Utilization Lab in Sitka, AK) recently completed a survey of 205 deck builders and 213 home builders across the US. In particular, this research project was interested in documenting the current usage of Alaska Yellow Cedar (AYC) in residential decking, evaluating builders perceptions of AYC lumber as a decking material, assessing the potential for expanding the use of AYC in deck building and developing a set of strategic marketing recommendations to promote the expanded use of AYC in deck building. Refinement of the marketing recommendations should be considered once an accurate supply projection for AYC logs is available.
The deck building industry is dominated by small to medium-sized firms with over 63% of survey respondents indicating that their sales revenue was less than $1 million in 2003. In contrast, over 11% of deck builders generated sales revenue in excess of $5 million. The average deck builder constructed 93 decks with an average deck size of 456 square feet. Since the average construction cost for a new deck was $6,161, the average construction cost for a deck in the US was $13.51 per square foot. Approximately 45% of the construction cost was attributed to the deck surface while 33% was for the substructure and 21% was for accessories. Just over 40% of deck builder projects were new (first time) decks built on existing homes while 25% were new decks built on new homes and almost a third were replacement decks built on existing homes. However, the survey data clearly shows substantial differences in deck characteristics based on geographic location. For example, deck builders in the eastern US built more than twice as many decks per year as companies in the western US (126 decks vs. 52) although the average deck size was significantly higher in the west (530 square feet vs. 395 square feet). Despite this, the average construction cost was relatively similar between the regions ($15.04 per square foot in the west vs. $15.90)
Material use in the substructure was dominated by treated lumber with a market share of over 90%. Material use in deck surface applications was dominated by wood-plastic composite products followed by treated lumber and western red cedar. Finally, approximately 30% of deck accessories were built using wood-plastic composites and treated lumber while an additional 18% were built from western red cedar. Deck builders were also asked to indicate the relative importance of a variety of product attributes in their material specification decision. The most important attributes in the material specification process were long life, visual appearance, consistent material quality and product availability. In contrast, the lowest rated attribute was low price. In other words, deck builders base their material purchase decisions less on price, preferring to focus on material quality. This suggests that home owners are less price-sensitive in the purchase of a deck, preferring high quality, durability and ease of maintenance over low price.
Strategic Marketing Recommendations
The results of the market research suggest that the target market for Alaska yellow cedar should be deck builders located on the US west coast, comprised of California, Oregon and Washington. The survey results show that decks built in this market are larger, more expensive and more likely to use naturally durable woods. The focus on deck builders is based on the fact that the demand for decking lumber in the repair and remodel market is expected to total 4.4 billion board feet in 2005 as compared to a demand of just 700 million board feet in the new construction market. In addition, our research results indicate that approximately 46% of the decks built on new homes are subcontracted out to deck builders. It is important to note that the survey results suggest that homeowners play a very important role in specifying decking material. For example, home builders indicated that home owners were responsible for specifying the decking material 30% of the time while deck contractors indicated that the homeowners specified the decking materials almost 50% of the time.
The product offering should reflect a premium product strategy. Based on the survey results we recommend that lumber manufacturers in Alaska supply a family of products that includes decking lumber, deck joists and accessory products. This recommendation is based on the survey results showing that the use of naturally decay resistant wood is substantially higher in deck surface and deck accessory applications as opposed to deck substructures.
Developing an efficient distribution channel for AYC decking products will be critical to the market development strategy. Our market research clearly shows that many deck builders cited the lack of availability as a primary reason why they have not been willing to use AYC or why they have not increased their use of AYC. Consequently, it will be important to match the expected supply of products with the size of the target market. Uncertainty over the short-term supply would argue for a more conservative strategy that constrains the size of the target market during the initial phase of the marketing campaign, allowing it to increase only as an increased supply of AYC products become available. Further, given the distance of Alaska suppliers from the target market, we would recommend that Alaska lumber producers consider establishing a relationship with stocking wholesalers that would allow for substantial volumes of product to be inventoried within a target market to reduce the logistical constraints of providing a reliable supply of products within a short timeframe.
The survey results suggest that deck builders using naturally durable wood species have a relatively low price sensitivity which supports our recommendation for implementing a premium pricing strategy. In contrast, deck builders placed the highest importance on lumber attributes such as durability, beauty, consistent material quality and reliability of supply. Emphasizing these lumber attributes will further support the premium pricing strategy. We recommend initially pricing AYC slightly lower than similar WRC and redwood products.
The promotional message must support the effort of positioning AYC as a high quality decking material. This means that the promotional message should emphasize the beauty, natural decay resistance, durability and consistent material quality of AYC. This can be effectively done by a direct comparison of AYC, WRC and RW across the major product attributes. As part of this strategy it may be useful to distinguish AYC from WRC and RW in terms of color, contrasting its light color to the darker colors of WRC and RW. This strategy will appeal to deck builders and home owners who are looking for a decking material that has beauty, durability and natural decay resistance but which provides a unique light colored appearance.
