On market diversification and educating new markets: A conversation with AHEC

The American Hardwood Export Council (AHEC) has recently concluded their appearances in Vietnam and Bangkok timber events. We speak to Michael Snow, the executive director of AHEC, on the current hardwood market outlook, the council’s strategies for diversification and education, and what sustainability means to them.

Diversifying the market

How was the recent convention by AHEC in Bangkok?
Michael Snow: We were pleasantly surprised. We were hoping for maybe 150 people, and we ended up with more than 200. We had 30 American companies that travelled with us, which was good too, given the problems in the industry now with low prices and a difficulty in selling stock anywhere. A lot of them came [to Bangkok] to find new customers, and we already know from several members that they made sales during the convention. From that perspective, I think the convention was very good.

Can you describe what the timber market is like now?
Snow: It has been a roller coaster ride the last two years, especially last year. This year started out strong, but now, the last two or three months were bad. Prices are going down quickly, lots of people in the industry are sitting on too much inventory. It is not helping in Europe with what is going on, the energy prices and inflation, and housing markets slowing down everywhere, whether in China, the US, or Europe. And these are usually big drivers of demand. So, I think we will be looking at probably, at least, six months of difficult trading conditions.

And in Europe, one of the AHEC’s biggest regions, people are worried about how they are going to afford to keep their homes this winter. So, I do not think people are doing much renovation work. Compared to 2021 and early 2022, we saw big increases in demand everywhere. After being cooped up at home during COVID, a lot of people wanted to do furniture and flooring, then we had a big push, and we probably saw three years’ worth of normal home renovations in one year. But now it is slowing way down. We have a shortage of truck drivers in the US, there are still problems with logistics. Shipping is getting better, but there is still a lot of bottlenecks.

What about the demand for US hardwoods in South East Asia?
Snow: For South East Asia in the last couple of years, especially since COVID, we are now selling more to the region than we ever have. It is better than it was pre-COVID. Vietnam is one of the biggest markets in South East Asia for us, and of course, Indonesia, Thailand, and Malaysia.

The other thing we are seeing that is exciting for us is Vietnam moving up the value chain. If we look back to 2017, more than half of what was sold to Vietnam was yellow poplar, which is the least expensive wood in the US that we sell internationally. Now they are using less of that, and much more white oak, red oak, and walnut than before. They are no longer looking to be the cheapest manufacturer. They are moving up the value chain and making more expensive, higher-end furniture. And that is good for us too, because we need to sell a bigger spread of species, and the spread to Vietnam now is more even.

What kind of markets is AHEC trying to expand into to promote the use of US hardwoods?
Snow: We have been focusing a lot on India. We still have a small percentage of the Indian market, so that is one area where we see a lot of growth. We have also been looking at North Africa, like Algeria and Morocco. We are trying to find more smaller markets to pick up some of the slack from the declining market in China, such as Brazil, and a little bit in Colombia. So, we are reaching out a little more into South America. And Mexico continues to grow very much. I was in a show in August in Guadalajara, Mexico, where a lot of the furniture is made. A big part of our promotion is the nearshoring in France too. There are also a lot of Taiwanese looking to invest in the US market.

Our main focus now is to diversify our markets as much as possible. We learned a big lesson with China, that it is a problem when more than half of your exports go to one country. That is one of our biggest goals right now, to start developing other markets, even if they are small, which is why we are going to South Africa, Algeria, Morocco, the Middle East, Saudi Arabia, among others. If we can spread the risk over to more than one country, any trade or real war will not impact the business much.

Curious to know more? Click here to read more in the November / December issue of Panels & Furniture Asia.