Editor’s pickWhat are U.S. hardwood lumber suppliers’ sentiments on conducting business with China?
By Judd Johnson, Hardwood Market Report
Turning to industry sources to answer this question, they were very clear in stating they do not do business with China, specifically. Rather, they conduct business in China with Chinese wood products manufacturing and distribution companies. Add to that: they do business with Taiwanese and Vietnamese wood products companies that have facilities in China, Vietnam and other markets in the Greater China Region (GCR).
A catalogue of American hardwoods
This is an important distinction. It is a matter of companies conducting business with companies and even more personally by conducting business with individuals. In this respect, it is no different for the U.S. hardwood lumber supplier than with customers in other parts of the world, including U.S. wood products customers.
Just as with customers elsewhere in the world, the U.S. hardwood lumber supplier has experienced tremendous accomplishments and some memorable failures with their Chinese business. But the sentiment on conducting business with Chinese customers is very positive, and the outlook on future business in the Chinese marketplace is highly favourable.
Reaching new stakeholders
It should not be overlooked that getting to this point has been challenging. The idea of spending more than 24 hours to travel halfway around the world to a different country that has a different language and different cultures was not something the U.S. hardwood supplier readily embraced initially. Yet, as a critical mass of U.S. wood products manufacturing relocated to China by the early 2000s, the U.S. hardwood lumber industry had no choice but to follow.
U.S. hardwood lumber suppliers understand that developing business relationships is not one-sided. Financial and human capital have been invested by all parties to build business in the Chinese market. It has been a historic achievement for the companies involved. It started from essentially nothing and has grown into a market that now consumes more than 2.4 million cubic metres of U.S. sawn hardwood lumber annually. It is the U.S. hardwood lumber suppliers’ mindset that they are more than just participants. They are stakeholders in the long-term success of their Chinese customers.
Divided on U.S. exports of hardwood logs
The Chinese market outreach for U.S. hardwood logs has complicated matters. At some level, the Chinese customer has become the U.S. hardwood lumber supplier’s competitor – a competitor for raw materials needed to support efficient sawmill operations and lumber sales into China (among other destinations); and a competitor in the Chinese marketplace with U.S. hardwood lumber that is sawn in China.
Additional impacts on the U.S. hardwood lumber supply stream from the added competition for logs include:
• Higher prices for logs
• Greater strains on log harvesting and procurement capabilities
• Constricted production capacity utilisation for U.S. hardwood sawmills and concentration lumber yards
• Greater strains and inflation pressures on hardwood lumber procurement for U.S. concentration yards, distribution yards, and secondary manufacturers
These effects are amplified by the timing of increased log exports. Exceptionally wet weather conditions in hardwood producing regions of the U.S. disrupted timber harvesting much of last year and so far in 2018. The additional demand intensified underlying supply tensions.
It is easy for U.S. hardwood producers, processors and consumers to single out “China” and Chinese businesses as the culprits for local log shortage problems, even though exports are not the primary cause for current shortages. And, it’s also readily understood that log sales to Chinese businesses could not possibly occur without direct and willing participation by US businesses. Blame may be misdirected. But in cases where log exports are considered the difference between U.S. sawmills being able to produce efficiently and profitably, the line of rationale can change.
Log exports are viewed as a problem by many U.S. hardwood companies. It is an emotional issue for some because their businesses have been negatively affected to an extent. Perhaps more significant are their concerns about unknown risks to future business if log exports continue to increase. Consequently, some U.S. hardwood companies have a negative sentiment about log exports to China. But, notably, most of those same companies have a very positive sentiment about hardwood lumber business in China.
This article is part of a longer series in the Sylva Wood 2018 show preview. It was first published in Panels & Furniture Asia (May/Jun Issue). Sylva Wood 2018 runs from 25 – 27 June in Shanghai.