Wood Market Trends in Japan

Transcription

1 Christopher Gaston Dr. Director, Markets and Economics Forintek Canada Corp. Vancouver, British Columbia Canada Wood Market Trends in Japan Aktuelle Studie über den Fertighausmarkt Japan Analisi attuale del mercato delle case prefabbricate in Giappone document in english 1

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3 Wood Market Trends in Japan 1 Introduction Japan remains the single most important offshore market for the North American wood products industry. Yet many of the competitive advantages that N.A. has enjoyed as the premier supplier have been challenged, focused around a number of identifiable trends in demand and supply (market share shifts shown in Figure 1). Based on an upcoming publication by Gaston, Cohen and Eastin (Wood Market Trends in Japan 24 Edition), this presentation summarizes these trends and identifies the challenges and opportunities for wood product suppliers to Japan. 12,, 1,, Cubic Metres 8,, 6,, 4,, 2,, Canada US Chile NZ Russia Scandinavia Other Figure 1: Japan imports of softwood lumber 2 Strengthening of the yen against N.A. currencies In the 197s, the Yen per U.S. or Canadian dollar was trading around 35. By 2, this had declined to 75 yen per $CDN and 15 yen per $US, which meant that Japanese buyers were paying less in real (inflation adjusted) yen for virtually any wood commodity in 2 than they were three decades earlier! From 2 to present, the yen has stayed relatively constant against the U.S. dollar (with a short-term peak in 22) and weakened modestly against the Canadian dollar. More importantly, the yen against the Euro has weakened significantly (Figure 2). Given the strong U.S. demand for wood products over these years, however, this has not lead to a significant increase in North American wood product share to Japan (to date). 15. Monthly Exchange Rate /Euro /$US /$Can 5. Jan- May- Sep- Jan-1 May-1 Sep-1 Jan-2 May-2 Sep-2 Jan-3 May-3 Sep-3 Jan-4 May-4 Sep-4 Figure 2: Japanese exchange rates 3

4 3 Increased demand for housing performance and longevity Stimulated by the Kobe earthquake of 1995, Japan began valuing wood and wood structures for performance in addition to aesthetic values. In fact, the average life span of a single family detached wood home in Japan in the 199s was only 25 years or so, compared to recent market research suggesting a desire for 55 years. This is a significant change, both in the type of wood products and systems being demanded in Japan, and in the expected increases in future repair and renovation activity (which has historically been very low). This trend leads to, or is related to, many of the trends which are discussed below. 4 Japan s aging population stimulates healthy house As of 23, 19% of Japanese people were reported to be aged 65 and over, making Japan one of the most aged societies in the world (Figure 3). This has tremendous implications via the need for more seniors housing (both single and multi-family), barrier-free and with the need for second, smaller kitchens and bathrooms. It also stimulates the demand for higher air-quality inside the house, leading to low formaldehyde panels and engineered wood products, as well as ready to assemble solid and composite flooring in place of carpeting. Figure 3: Age structure in Japan 5 Western-style housing remains strong There is no question that housing is the single most important demand driver for wood products in Japan. In fact Japan is the third largest user of wood-based single-family homes after the U.S. and Canada (Figure 4). Most of these wood structures are of a post & beam system, both traditional and modern in architecture. Due in part to Canadian promotional efforts and their performance in Japan s Kobe earthquake, the North American platform-frame system (termed 2x4 in Japan) has gained strong popularity, as emphasized in Figure 5. This has translated into a demand for N.A. sized structural lumber, sheathing, and for western value-added products such as doors, windows and furniture. 4

5 p g 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, P&B 2 x 4 Total Starts Figure 4: Japanese housing starts 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, % 16% 14% 12% 1% 8% 6% 4% 2% % 2 x 4 2x4 percent of all wood Figure 5: Japanese platform-frame housing starts 6 Post & beam construction largely moved to pre-cut An aging and diminishing skilled labour force necessitated the move toward prefabricated automation. With North American platform-frame construction, this has meant a move toward prefabricated wall panels, and to a lesser degree, floor and roof systems. With post & beam construction this has meant the adoption of the so called pre-cut component system, where the detailed joinery system typical of post & beam connections are pre-manufactured in a factory setting (utilizing CNC router technology), and packaged for on-site use (Figure 6). Well over 3, homes erected annually in Japan are utilizing structural components sourced from pre-cut facilities today, representing about 75% of the post & beam market. The transformation away from on-site construction has all but eliminated the demand for green lumber. Given that Japan has found itself short of needed kiln drying capacity to meet its domestic needs, this has reinforced the demand for imports of kiln dried dimension lumber, including lamstock for domestic glulam production. 5

