1 October 2009
Change in California Law Leads to Sales of Forest Carbon Credits
The Los Angeles Times reports today that Sierra Pacific Industries will begin selling carbon offsets from its forest lands to other industries to help compensated for their emissions. Coming less than a week after the change in CA law allowing such sales, the proposal includes altered management practices designed to increase carbon sequestration on 60,000 acres, as well as declaring some areas permanently off limits to logging.
15 June 2009
PA Hardwood Quarantine Expands to Seventh County
The detection of the Emerald Ash Borer in Westmoreland County PA marks the seventh Pennsylvania county where state and or federal regulations prohibit the movement of ash nursery stock, as well as green lumber and all other ash materials. The Valley News Dispatch notes that the affected area has been expanding consistently since the first detections in the state in 2007.
27 May 2009
Alberta Forest Products Woes Are Similar to the Rest of Canada, US.
The Whitecourt Star reports today on trends in forest products in Alberta, echoing stories that have become familiar throughout North America. Beginning with a decline in production, and curtailments in operations at solid wood products firms, the article also notes decline in newsprint consumption and concerns about the Mountain Pine Beetle. Although industry figures are cautiously optimistic, all spoke in terms of waiting for an upturn rather than seeing evidence of one.
15 May 2009
Uncertainty Surrounds NDP Policies on Crown Timber Lands, Softwood Lumber Agreement
The Globe and Mail reports this morning on the confusion surrounding policy proposals by the New Democrats regarding forest tenure and the SLA. While the national party appears to be advocating renegotiating the softwood lumber agreement, BC party officials reject calls to abrogate the agreement. There appears to be broader agreement on the desire to allow broader access to harvesting on crown lands, particularly with an eye towards emerging business and biofuels, an agreement which has raised concerns amongst leaders of established large timber firms.
13 May 2009
Demand for US Hardwoods in Middle East Expected to Remain High
The American Hardwood Export Council projects strong demand and stable exports to the Middle East and North Africa. This is expected to include hardwood lumber, as well as logs and veneers. Exports to the region in 2008 totaled $55.5 Million USD.
30 April 2009
Canfor Losses Top $58M in First Quarter, Production at 60% of Capacity
The Canadian Press reports today that Canfor’s sales have declined 25 year over year, with the majority of the loss being attributed to a further 20% decline in US housing starts. Declines in pulp markets further contributed to the firm’s financial woes.
5 March 2009
Small Log Mill in Quincy CA Closes, Citing Timber Sale Litigation
The small log mill in Quincy California was originally intended to process the small diameter trees harvested in wildfire risk reduction programs, but lawsuits and administrative appeals have delayed nearly two thirds of this year’s intended cut. As wood is sourced from further afield, increased haul costs have further impacted the mill’s bottom line. Quincy, once held up as an example of cooperation in responsible forest management, now demonstrates the risks associated with politically sensitive fuel reduction programs. (Based on reporting by the New York Times.)
3 March 2009
Court upholds limits on public input on small USFS projects.
Ruling today, the Supreme Court found that challenges to federal regulations on timber sales must be tied to a specific project, the AP reports. In a 5-4 decision, the court overturned an injunction against regulations limiting public input on USFS projects whose environmental impact was expected to be small.
27 February 2009
Further Delays Expected Before Recovery in the Forest Products Sector.
Recovery in the housing sector should not be expected prior to fall 2010, according to a University of Arkansas forest economics professor, who notes that this may not occur before 2013. Potential bright spots that were noted include wood pellet / biofuel production, as well as increased demand overseas for hardwoods such as ash and hickory, the Siftings Herald reports today.
2 January 2009
Forest Restoration Projects, Salvage Logging Proposed to Save Troubled Timber Sector.
The Missoulian reports today on national and state proposals to fund forest restoration projects ranging from road removal to salvage logging. These proposals call for funding “shovel ready” projects identified by the Forest Service and National Park Service, and are envisioned as both a public investment and a bridge to keep the industry afloat until the forest product sector recovers.
16 December 2008
Allegations Raised that BC Timber Being Wrongly Priced as Pulpwood.