The promotional strategy must address the fact that many deck builders (and home owners) are unfamiliar with the properties and appearance of AYC. This can be accomplished through a variety of strategies, including working with stocking wholesalers to build sample decks in their show rooms and establishing a website to educate potential users on the properties, end-uses and benefits of using AYC.
The survey data further indicated that deck builders utilized a broad range of information sources to learn about new decking materials. As a result, we recommend that AYC producers consider a low-cost strategy to provide information on AYC across a broad range of media including the internet (through use of a website on AYC), attendance at trade shows (for example, the annual Deck Expo conference), material spec sheets for distribution through stocking wholesalers, advertising in industry magazines and advertising in consumer lifestyle magazines that emphasize the outdoor living. Finally, it may be useful to consider the possibility of offering promotional incentives for stocking wholesalers who install sample AYC decking exhibits in their sales showroom area and who meet specified sales goals.
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The Importance of Oregon’s Forests in US and International Markets: Meeting the Needs of Future Consumers of Forest Products and Environmental Services
Author: John Perez-Garcia
The consequences of decisions regarding the management of forest resources in Oregon are local, national and international. This is to say that unilateral policies implemented to achieve an objective associated with Oregonian forest management programs will have unintended consequences elsewhere. This study examines the unintended consequences that arise from a simulated policy to maintain Oregon’s harvest levels constant over the next 4 decades.
Forest economies other than Oregon and their associated environments are affected by our local choices. With a projected increase in the demand for wood products, what does it mean for Oregon to constrain its participation by restraining timber harvest? This study projects a future scenario for the global forest sector with and without Oregon’s increased participation to describe the impact the Oregon forest sector has on national and international markets. It also discusses several potential impacts on the environment associated with the changes in wood flows. This study addresses the following questions: What does a reduction in Oregon’s timber output mean for forest products markets locally, across the US and internationally? Which regions pick up the market share vacated by Oregon? What tradeoffs exist between timber production and the environment? What is Oregon’s role in providing forest products, environmental protection, social and economic benefits into the future for its citizens and the global community?
To estimate the effect of Oregon’s annual harvest level on US and foreign markets, we first analyze the future demand for wood products to 2040, and identify the producers of wood products that meet this demand. We next constrain the annual harvest level in Oregon to be constant throughout the projection period (2000 to 2040), and note the changes in harvest volumes in markets outside of Oregon. Once recorded, environmental measures for the areas that increase harvest activities are examined. We also note the potential social and economic benefits associated with changes in market shares.
An estimate of future global demand for wood fiber is based on annual projections of gross domestic product (GDP) of 3.5% and two historical trends in consumption of wood fiber. Consumption is estimated to reach between 2.0 and 2.8 billion cubic meters (Bm3) over the next 5 decades, adding from 0.5 to 1.3 Bm3 by the end of the 50-year period.
Many regions participate in meeting this growing demand for wood products, including Oregon, in this business-as-usual scenario. Focusing on softwood saw logs, the South contributes over 100 million cubic meters (MMm3) or 17.7 billion board feet (BBF) followed by Canada (40 MMm3 or 7.1 BBF) and the US West (including Oregon) (10 MMm3 or 1.8 BBF). This study estimates that the southern states will meet more than half of the projected demand growth.
When Oregon’s annual harvest levels are maintained constant—i.e. harvest levels are not allowed to expand to meet the projected demand growth—two effects occur in the market. The first effect is an increase in timber prices. This is followed by responses from other regions and alternative material producers to increase production. The South captures 43% of the decline in Oregon’s annual harvest levels. Alternative material producers—i.e. lost wood demand—capture 32% of the lost market. They are followed by Asia and Canada, which capture 15% and 10% respectively of the projected demand growth without an increase in Oregon’s annual harvest levels.
These results suggest there are several competing regions with the capacity to increase harvest volumes that an Oregonian forest manager must contend with including southern states, Canada and countries outside of the US with established plantations. Recent data on import trends confirm increased market activity from several countries with expanding forest resources. Latin America, as a region, has increased its exports of softwood lumber and plywood to western ports from less than $10 million in 1990 to over $100 million in 2002 for softwood lumber and from nearly no activity in 1997 to over $8 million in softwood plywood (mostly from Chile). While Brazil’s share appears to have peaked in 1999 at less than $25 million (mostly lumber), other countries have increased exports to western ports including Chile (both lumber and plywood), Uruguay (lumber) and Argentina (plywood). Softwood lumber entering western ports from Australia and New Zealand has increased from negligible numbers in 1990 to nearly $150 million in 2002. Imports of softwood plywood from New Zealand topped $1 million in 2002. These trade flows are small but significant since they signal new market suppliers to the US through western ports that directly compete with Oregonian products.