6 Figure 6: Example of Japanese pre-cut post & beam components 7 Post & beam construction continues to move to engineered wood products To date, engineered wood products in Japan mostly means laminated lumber, and in particular glulam. Strengthened by the previous trend of prefabrication and the need for kiln dried products, large dimension solid and dried members are reserved for the high-end of the market, with glulam now commonplace in the majority of post & beam structures. Again, given Japan s inadequate drying capacity, this has translated into a strong demand for first glulam imports and them lamstock imports. While the volume of the latter are difficult to gauge as they are recorded under softwood lumber import statistics, glulam imports are reported to be growing as shown in Figure 7. Note that Japan uses laminated lumber in both structural and non-structural applications (the latter typically laminated veneer lumber). The premier supplier of hardwood laminated lumber is the South Seas and China/other SE Asia, with Scandinavia, Germany, and Austria dominating softwood laminated lumber supply. 1,2, 1,2, 1,, 1,, 8, 8, Cubic Metres 6, 4, Cubic Metres 6, 4, 2, 2, Non-Structural Structural Canada US NZ South Seas Scandinavia Other Figure 7: Japanese imports of laminated lumber 6

7 8 Hybrid construction becomes established Hybrid construction can take many forms. The first is a hybrid of construction techniques, mixing post & beam with platform-frame. This is the most common in Japan, including the sheathing post & beam structures with plywood, the use of metal connectors in place of traditional joinery, earthquake tie-downs, addition of non-structural interior studs for ease of later renovations, and so on (see Figure 8). The second type of hybrid, and still in its infancy in Japan, is mixed materials (such as concrete ground floor and wood-frame upper floors) and mixed use (commercial with residential). These are being addressed in the Japanese building codes and are expected to increase in the near future. Figure 8: Examples of "hybrid" construction in Japan 9 Housing styles increase in diversity Until the end of World War II, the extended family was commonplace in Japan, consisting of three generations (grandparents, parents and children) living under one roof, often along with various uncles, cousins and so on. The average number of persons per household had remained constant at about 5 for over 5 years. However, after the war the nuclear family, consisting of one set of parents and their children, was promoted as the official government policy. The average number of people per household declined continuously from 1955 onward, and by 22 there were less than However, while many Japanese adopted the nuclear family structure, during the past 15 years there has been a resurgence to a modified extended family - the expanded family - where three generations once again live under the same roof. Unlike the extended family, the elderly retain independence, and the house is much like an internal duplex. In 22, 4.6 million households had three generations living in them, representing over 1% of all occupied houses in Japan (Figure 9). 7

8 195 Extended hierarchical multi-generational paternalistic group focus royal lineage resists change 21 st Century ExpandedFamily 3 + generations privacy + group caregiver & baby sitter Financial base 199 Nuclear modular two generations focus on individual privacy important promotes change personal power open house design multi purpose rooms self contained floors (interior duplex) universal design elderly separate rooms in house single purpose rooms Figure 9: Japan's evolution of family structure This has translated into the demand for a new mix of housing styles: traditional and modern post & beam structures, larger (often three story) homes suitable for independent space for multi-generations, smaller, single elderly couple appropriate living spaces (high-end apartments), and an increased demand for mid-end, affordable quality / built for sale homes. The latter is particularly appealing to the echo-baby boomers, and is often in platform-frame. 1 Government regulation in housing increases Staring with the new Building Standars Law, and the associated Housing Quality Assurance Law of 2, the trend emerged of government becoming more involved in the regulation of housing. Regulations which initially applied to only platform-frame construction now extent to post & beam. Most of these regulations, including the so-called performance indicators have been designed to protect the homeowner. Interstingly, this has led to homebuilders to market their homes on the basis of these indicators, and even to have them warannty their homes for up to 25 years, subject to inspections and repair & renovations done by contract. Regulations have most recently focused on indoor air quality, particularly regarding formaldahyde emmission tollerences. Even more recently, govenernment is proposing regulations related to green space requirements, with the Ministry of Land, Infrastructure and Transport (MLIT) proposing legislation to ensure that space will be provided for gardens (including rooftop), totalling 25% of the total building lot size. 11 Increased repair & renovation demand As mentioned earlier, the live expectance of a single-family home is double today from the roughly 25 years of less than a decade ago. While there remains a large stock of homes that are in need of replacement, this is leading to an increase in demand for repair & renovation (termed reform ) products and services. This trend is expected to continue in the future, fed not only by the desire for home longevity, but also by performance expectations and more price-conscious homeowners (Figure 1). The four most common repair & renovation projects in Japan are kitchen 23%, bathroom (19%), room additions (12%) and exterior (12%) (Center for International Trade in Forest Products, 24). This trend could lead to increased demand for flooring, doors/windows, cabinets, moldings, structural, outdoor and other value-added wood products. 8