Market Watch reports today on assertions by the Coalition for Fair Lumber Imports that timber being sold for as little as 25 cents Canadian per cubic meter is being used in the production of softwood lumber. Although there are reductions in lumber recovery and increased costs associated with processing timber affected by the pine beetle, the CFL disputes that the reduction in value corresponds with the 97% difference between Grade-1 and Grade-4 lumber.
28 November 2008
Continued Declines Seen for Alberta Forest Products.
Shipments of lumber, panel, pulp and paper declined nearly 13 percent in the first three quarters, compared with 2007, reports the Edmonton Journal. Projections for the first half of 2009 include lower demand and lower prices for all forest products, with declines in the value of the Canadian dollar failing to compensate for reduced demand for exports.
3 October 2008
Losses in Canada’s Forest Industry topped US$1 Billion in Six Months.
The Financial Post reports today that losses in Canada’s forest sector approached US$1.2 Billion, according to Pricewaterhouse Coopers. Losses were reportedly spread evenly across the country, with only one major forestry firm posting positive earnings for the first half of 2008. Slight improvements are expected in the third quarter in response to the weakening Canadian dollar, and higher prices for newsprint and lumber. In spite of this, earlier predictions of a recovery in 2009 have been pushed back to 2010.
2 October 2008
B.C. Push to Regain Market Share in Japan through Earthquake Testing.
A full size three story post and beam house was tested on a seismic shake table recently to demonstrate the ability of construction using coastal hemlock to survive powerful earthquakes. Representing the conclusion of a six year development program, a video of the test was shown to a gathering of Mayors to promote the use of Canadian forest products for commercial and residential use. Marketed as “Canada Tsuga”, it is believed that this test will demonstrate to regulators in Japan that coastal hemlock meets requirements for seismic performance.
15 September 2008
Contention over use of Pine Beetle Funds in British Columbia.
Toronto's Globe and Mail reports today on the Liberal Party's four year,
250 million dollar plan to confront the pine beetle outbreak. Quoting a
Liberal Party spokesman, the article notes that a significant portion of
the spending to date under the Conservative Party plan has gone to airport
improvements, and fire mitigation. The Liberal Party plan, in contrast, is
expected to include support for homeowners removing infected trees, further
fire safety efforts, and the implementation of buffer zones for aboriginal
communities.
12 September 2008
Forest Stewardship Council joins case Against SLA.
The Seattle Times expands its reporting today on the lawsuit filed by a
number of conservation groups regarding the distribution of funds from the
Softwood Lumber Agreement. Notable updates include the joining of the
Forest Stewardship Council to the case, and the request that the court find
the SLA was no legal under federal law and that it should be subject to
environmental analysis.
08 September 2008
Lawsuit over Distribution of Canadian Softwood Tariff Reciepts.
Conservation Northwest and the Center for Biological Diversity have filed a
lawsuit to challenge the distribution of USD 450 Million that was returned
to the United States as a part of the settlement of the softwood lumber
dispute. The Seattle Times reports this morning that their primary
challenge is to the makeup of the groups that received these funds,
claiming that the American Forest Foundation and the US Endowment for
Forestry and Communities do not represent the full breadth of concerned
parties.
01 September 2008
Minnesota Loggers Sell Equipment, Seek New Jobs.
The Duluth News Tribune reports today that fully ten percent of MN loggers have been put out of work over the last two years, citing the now common complaints of decreased demand, mill closures, and ever increasing fuel and equipment costs. Mill closures and mill job losses have already met the worst case scenario envisioned in a study published last summer by UM Duluth, reflecting a loss of over 1500 related jobs and a greater than 20 percent decline in harvested wood volume. In conclusion the article cites Wayne Brandt of the Minnesota Timber Producer’s Association, who doesn’t expect to see a significant turnaround in 2009.
30 August 2008
Emerald Ash Borer Quarantine Made Permanent.
The Washington Post reports today that the Emerald Ash Borer quarantine implemented in Northern Virginia has been made permanent. The quarantine, previously noted on this site, effects the movement of ash trees, ash wood that has not been treated, and all firewood. Five counties are now included in the quarantine area.
27 August 2008
Educating the Public about Invasive Beetles.