Within the southern states, annual harvest levels are projected to increase over the next twenty years in those states outlying the traditional timber-producing central states of Georgia and Alabama. Fringe regions in eastern Texas and the Carolinas are expected to increase annual harvest volumes by 15% or more in some areas more than offsetting declines in Georgia, Alabama and Mississippi.
We examine several environmental measures for those regions expected to increase market share due to constant annual harvest levels in Oregon. In general, since regions that compensate for Oregon’s lower harvest volume have shorter rotations and lower volumes per acre at harvest time, there will be more acres disturbed by harvest activities than would have been if the harvest activity were to occur in Oregon. Conservation concerns in the South are growing as they continue to augment their share of the US market. They include a decline in ecosystem communities that are endangered and not under public management. Also, with much wood growing in emerging plantation regions around the world, and their rankings in biodiversity and other indices low, there is concern that the shift to Asian and Latin American producers may lead to lower conservation efforts abroad. Carbon dioxide and other green house gas emissions also increase with greater use of alternative materials like steel and concrete. Estimates place the additional emissions as high as 1.4 million metric tons annually by 2040.
A loss in future market share also has implications for investment strategies in Oregon, with its social and economic consequences. One conclusion of the analysis suggests that the South, with continued growing demand for wood fiber, will increase its management intensity of forests augmenting productivity. Without the larger market for Oregon producers such management investments become more questionable in Oregon with a concomitant effect on its own forest productivity. While prices for timber may go up, the revenues that landowners receive maybe reduced since they are not able to harvest the same volumes as before. In addition, the lower harvest level removes any incentive for new capacity expansion in Oregon, amounting to 7 to 8 average-sized mills. There are also extensive areas of plantations internationally. These areas are likely to come into play in the near future representing low-cost sources of wood and attracting investments to produce wood products for a globalized market.
These results suggest that planners need to evaluate the tradeoffs associated with an unexpected change in harvest levels for Oregon. Since there is a need to meet growing demand and Oregon can increase its annual harvest level to meet a part of the growth in demand, any program that limits its potential to supply wood products will allow other regions and countries to expand their harvest levels, with an associated environmental tradeoff and shift in social and economic benefits. The question becomes whether the tradeoffs are favorable for Oregon and the global community or not. These tradeoffs need to be considered in order to reach environmental, social and economic goals, which may extend outside of Oregon’s boundaries. This study, combined with others that detail Oregon’s environmental management, should prove useful in answering that question.
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Authors: Steven R. Shook, Ivan L. Eastin, Samuel J. Fleishman
Approximately 85 percent of all single family homes in the US include a deck or deck-like structure (e.g., patio, porch, or balcony), which is equivalent to roughly 30 million decks. Sixty percent of all new homes are constructed with a deck, while nearly 2.75 million decks are replaced on an annual basis (the average deck has a life expectancy of about eleven years). Furthermore, slightly over 4 percent of all households add a deck to their home on an annual basis, resulting in another 3 million new decks. Collectively, over 6.5 million new decks have been constructed throughout the US on an annual basis since 1995, which represents approximately $3 billion spent annually in deck materials. During the decade of the 1990s, the deck market grew at an average annual rate of 8.1 percent. Assuming a constant rate of growth of 8.1 percent, the deck market in 2010 could be as large as $6.5 billion. Despite the enormous size and healthy growth of the residential deck market in the US, very little research has been conducted evaluating consumer perceptions of the various deck materials available to them in the market. The objective of this study was to review secondary information regarding the residential deck material market in the US. Additionally, a survey of residential homebuilders in the US was conducted to characterize the industry’s use of various deck materials, as well as to assess the industry’s perceptions of these deck materials.
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Author: Jun Fukuda
The trade of softwood lumber between the United States and Canada is one of the major forest products trade flows in the world. Since 1996, exports from the four major softwood lumber producing provinces in Canada (British Columbia, Alberta, Ontario, and Quebec) into the US have been regulated by the voluntary export restraint (VER) as defined within the "Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America" (SLA). The SLA allows Canadian producers to export up to 14.7 billion board feet (bbf) of softwood lumber without export fee and imposes high export fees on volumes exceeding the limit. The SLA is a temporary resolution of the trade dispute between the two countries that has lasted for more than fifteen years and is set to expire on March 31st, 2001.
