Produced by: Forest Business Network, Montana World Trade Center, and BitterRoot Economic Development District
Time: 60 minutes
Webinar: Scroll down to view the webinar. Download the webinar PowerPoint slides.
Q&A: Scroll down to see an exclusive question and answer session with Paul Owen
Booming Asian markets have come on strong over the last year, saving many coastal Canadian and American mills. If you’ve wondered how your forest products business might tap into these lucrative markets with your own wood exports, but have no idea where to start (or even if your products are in demand), then we have a webinar you don’t want to miss.
Learn from the best track record in the industry
Paul Owen, President of Vanport International, and one of the leading authorities on exporting forest products to Asia, gives you his exclusive insight into these niche markets and how your company can play a role.
Paul shows you:
- The Asian countries you should focus on right now
- The fiber and species currently in demand by countries hungry for American forest products
- Size, types and grades of lumber in demand, by country
- Cultural landmines to avoid
- Logistics information you must have to ensure your exporting success
- And more!
A question and answer session with Paul Owen, President of Vanport International
Paul answers questions from webinar attendees…
Can you talk about the payments? I noticed that for most of the markets the payments were letter of credit (LC) or cash advance. Can you talk about the risks and how companies can mitigate that?
The number one way to mitigate risk is cash in advance if you can find a customer to do that. But if they don’t know you it rarely happens. A letter of credit allows a bank to act as an intermediary saying the customer can’t receive your goods until they receive the funds. And any of the major banks can help you – US Bank, Wells Fargo, etc. They all have foreign exchange divisions that can help with the LC and basically they’re guaranteeing payment of your customer.
What can the Federal Government do to help create better opportunities for U.S. softwood exports to Asian markets?
I think the biggest issue is you have the federal government working on one level. Each state government is working on their own level, then you have the Port of Portland, the Port of Tacoma, and the Port of Seattle working on their own level. And although they talk about working together, it doesn’t seem to happen. If you take the best people of the best organizations and get them to work together, and provide that information, that would go a long ways to helping U.S. companies export. I find that private, kind of hybrid organizations like the Softwood Export Council, World Trade Organization, Oregon State University, University of Washington – all these places do an excellent job of helping people understand the export market.
What do you see in terms of prospects of increasing exports of Southern yellow pine (SYP) into the markets you are familiar with?
Southern yellow pine is not my specialty, but when it comes to wane-free decking, China is a very decent, stable market with good suppliers out of the southeast. When youre talking about a small log, heart-center-only product, Taiwan, and the Indians, are definitely very good markets. The biggest issue with SYP is going to be the freight costs so you can compete with radiate pine products out of New Zealand.
Are there any niche markets for specialty products from KD White spruce – such as dimensional lumber or house logs?
Dimension lumber has an opportunity in particular in China but the usage is not in wood frame housing. They’re going to rip it into smaller pieces or use it as concrete form structures. That market exists, but please understand it’s price-sensitive. It’s volume-oriented, but it’s very price-sensitive and whether it pays or not becomes the calculation of the day.
Do you have experience with exporting wood pellets for heat or power to the Asian market?
I’m a little bit distant from that. But I think the big issue with wood pellets going forward is that in Japan, in particular, as a government they determine that they want biomass or non-fossil fuel products to generate power going into the future and so they’re mandating the use of pellets for some of their power generation. So that’s going to cause a huge spike in the usage of pellets in Japan. And we see a large volume of pellets heading out of northern British Columbia and Alberta and out of the European countries to Japan because of that. Now with their nuclear energy problems, that industry may dramatically increase the use of pellets going forward into the future. As far as China or Taiwan, I’m unaware of the amount of usage for wood pellets.
When someone’s first getting into the export process, freight and logistics are pretty overwhelming and challenging. Can you give some recommendations on how companies can start to learn this process and what they need to be aware of when first starting?
The number one thing when getting into the export market is as a mill you have to worry about your package size that you can actually stuff into a container. And how much weight is allowed in a container so you don’t miscalculate what the freight is going to cost you. As far as dealing with freight companies, there’s some excellent brokers in the Portland area and the Seattle area that understand stuffing of containers, freight costs, brokering and shipping across the ocean and all the legal documentation you need to provide. And a lot of exporters like us also know how to deal with the USDA and the permits that are required to allow you to export. There are a lot of things like vital sanitary certificates, banking documents, mill certificates, shipping manifests. Those are all things that shipping brokers as well as export lumber companies can help you with.