Reports in the Boston Globe, Carroll County Comet, and the Erie Times-News over the last three days reflect efforts to inform the public about the threat posed by invasive beetle species, and their role in controlling this threat. While the first report includes only a brief description of the Asian longhorned beetle and a local contact number to report sightings, the later provide a more extensive description of the species and symptoms that may be recognized in affected trees. Also included are links to several websites highlighting the risk of moving firewood or other potentially contaminated materials, including dontmovefirewood.org.
19 August 2008
Softwood lumber prices fall while other construction inputs gain.
American Surveyor reports today that the price of construction inputs rose two percent in July, part of a nearly twelve percent increase over the last twelve months, the largest year over year gain in two decades. While all other listed components increased, the price of softwood lumber was seen to decline 3.4 percent.
13 August 2008
Wet Soils Impact Vermont Loggers, Mills
Extended wet periods have kept Vermont loggers out of the woods for much of the summer, reports the Times Argus today. Complying with standards designed to prevent soil compaction and erosion has kept some firms out of the woods as long as ten weeks this summer, leaving some concerned that they will be unable to make equipment payments without a dry period to provide some revenue flow prior to the winter freeze. Jonathan Wood, commissioner of the Department of Forests Parks and Recreation worries that the slowdown could provoke layoffs in mills and secondary manufacturing as well.
11 August 2008
Concerns About the Impact of Timber Availability on Recovery in Montana
The Missoulian reports today on concerns about the future availability of timber in Montana, and how that will affect the eventual recovery of the state's forest products industry. Additional cited concerns include the closure of mills and the permanent loss of skilled workers, all of which would impact the speed and extent of any future recovery.
8 August 2008
Market Factors and Structural Changes Argue Against Rapid Recovery for Forest Products in Quebec
The usual list of causal factors (slumping U.S. home market, fuel costs, and softwood export tariffs to the U.S.) is supplemented by discussion of expanded pulp production in South America and beetle driven cutting in B.C. to explain the gloomy economic picture for Quebecois producers. Potential future bright spots identified by the Montreal Gazette include biomass for fuel, pre-cut home kits, and green home building, but the overall assessment calls for little recovery in the short term and notes that long term gains will depend on research and development now.
7 August 2008
Beetle Outbreaks in VA, WI
The Boston Globe and the Wisconsin Capitol Times report separately today on beetle outbreaks, and associated quarantines and control measures being implemented. In the first case, the article notes the discovery of Asian Longhorned Beetles in Worchester with an associated 1.5 mile quarantine area. In the later, evidence of Emerald Ash Borer infestation has resulted in a four county quarantine, and extensive survey efforts are being undertaken to determine the extent of the problem. In the effected areas, materials must be treated to eliminate the possibility of transporting the insects before they can be removed.
1 August 2008
Opportunities for Export in US Round Wood Market
An overview of the US position in the global forest products market today highlighted several opportunities for growth. Most notable amongst these were the potential for increased raw log exports to China following the implementation of Russian tariffs, and the potential for expanded presence of US hardwood products overseas resulting from increased demand for certified wood products and the depressed US dollar. Noting an expansion of production in Vietnam and other SE Asian states, Timberline reports that while the production of labor intensive products will continue to be centered overseas the US will continue to lead in products demanding high degrees of automation.
31 July 2008
High demand for skilled forest workers in Alberta.
The Edmonton Journal reports today that mills in Alberta are having trouble retaining skilled workers in the face of booming demand and higher wages in the oil and gas sectors. Proposed solutions range from training programs for younger workers and promoting inter-provincial migration of skilled workers, although one mill notes that their short term solution is to import temporary foreign workers from the Philippines.
25 July 2008
Continued Downward Pressure Seen for Forest Products
In a roundup of analysts reviews of the building materials and forest products sectors, CNN Money quotes Citi Investment of predicting a 93% decline in aggregate net earnings in the housing sector since the second quarter of 2007. Analysts further attribute current moves towards improved prices to curtailments and closures, predicting that these gains will be eroded through higher energy and transportation costs.
21 July 2008
Chinese Shortfall in Wood Fiber to Expand Through 2012.
MarketWatch reports today on expected increases in demand across the sector, including logs, hardwood and softwood lumber, and chips. This demand is expected to grow in spite of the Russian log export tax, which will dramatically reduce the availability of round wood, particularly softwood.