The objective of this study is to determine if the expected effects of the SLA on the US softwood lumber market during the period 1996-1999 have actually occurred. The study discussed four possible direct effects and five possible indirect effects that the SLA might have had on the US softwood lumber market from a simple economic model and a review of the literature. The expected direct effects include: 1) a regulated volume of softwood lumber imports into the US from the four major provinces in Canada, 2) an increase in the price of softwood lumber in the US, 3) an increase in US softwood lumber production, and 4) a decrease in US softwood lumber consumption. The expected indirect effects of the SLA include: 1) a shift in the composition of countries exporting softwood lumber into the US, 2) an upgrade in the quality of softwood lumber exported from the four major Canadian provinces into the US, 3) an increase in the volume of softwood logs and value-added wood products exported from Canada into the US, 4) some attempts by Canadian manufacturers to avoid the export permit requirement under the SLA, and 5) an increase in the use of alternative products (both wood and non-wood) as substitutes for softwood lumber in the US. The study also provides a discussion of the alternative solutions that might be implemented upon the expiration of the SLA on March 31st, 2001 and a discussion of desirability/undesirability of the SLA based upon future softwood resource availability in the US.
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A Technical Evaluation of the Market for US Wood Windows within the Japanese Post and Beam Construction Industry
Authors: Ivan Eastin, Joseph Roos and Paul Boardman
In response to weakened demand for imported wood building materials within the 2x4 segment of the housing industry, a number of US exporters have begun to explore opportunities in the post & beam and prefabricated housing markets. In order to develop a better understanding of the problems and opportunities confronting US wooden windows in the post & beam segment of the Japanese residential construction industry, this project was designed to integrate with the ongoing market development programs being undertaken by OTED. The objectives of this project are to: 1) describe the factors driving technological change in the Japanese post and beam industry, 2) characterize and describe the major construction technologies used in the post and beam industry, 3) document the technical specifications and construction details required for wooden windows within the post and beam industry, and 4) recommend strategies for increasing the competitiveness of US wooden windows in the Japanese post and beam industry.
This results of this project support the idea that standard US wooden windows can be incorporated into the post and beam construction system used in Japan. However, product design and accessories as well as the range of support services offered by Japanese window manufacturers have a substantial impact on the competitiveness of US windows in Japan. US wooden window manufacturers (including clad wood windows) need to ensure that their windows are properly installed, finished, and maintained in order to ensure that their long-term durability and performance meets Japanese expectations. Significant technical and installation issues exist and US manufacturers must take the initiative to develop training programs and strategies to effectively address these issues so that window performance meets homeowner expectations.
While the fire codes in Japan describe the performance standards that windows must meet, it is interesting to note that the fire codes specify that aluminum is a non-combustible material and therefor exempted from the performance standards. Several people in Japan noted that, although it is difficult for wooden windows to meet the performance standards specified in the fire codes, to date approximately 15 wooden windows have been certified as meeting the fire code criteria. In contrast, they noted that most aluminum windows used in Japan, if exposed to the test criteria described in the fire tests, would melt and fail early on in the test process. It is obvious that the exemption of aluminum as a non-combustible material has played a critical role in providing aluminum window manufacturers with their dominant position in the industry.
During our visits to construction sites it was noted that the majority of windows had not been sized to fit the rough opening between adjacent posts. Rather, the rough opening for these windows was often framed in between the posts to accommodate the size of each window. Given this practice of in-fill framing for windows, it would be no more difficult for Japanese carpenters to frame in US standard size windows than Japanese metric size windows, a fact that our discussions with Japanese builders and carpenters confirmed. However, the different post sizes used in post and beam construction means that the casing width used to frame out the window in the wall varies based on the size of post being used. To address this complication, Japanese carpenters usually rip the window casing from a wide piece of casing after the window has been installed in the rough opening. So what is limiting the specification and use of US wood windows in Japan? Certainly price is one factor. But beyond this, product design and the range of services offered are equally important factors.
Another factor that impacts the window specification decision relates to the fact that Japanese home builders are usually provided with a range of services by domestic window manufacturers and wholesalers that are often not available from US manufacturers and exporters. These services include extended credit (tegata), on-site product delivery, on-site installation crews, and locally available parts and replacement windows.
This research suggests that standard US window sizes can be easily accommodated within the post and beam construction system used in Japan. However, product design and the range of services being offered have a substantial impact on the competitiveness of windows in Japan. US wood window manufacturers should at least consider the following factors to increase the competitiveness of their products in the future: 1) establishing of training and education programs for Japanese builders and carpenters, 2) developing a certification program for Japanese window installers and carpenters, 3) producing and distributing a generic window installation manual in Japanese, and 4) maintaining technical support, parts and product inventory in Japan. This research clearly shows that with a well thought out strategy, US wood window manufacturers could be competitive in the Japanese post and beam segment of the residential construction industry.
