There was no hiding from the stark statistics at the American Hardwood Export Council annual convention. The delegates, including key US hardwood suppliers and leading importers from across Europe, had to face up to some pretty unpalatable figures for the past year. The combination of the strong US dollar, end-user migration to lower labour cost countries and, in the EU, depressed timber demand and competition from east European hardwood put a serious squeeze on American exports.
But while some of the bad news was given a rather doom-laden delivery, the overall mood of the convention (AHEC‘s 10th) was far from downbeat. Speakers addressed how the industry should move on from the current market position, highlighting the still growing potential for hardwood in Europe, especially in architecture and interior design, and the fact that the US, with its vast and varied hardwood resource, remains well placed to take advantage of changing global trading patterns.
Under pressure
AHEC chairman Eric Lacey said that the US hardwood sector had been under pressure not only on the export front. Since 1999, production overall had slipped 30% from 14.5 billion bd ft to 10.5 billion bd ft. This was due to a range of factors; static or falling prices, lower log availability and declining margins.
“Smaller mills producing under 5 million board feet have been hit particularly hard,” he said.
Adding to the pressure, hardwood suppliers have been expected to ship more customised orders sorted by length and colour and less by random width and length.
“That means higher handling costs and costly inventories of ‘left-over lumber’,” said Mr Lacey.
Dimension study
John Wadsworth of consultant Intermark underlined other pressures facing the US hardwood sector, basing his remarks on his company’s study of the European market for American ‘dimension’, which is due to be published in the New Year.
Excluding furniture, he put the value of the European hardwood market at US$8.4bn, with US suppliers taking around an 8% share.
Most of the buyers canvassed for the report bought US, European or tropical timber, switching between sources as price, currency fluctuation and fashion dictated. In short, said Mr Wadsworth, the market was increasingly competitive: “hardly any customers are exclusive to you and every day they’re making comparisons between suppliers”.
Globalisation was also making the market increasingly complex.
“One Italian company we spoke to had a mill in Rumania where it cut beech for shipping to its furniture component factory in Carolina,” he said.
Substitution of solid hardwoods with synthetics and veneer was another challenge, (although in the UK solids were still favoured for cabinet door manufacture) and migration of end-user industries, notably furniture, to lower-cost labour countries in eastern Europe and the Far East was having a mounting impact.
“People say hardwood suppliers should simply follow the furniture manufacturing industry, but that is proving difficult,” said Mr Wadsworth.
Environmental challenges
Addressing the issues of ‘global forestry policy’, Betsy Ward, executive director wood products international at the American Forest & Paper Association, told the convention that the hardwood sector also faced challenges on environmental certification and illegal logging. In particular there were fears that the EU might opt for “demand-driven solutions” on illegal logging, dividing timber sources rigidly into ‘legal’ and ‘illegal’ categories and preferring certain certification schemes. Such approaches risked penalising ‘good actors’ in the trade; companies committed to sustainable timber sourcing but with the ‘wrong’ certification system.
But Ms Ward was positive about the overall direction of the global forestry debate, particularly following the Johannesburg World Summit on Sustainable Development. Illegal logging was the “number one issue” at Johannesburg and American forestry accepted that was right.
“Illegal logging undermines confidence in legal timber and costs the industry globally around US$5bn a year in lost revenue” said Ms Ward. “And if forestry worldwide is pressed to raise its standards to US levels, the US industry also becomes more competitive.”
The key though was to realise that illegal logging could best be tackled domestically rather than with inflexible international controls. “After all, only 25% of all forest products are traded internationally,” she said.
She concluded that to ensure environmental and sustainability measures aren’t imposed to the industry’s detriment, it should “engage with governments on solutions, remain active with international forestry bodies and encourage certification scheme mutual recognition”.
Promotional activities
Proactivity was also a theme for AHEC executive director Mike Snow. In today’s highly competitive international market, he said it was more important than ever for the US hardwood sector to promote itself worldwide, which is why AHEC now has offices in Mexico, Osaka, Shanghai, Hong Kong, Seoul, Beijing and London (which covers Europe and the Middle East).
Effective marketing, said Mr Snow, was a means for the sector to adapt to migration of end-user industries. But that did not simply mean refocusing promotion on the emerging manufacturing countries. “Since 1995 our exports to Japan have dropped from U$140m to US$60m, essentially because the furniture industry has moved offshore,” he said. “But we should not stop promoting there. The Japanese are still increasing furniture consumption and making the raw material decisions.”
He cited South Korea as another market where American suppliers were having to adapt. With its furniture sector also moving abroad to countries like Vietnam, imports of US hardwood had slipped from US$60m in 1997 to US$20m in 2001 (Vietnam’s rose 400% last year).
“But the government has recently removed the resale price cap on property making it worthwhile for Koreans to upgrade their homes, so now we’re targeting the interior design market.”
Moving targets
China is also, naturally, an AHEC target, but not simply as the beneficiary of manufacturing migration. Its 800% growth in American hardwood imports since 1995 has also been fired by a domestic consumer bonanza.
“Chinese furniture sales are US$14bn a year, but only US$3bn derives from exports. Their construction industry is booming too with1.6 billion m2 of new building in 2000. At the same time, Chinese annual per capita hardwood consumption is just 0.2m3, compared to 1.4m3 in the US, creating even more potential for growth.”
He added that AHEC was currently undertaking further market research in Central and South America, the Caribbean, the Middle East and eastern Europe.
Industry consultant and former AHEC European director Michael Buckley also acknowledged the demands on the industry, both on the commercial front and in terms of pressure from NGOs and governmental control and regulation.
But he also highlighted positive indicators, such as hardwood’s improving environmental image. “In the UK the hardwood company Timbmet, once the target for NGO protests, has set up a timber specification training centre endorsed by Greenpeace,” he said.
Influencing the architectural sector had to be one of the key strategies for the future of the industry, he stressed. “Architects are radical thinking people and not easy to lead. We have to work hard to affect their judgement.”
But, he added, signs are that architects are being won over to hardwood on grounds of fashion as well as environmental acceptability. As evidence he pointed to recent flagship American hardwood-rich building projects like the new Vet Centre in Ireland and Haberdashers’ Hall in the UK, plus an article in the UK Sunday Times which stated that “timber is undergoing a renaissance” in construction.
The hardwood sector, he concluded, should “embrace controls because we have no option, influence fashion as far as we can, develop the image of hardwood further and exploit its growing acceptance for all it is worth”.