19 July 2008
Thousands of Sinker Logs to be Recovered in Montana
Breaching the Milltown Dam on the Blackfoot river has wholly or partially exposed thousands of sinker logs lost in transit or in holding ponds. Removal of the Bonner Dam two years earlier exposed about 2000 logs, for which there was limited demand to the risk of sand infiltration, but previous buyers report little trouble in producing siding and flooring. At least a dozen inquiries have already been registered by interested parties for this round of salvaged logs, reports the Missoulian.
6/24/2008
New Import Regulations on Illegally Harvested Lumber
Amendments to the Lacey Act that were included in the recent farm bill will require importers to declare the source country and the species of wood and other plant materials, with a focus on preventing illegal cutting. Penalties range from $250 to greater than $500,000, with the potential of jail time, for importing illegal timber, whether knowingly or carelessly, reports Furniture Today. While much will depend on the strictness and vigor of the enforcement, as certification is not required, leaving the grounds for finding wood illegal unclear.
6/22/2008
Surge in demand for firewood, engineered wood fuels
The Bonner County Daily Bee (ID) reports today on a regional trend in increased demand for wood for home heating. Noting both an increase in demand for firewood cutting permits and increased sales of wood and pellet stoves, the article does note that the supply of wood pellets is constrained by the supply of scrap from mills. The shift in demand is largely attributed to increased fuel costs, beginning shortly after hurricane Katrina.
6/17/2008
Softwood Lumber Declaration Requirement to Take Effect within 60 Days of Approval
Us and Canadian sources expect that the softwood lumber declaration requirement, and element of the recently passed farm bill, will be implemented within sixty days of final approval. Reuters reporting today indicates that the Canadian government is concerned about both increased costs and barriers to trade resulting from the passage of this bill.
6/12/2008
Slow Return to Profitability expected for Canadian Industry in 2009
The Vancouver Sun reports this morning that the global move to convert forest lands to fuel and food production in likely to result in increased demand for wood products from those nations where these use do not compete for land. The article notes that with regard to British Columbia, the impacts of the mountain pine beetle will limit the potential upside.
6/10/2008
New Farm Bill Improves Tax Picture for Timber Owners
The Vancouver Washington Columbian today reports on the Timber Revitalization and Economic Enhancement Act, and element of the farm bill which lowers the tax on integrated forest products companies which are also landowners. Weyerhaeuser in particular is noted as seeing it's "landowner tax bills" lowered from 35% to 17%.
6/6/2008
Housing Shortage in Mexico Points to Opportunity for Exporters
A housing shortfall of 750,000 units is reported in an article today in the New Brunswick Business Journal, noting the opportunity for wood products investors. While most construction in Mexico is cement based, opportunities exist for roof trusses, concrete forms, and the renovation market.
5/30/2008
Incentive Program to Triple Wood Use in Construction in Quebec
The CBC reports today that the government of Quebec will invest C$16 million over the next six years with the stated goal of tripling the use of lumber in construction in the province. Spending appears to be targeted at developing tools for engineers and designers comparable to those used for concrete and steel construction techniques, noting that the program will respect NAFTA restrictions on subsidy to industry.
5/30/2008
Economic Bright Spots Conspicuously Exclude Wood Products
Regional Stories in the Eugene Register-Guard and MaineToday cite predictions of slower than normal growth rather than recession. Yet both note the impacts of the housing crisis as having particular impact on the local wood products sectors, and that sector as an important contributor to the downside of the economic picture.
5/28/2008
Softwood Lumber Regulations Accidentally Left Out of Farm Bill
The formal copy of the recent farm bill passed out of congress, vetoed by the President, and overridden by the congress accidentally failed to include the trade policy section, including the softwood Importer Declaration program. Congressional leaders scrambled after the omission was discovered to resubmit the bill, which is is currently waiting for a second override vote.
5/23/2008
Declining Hardwood Demand in European Markets, Reduced Production in West Africa
TTJ reports today that declining demand in Europe is leading to reduced logging and mill layoffs amongst West African producers of tropical hardwoods. Layoffs as great as one third of the workforce are reported for some firms in Cameroon and Gabon, although primarily in private concerns with no layoffs noted in state owned enterprises. Oversupply of housing in select European markets, as well as adequate supplies of logs at European mills are reported to be driving down log prices in more popular species as well.