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Author: Jun Fukuda
Since the early 1980s, the US has worked to persuade Japan to open its wood products market to US products through various channels including bilateral talks, multilateral negotiations, and regional alliances. In response, Japan has reluctantly liberalized and deregulated its wood products imports through tariff reductions, building standards revisions, and foreign product standards recognition over the last fifteen years. Although the US-Japan trade dispute has been a widely discussed topic in general, the dispute over trade liberalization and market deregulation of the wood products sector has been often neglected or seldom mentioned. At a time when discussions of new multilateral trade talks are beginning within the WTO, and Japan is reevaluating its stance toward liberalized wood products imports by initiating a preliminary investigation to the possible implementation of a safeguard action against softwood lumber imports, it will be useful to look back and understand the process through which the US-Japan wood products trade dispute has progressed, the outcomes it has achieved, and the lessons that can be drawn from this experience.
The objectives of this study are 1) to describe the historical development of the US-Japan wood products trade dispute, 2) to summarize the trade liberalization and market deregulation measures taken in Japan as a result of these trade negotiations, 3) to analyze the performance of US products in Japan’s mix of wood products imports, and 4) to conduct a preliminary evaluation of US trade liberalization and market deregulation initiatives on Japan’s wood products market.
Historical Development of the Us-Japan Wood Products Trade Dispute
The US-Japan wood products trade dispute began in the early 1980s under the conditions of a growing US trade deficit with Japan, the economic recession in the US, and the relative decline of the wood products industry in the western US. In 1985, Japan’s wood products sector was chosen as a target for the MOSS talks, mainly due to Japan’s strong opposition to the reduction of tariffs on veneer and plywood. Both countries reached an agreement to reduce specific wood product tariffs and to modify product standards so as to meet the requests of the US.
In spite of the trade policy changes achieved in 1985, US legislators remained dissatisfied with the growing trade deficit with Japan and legislated the Omnibus Trade and Competitiveness Act of 1988, including the Super 301 provision. Due to US industry frustration with Japan’s reluctance toward continuing the MOSS process, Japan’s wood products sector was identified as a "priority practice" under the Super 301 provision in 1989. Under the threat of retaliation, both countries concluded the "1990 Agreement on Wood Products." Although the Agreement did not deal with tariff issues directly, it required an overhaul of Japan’s building standards and products standards.
After the completion of Super 301 negotiations, the US wood products industry turned to a new trade issue: the zero-for-zero initiative in the GATT Uruguay Round, by forming the Zero Tariff Coalition in cooperation with other industrial sectors. Although several industrial sectors achieved mutual tariff elimination during the Uruguay Round, the wood products sector failed to achieve tariff elimination primarily due to Japan’s opposition.
Following the end of the GATT negotiations in December 1993, the US continued its pressure on Japan to eliminate tariffs on wood products. Due to Japan’s resistance, coupled with the failure of the Framework talks in February 1994, the US revived the Super 301 provision to name Japan’s wood products sector in the watch list, forcing Japan to compromise. With Japan’s promise to fully implement the 1990 Agreement and new initiatives in Japan’s housing sector that was partly stimulated by the Kobe Earthquake disaster, the US industry finally allowed the removal of Japan from the Super 301 watch list in 1996.
Although the tariff elimination issue was also discussed during the bilateral negotiations following the Super 301 revival, it was eventually transferred to the regional discussions held within APEC. While the elimination of wood products tariffs was successfully included in the EVSL initiative, Japan refused to participate in the wood products tariff measure citing the APEC principle of voluntarism. Finally, APEC members agreed to move the renamed ATL initiative to the WTO, hoping to reach agreement during the Third WTO Ministerial Meeting in Seattle. However, no progress was made on the ATL initiative, or on the initiation of the WTO New Round.
Results of Trade Liberalization and Market Deregulation
The US industry succeeded in the trade liberalization and market deregulation initiatives in Japan’s wood products sector. As the result of fifteen years of negotiations, Japan reduced tariffs on wood products, changed its building standards from prescriptive to performance-based, and recognized wood products graded in the US for construction use in Japan.
First, regarding tariffs, the MOSS agreement reduced tariffs on specific products including veneer and plywood, and the Uruguay Round Agreement reduced tariffs on most wood products by approximately 30% from the applied level in 1993. The final bound rates were implemented in 1999 following a five-year staging period. However, due to shifts in Japan’s wood products imports from logs to processed products, the trade-weighted average of wood products tariffs increased slightly during the 1985-1999 period.
Second, in 1999, Japan revised its Building Standard Law from a prescriptive to a performance-based system, as promised in the 1990 Agreement on Wood Products and the 1996 Emergency Priority Program. Additionally, Japan immediately implemented specific building standard measures listed in the ANNEX of the 1990 Agreement. It is expected that the revised BSL will increase the number of 2x4 wood frame housing starts and promote the use of imported value-added wood products for post and beam homes.
