“The American hardwood industry has a fantastic environmental story to tell, but you’d better get on and tell it or someone else will take advantage of the opportunity. So why not guys? The issue is getting bigger and bigger. Get yourselves an environmental label, get out there and sell the stuff!”
This was the no-nonsense rallying call delivered by Timbmet chief executive Simon Fineman to 142 US and European delegates at the American Hardwood Export Council European convention in Venice.
Mr Fineman’s challenge was issued during the sparky “Question Time” debate following discussion of the potential problems environmental certification poses for American hardwood exports. But in a way it summed up the conclusions of the conference as a whole. You left the event with the impression that the international hardwood market was a daunting place. With green groups pushing harder than ever and governments worldwide introducing environmental timber procurement rules, the pressure to supply certified hardwood, backed by the right certification scheme, is growing inexorably.
Then there’s the looming shadow of China. The country is already sucking in phenomenal quantities of hardwood lumber, logs and veneer and its appetite is increasing. Meanwhile, Chinese timber-using furniture producers have turned a swathe of American furniture factories into so much development real estate and threaten to do the same to the European competition.
American hardwood suppliers also face the new market dynamic created by the enlargement of the EU. Some new member states were already leading hardwood product suppliers to their western neighbours. Now they have even easier market access.
But despite the choppy waters ahead, there was no sign that convention delegates were leaving to jump in the Grand Canal. The consensus was that the American hardwood business has the tools to do the job, not just in the environmental arena, but also in terms of battling for its share of a rapidly changing international market.
Volume and value
The mood was also buoyed by the fact that the American hardwood industry had a better than expected 2003. Total exports dipped in volume but, thanks to rising hardwood prices, rose 3% in value. The year was not without its worries, including a 12% drop in value in sales to the UK, attributed by one delegate to a “higher than average degree of substitution with eastern European hardwoods”. But other key markets showed growth or recovery: China was up 26%, Germany 12%, Italy 10% and Spain 6%. Even ailing Japan showed a small upturn.
“And in the first six months of 2004 we’ve seen stronger improvement,” said AHEC executive director Mike Snow. “Lumber and veneer exports were up in volume and value. Log volumes were down marginally, but ahead 20% in value thanks to firm prices.”
Despite concerns about the UK, AHEC was upbeat about the European market specifically. Last year total US hardwood lumber exports to the EU fell 4.5% to 641,646m3. But veneer sales rose 4.3% to US$162.2m and this year lumber recovered too, hitting 358,989m3 in the first half compared to 331,241m3 in the same period of 2003. Veneer was up 7% at US$87m.
Among the speakers who stressed that recent positive trends should not lull the trade into complacency was George Barrett, editor of the USA Hardwood Review. His snapshot of the industry’s past decade emphasised that the pressure is on. From 1992-2002 the number of US hardwood mills fell from 1,118 to 679, with output from 1999-2002 dropping from 14.25 billion bd ft (32.8 million m3) to 10.32 billion bd ft, although recovering to 11.35 billion bd ft last year.
The industry has also become far more dependent on the international market, with exports in 2003 accounting for over 11% of sales, compared to under 8% in 1994. One reason for this has been the dramatic shrinkage of US furniture output as domestic manufacturers headed offshore, consolidated or closed. The surge in US furniture imports tells the tale. From 1993-2003 they rose from US$2.15bn to US$8bn, with China’s US sales rising 2,336% to US$3.4bn.
Mr Barrett was blunt in his assessment of why US furniture making has been swept aside. “It was one of our worst managed industries,” he said. “Companies put absolutely no money into their plants.”
The US flooring, mouldings and dimension industries have proved more resilient. But Mr Barrett warned that they too had to fight to avoid the furniture makers’ fate. Last year US hardwood flooring imports jumped 84.5% and mouldings and dimensions imports 10% to reach 675 million linear metres.
But while confronting some harsh realities, Mr Barrett saw profitable prospects for American hardwood mills which adapt and broaden their horizons.
“There is growing demand for sustainable North American hardwood worldwide,” he said, “so there is a bright future, provided businesses become more customer oriented and recognise they’re in a changing global market.”
A competitive advantage American hardwood producers have in the international arena, according to several speakers, is the work of AHEC, probably the most globally active hardwood promotional organisation.
In his resumé of its recent performance, John Wadsworth of analyst Intermark said that AHEC’s marketing efforts were reaching three to five million people in its target audience a year.
“And this does seem to be influencing the market,” he said. “A survey of EU architects found that 8% last year used American hardwoods for the first time and 20% of specifiers specified more.”
Given this success, Mr Wadsworth’s closed by saying that the Americans should step up promotion.
“AHEC’s annual budget only adds up to 0.5% of members’ FAS export earnings. You need to spend more.”
Creative potential
European director David Venables said that AHEC’s work in Europe is raising awareness of American hardwood’s creative potential in manufacturing and construction – and its environmental merits.
“Despite the growth of the Chinese and Asian markets generally, European demand for American hardwood is certainly not withering,” he said. “The EU is still the most important market by value and our activities reflect that. Of course, there is increasing competition from eastern Europe, particularly from oak. But we feel that each product will find its own level, with only some overlap. For example EU demand for American white oak is still growing.”
Looking at South-east Asia, Mr Snow said it was a mistake for the US hardwood sector to see the region, notably China, just as a raw material importer and exporter of cut-price manufactured goods.
“China has an increasingly wealthy middle class and, according to one estimate is building up to 21 million new dwellings a year [others put the figure at 7-11 million],” he said. “It is becoming a very valuable consumer market, with forecast expenditure on interior decorative materials in 2005 alone of US$48.7bn.”
According to Rupert Oliver of Forest industries Intelligence, staying abreast of the environmental certification debate will be just as challenging as adapting to changes in international trading patterns.
He was recently commissioned by the American Forestry & Paper Association to assess whether environmental timber procurement policies in Europe could become non-tariff barriers to American products. This included looking not only at EU, national and local government procurement rules, but also certification policies of 3,000 “priority companies”.
Despite the plethora of regulations and guidelines being introduced by governments at all levels, Mr Oliver concluded that certification per se is not yet an obstacle to US hardwood in Europe as few bodies are exclusively demanding one type of scheme. Where the risk lies is in the area of chain of custody, which has been difficult for the Americans to establish due to fragmented forest ownership.
Public procurement policies
“There is a real threat that public procurement policies tied to traceability could create barriers,” said Mr Oliver. “As a result the US should seriously consider introducing new mechanisms of legality verification.”
He also urged US and EU forest industries to work together on the certification issue and, to strengthen their market status, for the US Sustainable Forestry Initiative and the PEFC to achieve mutual recognition.
Delegates responded that the US hardwood industry is inherently sustainable, but has to convey this even more forcefully to the international market or, as Mr Fineman put it, “get a label and sell the stuff”.
“It is more a marketing challenge for American hardwood than an environmental one,” he said. “Once we’ve taken groups of British architects to the States to show them what the industry is doing on the ground, they’re happy to specify the timber.”
In his Convention summary Ed Pepke of the UN ECE Timber Committee acknowledged that the American hardwood trade had its work cut out, but said that the opportunities outweighed the challenges.
“It’s not sunset for American hardwood,” he said, “it’s sunrise.”
