June 2005

Forest product exports from the U.S. evaluated

With the assistance of forest products trade associations, university research centers, the South Carolina Export Consortium (SCEC) and federal/international forest products agencies, an overall market study of current forest products trade between the U.S. and its major trading partners, focusing on export data was conducted.

Trade data was compiled using various private and public resources including the Foreign Agricultural Service, the Global Trade Atlas, and the Center for International Trade in Forest Products. Product classifications were made using the Schedule B Harmonized System codes on record with the U.S. Department of Census. These classifications were cross-referenced with statistical data provided by the Foreign Agricultural Service’s Forest and Fishery Products Division which actively tracks the flow of forest products yearly. In it’s review and analysis of U.S. export activity in the forest products industry, the SCEC analyzed export activity for primary and secondary forest products, including wood-based furniture, where applicable.

The general U.S. export overview looked at macro trends in the export of forest products to the world; identifying top markets for U.S. forest products, identifying top commodities/categories of forest products exports, reporting of general trends in the export activity over the five year period mentioned above.

The South Carolina overview followed the same format with top markets identified, South Carolina’s ranking among other exporting states, and top commodities exported to the world via South Carolina. Upon identifying top markets for both the U.S. and South Carolina, the SCEC analyzed, in detail, current import and export trends within each top market.

The country market profiles detailed general trends and changes in the demand and supply chain for the top trading partners of the U.S. in the world. Countries profiled under this analysis were: Canada, Japan, Mexico, China, Spain, Italy, United Kingdom, Germany, Hong Kong, and South Korea. These markets represented the top ten markets for forest products exports from the U.S.

U.S. Results
U.S. exports of forest products reached $6.14 billion in 2003, making it one of the largest exporters of forest products in the world. The results of the study showed that, although the U.S. is currently the world’s fifth largest exporter, exports of forestry products to the world have been on the decline through the study period of 1999-2003. Diminished market share for the U.S. has come at the hands of emerging global forest products leaders such as Russia, Brazil, and China. Also, based on a country analysis, specific markets such as the European Union (EU) are now sourcing more products from within their regional market, and with the newly ascended Central and Eastern European countries entering the market, U.S. exports to the region will continue to decline as cheap imports from the CEE countries flood the market.

However, the U.S, with its own preferential trading agreement (NAFTA), is trading the majority of its products with Mexico and Canada. The U.S. has continued to see growth in each market over the period, but more importantly, product expansion and diversification.

Based on a regional analysis, top regions for U.S. exports were North America and the Asian-Pacific region, with European markets playing a secondary (and declining) role in exports. The U.S. saw significant export declines to most of the top ten markets, save Canada, Mexico, Hong Kong, and China. The most notable exception to this trend was China, where U.S. exports grew over 320% from 1999 to 2003. China is thought by many experts to be the next high volume export market for the U.S. The trend suggests that China’s juggernaut pace of importing will continue. Gains were made in almost all major primary and secondary categories, with raw materials such as logs and lumber accounting for the bulk of both Chinese imports and U.S. exports

South Carolina Results
Although data availability was limited at the state-level, South Carolina appeared to show marked expansion in its exports of forest products to the world, with increases over the period of 33%. South Carolina exported an estimated $67 million worth of primary and secondary products to the world in 2003. However, South Carolina is a minor exporter of forest products when compared to other states such as Washington, California, Oregon, or New York; being ranked as only the 25th largest exporting state for forestry products.

Top markets for South Carolina exports were Japan, Canada, China, and the United Kingdom. These four markets represented nearly half (45%) of all demand for South Carolina-based products. Some emerging growth markets that saw significant increases in SC-based forest products were Hong Kong, Taiwan, Portugal, Mexico, Australia, and Malaysia. South Carolina exports to major markets showed a very different trend as compared to the U.S., with significant gains made in 8 of the top 15 markets. South Carolina exports to China have grown over 3,000% since 1999, and a strong trade relationship with other Asian markets was also present in the market research. Mexico was another strong market for South Carolina, although at much lower volumes.

Major commodities exported via South Carolina included: lumber, builders’ carpentry, furniture, packing material, and logs. By far, South Carolina exports are defined by primary product exports, with primary exports accounting for nearly 70% of all products exported. The most exported product via South Carolina is hardwood lumber, constituting 49.6% of all exports from the state. Lumber products were also the largest category for nearly every market analyzed in this report.

U.S. Conclusions
While U.S. market share continues to erode on an international basis there are several strategic moves the forestry industry can make to position itself to be the dominant supplier where the growth is occurring. While each market had slightly different export profiles, an overwhelming conclusion can be drawn. China and other Asian markets represent the largest potential growth for forestry products exports from the U.S.

Exports to the region support this theory with either significant gains made or lower comparative losses in markets where competitor exports declined. Heavy reliance on foreign supplies of forest products are attributed to underdeveloped forestry industries, strict policies enforcing forest removal, strong and sustained economic growth fueling construction and housing development, and production geared to value-added wood products that require immense sources of raw materials.

In Europe, continued economic expansion of the EU, a harmonizing of standards, and entrance of partner countries with lower production costs for wood will continue to erode U.S. market share. U.S. companies seeking growth in the European market must compete with value-added products that fill niche consumer requirements. Continued and active marketing influence from major U.S. trade associations will continue to reshape the construction and housing sectors in these countries, but must convey a value proposition for U.S. forestry products. Several global issues that will come into play for U.S. prospects will be changing regulations regarding illegal timber trade, packaging/labeling of products, and sustainable wood initiatives. While global collaboration is under way to address many of these problems, U.S. firms must position themselves to take advantage of a changing demand landscape for wood products.

The full text of this report and other studies performed under contract with the South Carolina Forestry Commission are at www.state.sc.us/forest/prod.htm.


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