I have been working hard to market logs into China for over a year now and I have noticed that if you do not buy direct from the harvesters and buy from secondaries it puts me out of the market. Do you have any thoughts on this?
The log market is a difficult one to get into and a potentially dangerous one because of the differences in scaling when buying and selling between the US and China. Also, many people lost a lot of money in 2011 in China when the market prices corrected themselves from late spring all the way through today. In order to be successful in this business you definitely need to be as close to the harvesters as possible because the margins on log exports are quite low. It is a large volume and low margin business. So you need to make sure that all of your “t’s” are crossed and “i’s” dotted.
You touched briefly on Vietnam. I understand the Vietnamese economy is expanding rapidly. How does Vietnam compare with Taiwan?
The majority of the lumber going into Vietnam is for the export furniture manufacturers. This market has peaked as the furniture manufacturers there moved their factories from China to Vietnam and are now looking at moving their factories from Vietnam to other SE Asian countries with lower labor costs.
With the large volumes of mountain pine beetle-killed ponderosa pine in the intermountain west, is there rail transportation available to export these logs?
Whether trucking or railing the logs to the ports, the freight costs alone would make the logs too expensive to ship to Asia. This industry is one where freight costs and proximity to the ports will make or break the business. Basically a rule of thumb is three hours from the port on logs and 10 hours from the port on lumber is feasible for export. Beyond these distances freight will eat up any benefits.
Do the metric sizes you laid out for Japan upper grades carry over to the low grade items to China and Taiwan?
Yes, any fall down grades work perfect for the Southeast Asian markets.
How much are export taxes?
There are no export taxes or duties on hem/fir and Douglas-fir. There are duties on spruce.
Do you know anything about exporting eastern white pine from the east coast?
The majority of eastern white pine going into Asia is ending up in furniture factories and this is a highly price sensitive market with the main competition being radiata pine. Most Eastern White Pine if exported will go into the Chinese market at this time.
Is there a 2×3 market in china in particular?
There is a market for any size and grade of lumber in China, it is just a matter of price. In particular there is a market for full sawn 2×3 in China.
Is “certified wood” (FSC or SFI) a factor in the Asian market?
During the peak of the U.S. and global markets five or six years ago it was becoming important to have especially FSC Certification for Asia where the lumber was turned into products that then were exported back to the U.S. and Europe. Demand has dropped dramatically for certified wood now that people are not asking for it as much, unless of course the products are bound for Europe where that market demands PEFC, FSC or SFI certified lumber products to be used. The Japanese government projects are now requiring certified wood. But projects are limited and follow through on the certified wood useage is lax.
What do you expect for Chinese imports of logs vs. lumber in the future? Will the Chinese market begin to take more lumber and less logs?
China will take whatever has the lowest overall cost. If they can import logs and saw them into their needed sizes cheaper than importing lumber, especially lumber that is not the exact size that they want to use then they will import more logs than lumber. In looking at the Northwest market the logs for export will be more stable than the lumber for export.
You mentioned that China buys chips. What do they do with the chips?
Most of the chips going to China are for the pulp and paper industry. Lots of hardwood and Southern yellow pine out of the Southeast. Limited opportunities for west coast operators due to cost. Most West Coast chips are going into Japan.
Where/how can I find the freight rates from all 25 U.S. ports to Asia (say, Shanghai or Tokyo)?
You can contact your local freight forwarder for rates. As business grows you can join a shippers association which may be able to get you better rates. Lots of forwarders are out there, but do your research – rates can vary by as much as 40%. The Port of Tacoma provides the following link for 3rd party service providers in the Tacoma area: www.portoftacoma.com/3pls. Most other ports should offer this same service. Make sure if you use these sites that you ask if the forwarder handles lumber exports or not.
How far is too far from the ports to be export competitive to these markets?
It depends on who your competition is and what the C&F or CIF market price for your products are – whether logs or lumber. As a rule of thumb, logs need to be within 3 hours of a port and lumber needs to be within 10 hours trucking to a port.
Photo at top: Hung Chung Chih / Shutterstock.com