5/22/2008
Reclaimed Lumber to be Featured in Upcoming This Old House
The Nashua Telegraph reports on recent filming for an upcoming episode of This Old House that will prominently feature reclaimed lumber. The coverage is expected to go beyond their past usage of reclaimed flooring to include recovered materials that have been reprocessed into moulding and wall panels.
5/16/2008
Small Woodlot Owners Shifting Focus From Timber Production
A survey of the Oregon Small Woodland Association, reported in the Capital Press, notes that timber harvest has declined to the fourth highest priority of small woodlot owners. The primary drivers of this change are described as the complexity of forest land use regulations, declines in mill capacity, and a shift in mill focus to smaller commercial wood rather than the larger logs produced on small tree farms. Woodlot owners are also described as pursuing a method for pooling small properties to participate in carbon credit programs.
5/14/2008
Canadian Exporters, US Importers to Face New Paperwork Hurdles
The Globe and Mail reports today on the US Farm Bill, noting that the paperwork burden of the new Importer Declaration Program will fall both on Canadian industry and US importers. Observing that the customs officials will need importers to verify that exporters have met all their obligations, they describe the bill as creating a bureaucratic headache for all.
5/12/2008
Positive Future Seen for Forest Sector in Atlantic Provinces
A recent report by the University of New Brunswick and Natural Resources Canada suggest a positive future for the forestry sector in the Atlantic Provinces. While the report looks beyond traditional products to include other revenue streams including sustainable energy and environmental benefits, they predict an upturn for solid wood products for those firms that can weather then next 18 to 24 months.
5/11/2008
Weyerhaeuser to Sell Australian Mills
Weyerhaeuser is planning to sell its Austrailian mills to Carter Holt Harvey Ltd., in part to offset greater than expected first quarter losses, reports Bloomberg. The sale follows closely on the sale of forest and mill assets in New Zealand, and may include the sale of a half share of ownership in 20,000 hectares of forestland.
5/09/2008
2008 Farm Bill has Implications for Loggers, Importers
AgWeb provided a summary of the current status of the 2008 Farm Bill this morning, with a number of items of interest to the wood products sector. In particular, under this bill the USFS will be granted permission to cancel, extend, or revise timber contracts under poor timber market conditions. This bill will also establish a “Softwood Lumber Importer Declaration Program,” requiring importers to state that they are importing in compliance (largely with the Softwood Lumber Agreement) and imposing civil penalties for those who knowingly violate those agreements.
5/08/2008
High Export Taxes on Russian Softwood Logs Impact Global Markets
Wood Resources International reports a 22% decline in the price of pine sawlogs in the first quarter, primarily a result of increases in export taxes leading to an increase in domestic supply. This tax increase, from 20% to 25% of log value, is planned to reach 80% in 2009. Importers have already begun reducing their consumption, with softwood log imports to Europe declining from 10 million m3 in 2005 to 6 million m3 last year. Markets further afield are expected to be impacted as states currently dependent on Russian exports look for alternate sources.
4/30/2008
Weyerhaeuser Fined US$ 28 Million in Alder Lumber Case
A federal court found against Weyerhaeuser on charges of unlawfully monopolizing the finished alder lumber market, assessing $28 million in fines, the Oregonian reports. The case, a class action suit representing 400-500 business, alleged that Weyerhaeuser artificially inflated the price of alder logs by 7.5% between 2000 and 2006, with the goal of cornering the market and driving competitors out of business. Weyerhaeuser will appeal the case.
4/30/2008
Wood Products Sector Downturn Impacts Equipment Manufacturers
The impacts of the sector downturn are expanding beyond builders and wood products producers, notes BC’s Salmon Arm Observer. Reporting today on layoffs and a possible closure at Coe Newnes, they observe that this manufacturer of dimensional lumber production equipment does not expect to see any improvement in their market before 2010. Negotiations with creditors and clients at this point are focusing on the ability to continue production at some point in the future, but the current best case scenario involves cutting staffing to 1/3 of current levels.
