Why Export? Mitigating Risk by Diversifying Your Market Portfolio

Transcription

1 Why Export? Mitigating Risk by Diversifying Your Market Portfolio Dr. Ivan Eastin Director, CINTRAFOR College of Forest Resources, UW Presented at the: National Indian Forestry and Wildland Fire Management Conference Albuquerque, New Mexico March 3-7, 28

2 Jan-99 May-99 Sep-99 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 Jan-5 May-5 Sep-5 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan Weak US Dollar helps exports 16 $Canadian per $US 14 per $US Euro per $US $Canadian/Euro per $US. Yen per $US. Since 22 $US has weakened 18.7% against the $US has weakened 36.9% against the $C $US has weakened 4.1% against the The weak dollar has significantly improved the competitiveness of US wood exports

3 Weak US Dollar helps exports $5,, $ Trade Balance ($1,) -$5,, -$1,, -$15,, -$2,, -$25,, -$3,, although the US still runs a significant trade deficit

4 International Economic Growth 15. US Japan Korea Real GDP Growth Rate International economies do not track directly and selling in two markets can help to offset risk during a decline in one market

5 US Wood Products Exports 14,, $8,, 12,, Total Wood $7,, 1,, $6,, Export Volume (m3). 8,, 6,, 4,, Logs Lumber $5,, $4,, $3,, $2,, Export Value. 2,, $1,, $ Total US wood exports are up 31.7% since 22

6 US Log Exports 9, 8, 7, Export Value ($1,). 6, 5, 4, 3, Japan -1% 2, 1, Canada -4% Primary log markets have been declining

7 US Log Exports 8, 7, +275% +331% +44% 6, +162% Export Value ($1,). 5, 4, 3, 2, 1, MEXICO PORTUGAL GERMANY ITALY UK SPAIN HONG KONG VIETNAM KOREA CHINA % +282% +25% +548% +95% +286% but new emerging markets are growing quickly

8 US Lumber Exports 7, 6, 5, Japan -28% Export Value ($1,). 4, 3, 2, Canada +12% 1, Primary lumber markets have been stable or declining

9 US Lumber Exports 9, 8, +497% 7, +21% Export Value ($1,). 6, 5, 4, 3, 2, 1, VIETNAM UK PHILIPPINES MEXICO ITALY INDONESIA CHINA +152% +92% +26% +64% +144% but new emerging markets are growing quickly

10 Global Log and Lumber Imports 35,, 3,, Lumber Imports IMport Value ($1,). 25,, 2,, 15,, 1,, 5,, Log Imports Demand for logs and lumber has been increasing rapidly in all regions of the world

11 Global Log Imports 6,, China Japan India Korea Finland Austria 5,, Log Import Value ($1,). 4,, 3,, 2,, 1,, Chinese demand for logs has largely driven global log export trends

12 Global Lumber Imports 5,, 4,5, Japan UK Italy China Germany France Spain Netherlands 4,, Lumber Import Value ($1,). 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, while global lumber imports are more evenly distributed

13 Global Lumber Imports 1,, 9,, Japan UK Italy China Germany France Spain Netherlands US 8,, Lumber Import Value ($1,). 7,, 6,, 5,, 4,, 3,, 2,, 1,, as long as you don t include US demand

14 US Pine Lumber Exports 35, 3, 25, Export Value ($1,). 2, 15, 1, 5, Pine lumber exports have been increasing rapidly since 23

15 US Pine Lumber Exports 8, Canada Dominican Republic Mexico Spain 7, 6, Export Value ($1,). 5, 4, 3, 2, 1, Pine lumber exports have been increasing to Canada and Mexico

16 US L/P Pine Lumber Exports 18, 16, 14, Mexico Export Value ($1,). 12, 1, 8, 6, 4, Canada 2, Lodgepole and ponderosa pine lumber exports largely go to Mexico and Canada

17 Mexican SW Lumber Imports 4,, 35,, Total 3,, Import Value ($US). 25,, 2,, 15,, 1,, Chile US 5,, e Since 25, US SW lumber exports to Mexico have increased by 49.9% while Chilean exports have increased by only 6.3%.