Third, Japan introduced new systems, which recognized imported wood products for construction use in Japan. Regarding JAS, MAFF implemented the FTO system, which permitted the use of test data conducted by recognized foreign testing organizations for the mill certification and product testing process as a result of the MOSS agreement. Later, in 1999, MAFF revised the JAS Law to incorporate the RCO/RFCO system which authorized specific (foreign) certification organizations to certify (foreign) manufacturers to test their own products and self-label them as JAS approved. At the same time, MOC reached a mutual recognition agreement with the US industry which recognized the use of dimension lumber, MSR lumber, and finger-jointed lumber bearing the grademark of US testing agencies for 2x4 wood frame construction in Japan.
These measures will surely provide easier access for foreign products, not limited to just US products, in Japan’s wood products market.
Effects of Trade Liberalization and Market Deregulation
In spite of its success in the trade liberalization and market deregulation initiatives, the US wood products industry has been losing market share in Japan’s imports of softwood lumber, softwood plywood, softwood veneer, structural laminated lumber, wood doors, and wood windows. In some cases, the US increased its exports to Japan, but exports from other countries, mostly Canada and EU, increased more rapidly than those from the US, resulting in a lower market share for the US. This trend indicates that as the US industry was negotiating trade liberalization and market deregulation initiatives in Japan, structural changes were occurring that would adversely impact the competitiveness of the US wood products industry. These structural and market changes include changing material preferences in Japan toward kiln-dried products, the strength of the US dollar relative to Canadian and European currencies, and higher transportation costs from the US to Japan than from the EU. In addition, it should be noted that some studies indicated that other successful countries made substantial efforts to develop a better understanding of Japanese market conditions and accommodate Japanese customers’ extra requirement for products and services.
The declining share of US products in Japan’s wood products imports can be attributed to two factors: an increase in US domestic consumption of wood products, and the reduced international competitiveness of US wood products. First, wood products exports have become less important to the US industry with the increasing consumption of wood products under the strong economic growth of the 1990s. Second, the US industry has been slow to develop its advantage relative to its competitors in Japan, where some market conditions, including a shift in material preferences toward kiln-dried products, less favorable changing exchange rates, and higher transportation costs, have adversely impacted the competitiveness of US wood products.
If the US industry wants to increase its wood products exports, it would be advisable for the industry to develop its advantages relative to its competitors in addition to improving market access. Important factors for success include developing a better understanding of the market, making stronger efforts to match product offerings with changing customer preferences, accommodating customers’ extra requirements for products and services, improving product quality, and offering competitive prices. Additionally, the US industry may wish to reconsider their export strategies in response to increasing domestic consumption and constrained resource availability and the impact of these factors on their ability to commit to long-term relationships with their foreign customers.
At this time, it is too early to reach a final conclusion regarding the competitiveness of the US wood products industry. Given Japan’s changing market conditions, new opportunities could emerge for the US wood products industry to further penetrate Japan’s import market. In that case, future success is dependent upon the US industry’s efforts to develop its advantages relative to their competitors.
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Author: Vicente Cárdenas
This paper provides a projection of wastepaper consumption for the year 2002. Such a projection is difficult because there is no existing database to characterize how wastepaper gets used in each end product yet we know from fragmentary sources that uses are changing. A procedure was developed to allocate collection to uses in several stages in order to balance collection with uses and to characterize how uses have been changing.
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The Changing Japanese Housing Market: An Assessment of US Export Strategies for Prefabricated Wooden Housing and Building Materials
Authors: Ivan L. Eastin and Anne Rahikainen
The Japanese market for prefabricated homes and wooden building materials has tremendous potential for US firms, particularly those located in the Pacific Northwest. For example, exports of prefabricated housing to Japan increased by 51% from 1994 to 1995, with 81% of these exports originating from the Pacific Northwest. Despite this success, Japan is a relatively new market to most US firms and more information is required before US firms can fully take advantage of the opportunities that exist. This research project was developed to provide a broader understanding of the Japanese market for prefabricated homes and wooden building materials, and to identify the problems that exporters must overcome in order to compete effectively in Japan.
The objectives of this project were: (a) to perform a competitive assessment of the Japanese market for imported prefabricated housing and wooden building materials, (b) to identify those marketing strategies that are being employed by US manufacturers to compete successfully in Japan, and (c) to identify the tariff and non-tariff barriers that are perceived to adversely impact the competitiveness of US firms in Japan.
The results of this research study were derived from a census of prefabricated housing manufacturers, export consolidators, and Japanese trading companies currently exporting their products to the Japanese market. The final sample frame included sixty-six firms: fifty-one in Washington and fifteen in Oregon. Sixteen of the companies manufactured prefabricated housing, while thirty-four were export consolidators, and sixteen were subsidiaries of Japanese trading companies. The final response rate for the survey was 70%, with responses being received from 75% of the prefabricated housing manufacturers, and 79% of the export consolidators, but just 47% of the Japanese trading companies.