4/24/2008
Decline in New Home Sales to 1990s Housing Recession Levels
The New York Times today reports significant declines in new home sales, dropping 8.5% in March. Revisions to the first estimates for February sales show a decline of 5.3% rather than the initial figure of 1.8%. Estimates of housing overstock nationwide indicate an 11 month supply at current sales levels, a number not seen since 1981.
4/24/2008
Fiber Shortages Impact Particleboard and MDF Producers
Canadian Wood Products commented today on ongoing and deep shortages in the supply of fiber for producers of non-structural panel. Supply costs are rising as a result of this shortage, which is linked to downtime at sawmills, as well as increased demand from consumers in the agricultural and bioenergy sectors.
4/09/2008
Canadian Softwood Lumber Production Continues to Contract
Canfor Corp plans to reduce it's year over year production by 600 MMBF, roughly 13% of last 2007 production, the Toronto Globe and Mail reports. The weakness of the US dollar and export taxes are cited as factors maintaining high producer costs in spite of rapid declines in wood prices. The firm appears to be taking the long view, however, attaining these reductions by cutting shifts rather than closing mills entirely, positioning themselves to return to higher levels of production when the market improves.
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Japan Market Report
Japan utilizes many species of hardwood lumber (Canada
hardwood & U.S. hardwood), flooring, mouldings, etc. These
include oak cherry hickory maple mahogany walnut teak cedar pine
spruce cypress ash redwood and others. Cedar lumber (western red
cedar & Alaska yellow cedar) is also popular for exterior
applications. Cherry lumber (Brazilian cherry & North American
Cherry), oak lumber (red oak & white oak), and maple lumber (soft
maple & hard maple) are furniture species. As with the U.S., there
are markets for reclaimed lumber and antique lumber. Sawmills
cooperate with lumber wholesalers in the professional markets.
Globalization and an increase in supplier countries has kept the
lumber price pressure down.
The wooden residential construction market is comprised of the
traditional Japanese post and beam market which has a 76% share,
the modernized post and beam market which has a 6% share, the
2x4 market which has a 12% share, and the prefabricated market
which has a 6% market share. Of these four, the modernized post
and beam market segment is increasing at the fastest rate. These
modern houses often use reclaimed lumber from older structures.
The post and beam frame is built upon a cement foundation with
a 105 mm by 105 mm sill plate made from Japanese cedar (sugi)
or hemlock. Sub floors are made of plywood with dimensions
of 900 by 1800 mm and installed upon floor joists (neda) measuring
90 by 90 mm or 105 by 105 mm. The house is supported by vertical
and horizontal structural beams with dimensions of 105 by 105
mm, 120 X 120 mm, and 135 X 135 mm. Wall construction is supported
by vertical posts with cross bracing. The posts are 3 meters long
with dimensions of 105 mm by 105 mm.
Post WW II, imported lumber took a while to take hold in Japan.
One reason lumber imports were not a threat was that Japan’s residential
construction industry was fragmented and there was little standardization
of lumber sizes. Japan houses rarely have a yard. This favored
the domestic sawmill industry that had strong relationships with
local builders and could mill to local builder specifications.
Another reason was that U.S. saw mills concentrated on their domestic
market and did not aggressively pursue international markets.
A majority of the imported sawn wood during this period was medium
to large squares for re-manufacturing. The oil shock of 1973 put
the brakes on Japan’s economic growth. Japan housing starts, which
increased by a factor of 4 between 1960 and 1972, declined 30%
between 1973 and 1975. During this same 2 year period, softwood
consumption declined by 22%. Housing starts recovered and between
1974 and 1979 they showed a 13% increase. This growth was largely
fueled by imported timber (page 84 Lumber Liqidators).
However, the
second oil shock of 1979 and resulting wholesale price increase
again dampened the housing market. Between 1979 and 1983, softwood
consumption declined due to 23% drop in housing starts. This
period also marked the beginning of a decline in hardwood sawnwood
consumption. This is due to increased imports of softwood logs
and a reduction in the supply of hardwood logs. The percentage
of softwood log imports to total log imports began to gradually
increase in the mid-1980’s and then accelerated in the 1990’s.