18 Recent Trends of Interest Japanese and European public procurement policies require certification of legality for wood used in public projects (expected that private companies will comply eventually) Amendment of the Lacey Act will begin to move the US in this direction as well Russian log export tariff will dramatically reduce log imports into China and Japan

19 Recent Trends of Interest Russian announcement of log export tariffs aimed to encourage investment in wood processing industry Currently 6.5% 2% by July 27 but (not less than 1/m 3 ) 25% by April 28 but (not less than 15/m3) 8% by January 29 but (not less than 5/m3) Actual harvest was 14 million m 3 in RFE Sustainable harvest estimated to be 33 million m 3 Processing capacity only equals 2% of actual harvest Russia currently provides 38% of global log exports (provides over 8% of imports for China and 5% for Japan) Investment incentives likely to favor larger projects and provide log tariff reductions (3% of normal) provided at least 35% of harvest is processed locally Forest concessions increased from 5 years to 99 years

20 Russian Softwood Logs Exports 9,, 8,, World SW Log Exports 42.4% 5% 45% Softwood Log Exports (m 3 ). 7,, 6,, 5,, 4,, 3,, 2,, 34.4% 37.3% 37.3% Russian Ratio Russian SW Log Exports Russian Exports to China 42.3% 44.1% 4% 35% 3% 25% 2% 15% 1% Russian Ratio of World Total (%). 1,, Russian Exports to Japan 5% %

21 Russian Hardwood Logs Exports 1,, 26.8% 27.6% 3% Hardwood Log Exports (m3). 8,, 6,, 4,, 2,, 4.1% Russian Ratio 4.3% 1.2% 2.8% World HW Log Exports Russia HW Log Exports 25% 2% 15% 1% 5% Russian Ratio of World Total (%). Russian Exports to China %

22 3, 25, 2, 15, 1, 5, Japanese Import Log Prices US Hemlock Russian Larch NZ Radiata Pine Log Price (Yen/m 3 ) Jan- Jul- Jan-1 Jul-1 Jan-2 Jul-2 Jan-3 Jul-3 Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7

23 Japanese Import Log Prices 9, 8, Export Tariff as Announced 7, Log Price (Yen/m 3 ) 6, 5, 4, 3, US Hemlock 2% Tariff No Tariff 2, 1, Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Russian Larch NZ Radiata Pine

24 Why Consider Exporting Gain access to new customers Gain access to new ideas and technologies Extend the product life cycle Diversify exposure to geographic and Economic risk Utilize excess production capacity Improve profitability

25 Market Entry Strategies Domestic Manufacturer Exporter/Consolidator Overseas Agent Freight Forwarder Importer Wholesaler Retailer Industrial End-User Consumer

26 Indirect Exporting Market Entry Strategies Pros» minimize risk» utilize existing marketing channels» access foreign markets and customers through agent» no international marketing experience required» no new resource allocation required Cons» no direct contact with customers» no opportunity to gain direct export experience» little opportunity to acquire market information» reduced profitability» little control over marketing strategy» variable degree of selling effort by agent

27 Direct Exporting Market Entry Strategies Pros» direct access to market information» direct access to customers» increased control over marketing strategy» potential for increased sales and profits» access to available government export assistance Cons» increased costs» increased risks» exposure to exchange rate fluctuations» requires higher level of resource commitment» more complex business transactions

28 How to Learn About Foreign Markets Network with other exporters or trade groups Attend trade shows in target markets Participate in trade missions to target markets Join exporter association (e.g., Softwood Export Council) Work with Department of Commerce Export Assistance Centers

29 Certified Wood Public procurement policies and green building programs should increase the demand for certified wood in foreign markets in the future Important to recognize that demand for certified wood in low income countries (such as China and Vietnam) is generally for export products while demand in high income countries is more likely for domestic consumers Demand for Native American self-certified wood will depend on whether or not it is independently verified as being sustainably managed

30 Summary Observations Weaker US dollar should favor forest products exports provide some respite against European and Canadian exports in foreign markets $US weaker by 29.2% relative to $Can since 22 $US weaker by 34.6% relative to Euro since 22 $US weaker by 1.4% relative to Japan since 22 Slowing US housing market should encourage exports Russian log export tariffs of any size should provide good export opportunities for US logs and lumber, particularly in China, Japan, Korea, Taiwan and Finland and Sweden Public procurement policies in Europe and Japan should help stimulate demand for certified wood, especially in China, Vietnam, Japan and the EU Exports are a viable option but require commitment Pine exports to Mexico mainly lower grades Market research required to better understand where pine lumber exports are going in Mexico and how it is used

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