Prefabricated housing exporters in Washington and Oregon can be characterized as being small to medium-sized firms with annual sales of less than $10 million and employing less than 25 employees. Most of the firms have been exporting to Japan for a relatively short time, usually less than five years. However, prefabricated housing manufacturers appear to be highly involved in the Japanese market, as indicated by the fact that approximately half of the respondents generated more than 50% of their annual sales revenue from exporting to Japan.
The promotional strategies used by the survey respondents were fairly limited, a fact which might be attributed to the small size of the respondents and their limited financial resources. A majority of the respondents indicated that they relied on product brochures, word-of-mouth referrals, and trade shows to promote their products. Promotional strategies that required a higher commitment of financial resources, such as establishing a model home or product showroom in Japan, were employed less frequently than the other strategies.
In general, the distribution channels for wood products exports in Japan are complex, consisting of several layers of intermediaries. However, the results of this research indicate that many of the prefabricated housing manufacturers and export consolidators have been successful in bypassing the traditional Japanese distribution channels. Approximately half of the respondents indicated that their primary channel of distribution involves selling their products directly to Japanese home builders. This strategy provides these firms with substantial cost savings, helping to increase the competitiveness of US prefabricated homes and building materials in the Japanese market.
Most respondents considered the establishment of a strong personal relationship with their Japanese customers as one of the most important factors for succeeding in the Japanese market. This factor was rated as being more important than any other single marketing factor by each of the three groups of respondents included in the study. Other marketing factors that were perceived to be important included providing after-sales service, short delivery times, and technical assistance to the customer.
Product adaptation was also considered to be an important factor for succeeding in Japan. In fact, all of the prefabricated housing manufacturers and 88% of the export consolidators reported that they modify their product to some extent for their Japanese customers. The most common types of product adaptation included changing the design of the home to include a tatami room and/or a genkan (Japanese-style entryway), utilizing higher quality materials in those products exported to Japan, and translating product brochures, installation instructions, and technical information into Japanese.
JAS and JIS product certification of building materials and the Japanese building code were perceived to be non-tariff trade barriers that had a substantial negative impact on the competitiveness of US prefabricated houses and building materials in Japan. Two other factors, the difference between US/Japan construction technology and inefficient transfer of US construction technology, were also perceived to be non-tariff barriers that restricted the competitiveness of US firms in Japan. It is interesting to note that in many cases the US subsidiaries of Japanese trading companies perceived the various trade barriers as having a greater impact on competitiveness than did the US firms. This was particularly true with respect to the complexity of the distribution channels in Japan and the import tariffs for prefabricated houses and building materials.
The vast majority of the prefabricated housing units exported from the US to Japan are manufactured using 2x4 construction technology. This poses a problem given the fact that most of the survey respondents reported that Japanese architects, contractors, and carpenters do not possess a strong understanding of 2x4 technology. In addition, many respondents stressed the fact that Japanese residential contractors seldom utilize the construction management techniques that are widely used in the US residential construction industry. As a result, construction costs are more than twice as high in Japan as in the US. But perhaps more important from a long-term strategic market development perspective is the fact that this basic lack of understanding regarding 2x4 construction technology can adversely impact the quality of 2x4 homes built in Japan and reduce their long-term performance. Either of these factors could potentially erode the competitive position of US prefabricated housing and wooden building materials in the event that substandard products and/or product performance adversely affect Japanese consumer perception of US products.
Not surprisingly, survey respondents indicated that the efficient transfer of 2x4 construction technology was an important component of their marketing mix, with approximately 85% of the respondents utilizing some type of strategy to address the issue of technology transfer. The three most widely employed types of technical assistance were: providing customers with installation instructions and/or product brochures, providing customers with seminars and/or on-site technical training, and sending over carpenters and/or construction site supervisors to ensure the quality of the construction work. Unfortunately, current Japanese immigration law makes it very difficult for US contractors and carpenters to obtain the work visas that are required to work in Japan. When asked to indicate what strategy would be most effective in transferring 2x4 construction technology to Japan, almost half of the respondents indicated that they favored providing training for Japanese construction professionals.
The results of this study indicate that prefabricated housing manufacturers and export consolidators in the Pacific Northwest are strategically poised to take advantage of current housing policies in Japan that promote imported housing and building materials. Despite the fact that many of the participants in these industries are relatively new to the Japanese market, a large number are already experiencing success. In particular, these firms have demonstrated the ability to take advantage of the new competitive environment in Japan by developing strong business relationships with their customers and partners and developing distribution channels that bypass the traditional extended and costly distribution system. Given the strengthening Japanese economy, the opportunities for imported housing and building materials in Japan appear to be bright.