In June of 1990 the spotted owl was listed as an endangered
species in the United States effectively cutting off a large
percentage of the Pacific Northwest resource. Between 1991 and
1993, U.S. hemlock log prices increased 45% and Douglas fir
log prices increased 58%. As a result, imports of hemlock and
Douglas fir logs decreased dramatically. However, from 1991
to 1997, demand for lumber was increasing as annual wood housing
starts increased. The markets adjusted to reduced supply of
Pacific Northwest Logs in three ways. First, the demand for
domestic sugi and hinoki lumber increased between 1991 and 1994
from 11.5 million CM to 12.6 million CM. Second, log and lumber
imports from western Europe and Russia increased. Third, Japan
adopted new technology such as laminated posts and glulam beams.
Although all three of these are important shifts in Japan's
forest products market, the focus of this paper will be on the
on the adoption of new forest products technology. In addition
to reduced supply from the Pacific Northwest, another driver
of Japan's shift to forest products technology has been a change
in Japan's residential construction building technology. Japan
has averaged approximately 1.4 million annual housing starts
over the last 10 years while the U.S. has averaged 1.3 million.
So why does a country with half the population of the United
States build approximately the same number of houses?
There are three basic reasons. First, much of Japan's
housing stock, built immediately after World War II was not
replaced until the 1980's and 90's. Second, housing built
in the 1960's and 1970's was built to last only last approximately
15 years and these houses were being replaced. Third,
Japanese culture has an aversion to purchasing "used"
itemsand many Japanese families prefer to live in custom built
homes rather than previously owned homes.Japan's residential
housing market is split almost equally between steel, concrete,
and rebar construction used for multi-family units and wood
construction used for single family units.
The Swedish
Krona and Canadian dollar also devalued substantially against
the Japanese Yen. The currency that held the strongest during
the 1990's was the U.S. dollar devaluing 40% as compared to
the average of 98% for the Finnish Markaa, Swedish Krona, and
the Canadian Dollar. This put the United States at a
comparative disadvantage compared to these other softwood producing
regions. Currencies will play a large role in the future
of Japan's softwood lumber and log markets. One key question
to ask is how the Euro will trade against the other currencies.
Both Austria and Finland are Euro member countries and, as of
January 1, 1999, the Schilling and Markaa were pegged to the
Euro. These currencies will then be replaced totally
by the Euro as of January 1, 2002. The Euro
has been trading softly in the currency markets and, if this
trend continues, this will give Austria and Finland a comparative
advantage. It is important to note that, unlike
Finland and Austria, Sweden is not a Euro member country and
so the Krona will remain an independent currency.
All currencies of Japan's major softwood lumber trading partners
had one common trait in the 1990's. The Russian
Ruble, Finnish Markaa, Swedish Krona, New Zealand Dollar, U.S.
Dollar, and the Canadian Dollar all devalued against the Japanese
Yen. In order to examine which countries had a currency
advantage, it necessary to assess which currencies devalued
the most against the Japanese Yen. The undisputed
leader in this category was the Russian Ruble. The
Ruble began its plummet in November 1997 and then collapsed
in August of 1998. This gave Russian softwood producers
a major price advantage and export of Russian logs exports were
up substantially in 1999. The Finnish Markaa also
suffered during the 1990's due to the break up of the Soviet
economy. Finland had a profitable system of barter trade
with the Soviet Union that was a major part of Finland's economy.
When the Soviet Union broke up, so did Finland's system of barter
trade with the Soviet Union. The Russian
Ruble, Finnish Markaa, Swedish Krona, New Zealand Dollar, U.S.
Dollar, and the Canadian Dollar all devalued against the Japanese
Yen. In order to examine which countries had a currency
advantage, it necessary to assess which currencies devalued
the most against the Japanese Yen (Table 1). The
undisputed leader in this category was the Russian Ruble.
The Ruble began its plummet in November 1997 and then collapsed
in August of 1998. This gave Russian softwood producers
a major price advantage and export of Russian logs exports were
up substantially in 1999. The Finnish Markaa also
suffered during the 1990's due to the break up of the Soviet
economy. Finland had a profitable system of barter trade
with the Soviet Union that was a major part of Finland's economy.