9 12 Annual Reform Spending (Billion yen Figure 1: Repair & renovation spending in Japan 12 Secondary wood product demand remains strong Japan has consistently preferred wood products over other materials for furniture and interior finish (Figure 11). Even in flooring, which has been dominated by composites, growth in solid wood has been significant in recent years. Three trends are important to note for this market segment. First, unlike North America, the Japanese homeowner continues to value light coloured species and finishes for interior applications, offering a market beyond traditional hardwoods such as oak. Second, the demand for outdoor products such as decking, patio furniture, fencing, etc., continues to grow. Finally, cost consciousness is prompting substitution of lower cost components in manufacture, such as using edge-glued panels instead of solid wood (Figure 12). This has also led to increased sourcing of wood components from China. Figure 11: Homeowner preferences for materials used in interior finish (Cohen and Gaston, 2) 9

10 Figure 12: Example of edge-glued panels for decorative use 13 Consumers become more price sensitive Evidence of the growing price conciousness of Japanese specifiers is abound, including the choice of engineered wood post and beams over solid dried, the use of edge-glued panels in finish applicaions over solid wood, and the growing outsourcing of components and products to China. Even in structural lumber purchases for platform-frame construction, there is a noted trend away from the purchase of J-grade to lower, less expensive lumber grades. There are a number of reasons which contibute to this trend. The most obvious is the economic recession of the mid 199s. Further, over the past four years, there has been an ongoing drop in the consumber price index (Figure 13), leaving consumers in the position of wanting to put off purchases with the belief that everything will be even less expensive next year. Even more important to the primary driver of wood product demand (housing), land prices began a year-to-year decline from the early 199s to date (Figure 14). For the first time in recent history in Japan, this lead to the house being considered something other than a disposable good. As in North America and Europe, the house (as opposed to only the land) became viewed as an investment, something of lasting value. This even led to a before unforseen phenominon in Japan - a secondary housing market. CPI Change %) Figure 13: Japan consumer price index (percent change) 1

11 Land Value 1987= Figure 14: Japan land price index 14 Adapting to the emergence of China With Japan s shortage of workers and its growing price conciousness, the emergence of China a major world wood products suppier was a natural for consumption, outsourcing and joint ventures. This has become so prevalent, in fact, that any wood product supplier to Japan will likely have to consider China as part of the suppy chain. Evidence of this can be seen from structural to finished apperance prducts, illustrated in Figure 15 for recent supply trends for laminated lumber. m3 % chg. 3-4 Austria 82, Finland 64, China 57, Schweden 36, Germany 28, Canada 14, Russia 12, USA 3, Total 34, Japan Ministry of Finance Figure 15: Japanese Imports of Glulam Lumber (January June, 24) 11

12 15 Summary Outside of North America, Japan remains the single most important volume market for wood products related to wood-framed housing in the world. And unlike North America, or the smaller volume wood-for-housing users such as Europe and Oceania, Japan continues to be a significant net importer of wood products. To suceesfully compete in this market, suppliers more than ever need to fully uderstand the wood-use trends behind the market demands in Japan, both for structural systems and for nonstructural applications. 12