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Material substitution in the residential construction industry is driven by a variety of factors including product availability, product performance, price, price stability, and in-place costs. As competition between softwood lumber and substitute products increases, managers need to understand end-users’ changing perceptions of softwood lumber and the competitive position of softwood lumber vis a vis substitute products. Despite the relative availability of product literature describing substitute building materials, the extent of substitute product diffusion remains unclear. Perhaps more importantly, virtually no information exists regarding the diffusion process for substitute products in the residential construction industry, including the impact of specific product attributes and end-user characteristics in promoting the diffusion process. This exploratory study was developed to the competitive relationship between softwood lumber and substitute products in structural end-use applications in the US residential construction industry. In particular, the study was designed to identify those product attributes that are perceived by residential contractors to be important in influencing the substitution process.
Empirical data for this exploratory study was obtained from a cross-sectional mail survey of 1,500 residential contractors in the United States. The sample frame for the study was derived from the membership of the National Association of Home Builders (NAHB). In order to obtain a uniform geographical representation, equal numbers of participants were randomly selected from the northeast, southeast, southwest, and northwest regions of the US. 176 usable questionnaires were returned, providing an effective response rate of 11.7%.
Over 90% of the respondents indicated that they had used at least one substitute product for softwood lumber in a structural end-use application. The use of specific substitute products varied considerable, with 72.2% of respondents reporting that they had used glulam beams while none of the respondents reported using plastic lumber. Only two products (glulam beams and wooden I-beams) were use by more than half of the respondents. Adoption/trial curves for several substitute products show a rapid increase in their use, particularly over the past five years. Despite this, respondents indicated that their use of structural softwood lumber is changing only moderately.
Respondents were asked to rate the importance of various product attributes in influencing their purchase decision regarding structural building materials. The analysis of the data indicates that product strength and straightness were rated the most important factors. Price and price stability were also rated highly, while environmental factors generally received the lowest importance ratings. A principal components factor analysis of the twelve product attributes indentified three underlying factors that influence the material substitution process: the physical characteristics of the product, the technical characteristics of the product, and economic/supply characteristics of the product.
When asked to rate their satisfaction with softwood lumber, respondents indicated that they were satisfied with only two product attributes: lumber strength and lumber availability. Of the remaining product attributes, respondents were neutral regarding three and were dissatisfied with the remaining five product attributes. Lumber attributes with which respondents expressed dissatisfaction included: lumber straightness, number of defects, overall lumber quality, price, and price stability.
To explore the impact of environmental issues on the substitution process, respondents were asked to compare the perceived environmental impact of substitute building materials with that of softwood lumber. Surprisingly, almost all of the substitute products were perceived to produce a lower environmental impact than softwood lumber. No product was perceived to have a greater environmental impact than softwood lumber and only two products, plastic lumber and plastic/fiber composite lumber, were perceived to have a similar environmental impact. Finally, a statistical analysis of the research data indicated little variation in the responses based on the geographic location of the firm or the size of the firm.
The residential construction industry is extremely fragmented and competitive and the results of this research indicate that residential contractors are quite willing to experiment with new substitute products. To counter the competitive threat posed by aggressively promoted substitutes, softwood lumber manufacturers must become market-oriented. Only by adopting a strong market orientation can they hope to place themselves in a position to understand the needs of residential contractors and develop marketing strategies to meet those needs, thereby increasing customer satisfaction. It is only by thoroughly understanding and responding to residential contractors needs that the softwood lumber industry can effectively reduce market penetration by the wide range of substitute products currently by offered in the marketplace.
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Authors: Anne Rahikainen, Dorothy Paun, Lynn Catlett
The pulp and paper industry ended its four-year slump and enjoyed record-breaking profits in 1994. The unprecedented magnitude and speed of this recovery was due to the timely confluence of many factors: improving economies in Europe and North America resulted in a large increase in consumption of pulp and associated products such as newsprint and packaging; imports of European pulp and paper products into the US market leveled off in response to greater demand in European markets; substantial amounts of marginal capacity were removed from the North American market; international fiber shortages occurred; recyclable materials like old newsprint and corrugated containers were in short supply; weak US and Canadian dollars made North American pulp and paper exports more price-competitive in the international marketplace, thus driving up demand; and low customer inventories resulted in demand exceeding supply. The outlook remains rosy, as only limited additional capacity has been added or is scheduled to come on line in the next couple of years.
This project was undertaken to obtain an overview of the United States pulp and paper industry. First, all publicly-traded pulp and paper firms were examined in terms of principal products sold. The second objective was to identify the extent of international operations by these firms, using as a proxy percentage of annual sales from exports and the degree and number of international manufacturing plants, sales offices, and subsidiaries. The third objective was to evaluate the performance of the firms and to create an industry-based financial performance ranking based on net sales, return on equity, and earnings per share.