When the Soviet Union broke up, so did Finland's system of barter
trade with the Soviet Union.
Although penetration rates of engineered wood products are less
than that of North America, the market growth rates are astonishing.
From 1991 to 1999 domestic production of glue laminated beams
more than tripled from 126,500 CM to 483,400 CM and imported
glue laminated beams increased by a factor of 15 from 17,902
CM to 271,264 CM. No study exists as to exactly why Japanese
builders are switching from green solid sawn lumber to engineered
and kiln dry lumber. However, a 1998 questionnaire conducted
of U.S. builders showed low satisfaction levels of softwood
solid sawn lumber on important attributes such as product straightness,
strength, lack of defects, and price stability as reasons for
switching to engineered wood products. It is expected
that these results would be similar in Japan. In addition to
dissatisfaction of green softwood lumber, Japan has had building
reform and legislation that has also propelled the use of engineered
and kiln dried lumber. The purpose of this paper is to provide
a synopsis of these changes and how they are affecting utilization
of new forest products technology in Japan.
There was also recent major housing legislature
that propelled the growth of engineered wood products. This
was called
the Housing Quality Assurance Law. The foundation of this law
is a 10 year warranty requirement on all houses built covering
deficiencies such as structural damage and leaks. This law went
into effect May 2000. The purpose of this law is threefold:
to increase the quality of housing, to protect consumer interests,
and to promptly mediate disputes in a fair manner. A fee will
be assessed to cover the warranty process and the warranty requirement
can be waived if
mutually agreed upon by the homebuilder and home purchaser.
In addition to the 10 year warranty,
this law establishes a certification system that will rank houses
on various attributes. Under this provision, each house will
be given a performance evaluation across attributes such as
structural strength, fire resistance, sound resistance, and
energy efficiency. This evaluation will be conducted by an official
inspection agency that has been certified by the Ministry of
Construction. A standardized score will be provided for
each attribute to allow consumers to compare different houses
across various attributes and this performance evaluation will
be attached to the buyer/seller contract.
The law also
establishes a mediation organization to settle claims that arise
against houses that have been certified. This organization
will be made up of industry representatives including lawyers,
builders, and architects. There will be a mediation fee assessed
to the party that applies for the mediation. Further information
on the Housing Quality Assurance Law is included in Appendix
A.
The Japan
lumber and building materials market offers tremendous export
opportunity for hardwood lumber and softwood lumber. In addition,
products such as hardwood flooring, molding, and decking also
have tremendous potential. Even though the economy is currently
stagnant in Japan with GDP growth hovering between 0-1%, there
are some bright spots in the lumber and log markets. In order
to understand the Japan wood products market, it is important
to examine the history. This country has tremendous resources
of their own. Wood species include Sugi (Japanese Pine), Hinoki,
and various hardwoods. However, this resource is very expensive
to harvest and so the country imports over 50% of wood product
consumption. In March of 2002, Japan wood housing starts were
down 6.7% from March of 2001. It is expected that annual housing
starts will remain at the 1.1 - 1.2 million level. On a global
scale this is still 2nd only to U.S. wood housing starts. This
is a summary of a paper that you can access at the link located
at the bottom of this page. Understanding Japan's future housing
market is part of a key to the puzzle of the global forest products
market.
The
first is motivation and the second is ability. Although the
amount of expertise in Japanese forest products companies is
hard to measure, a perspective into motivation can be gained
through examining search engine and directory results (Table
3). In order to be listed in the lumber category for Yahoo,
firms must actively go to the site and register in the business
to business lumber category (http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Construction/Wood_and_Plastics/Lumber/
). The author did a search for the word lumber word
“lumber” (“mokuzai ” in Japanese) on three search web U.S. and
Japanese portal sites. The most accurate of the following measures
is Yahoo because Yahoo is the number one search directory in
both the United States and Japan (Japan Internet White Paper
2000). There are approximately five times more listings for
U.S. Yahoo than Japan Yahoo in the business to business lumber
category. Although these measures are not scientific, the results
imply there is still low participation in the Japan’s internet
lumber market. This would suggest that current users could be
categorized as “innovators” and that the internet would be a
good communication channel to reach the innovator market segment.
