Timber companies in the Northwest need a new plan if they want to build profits in Japan’s booming housing market, industry experts say.
Faced with falling production of softwood for sale to Japan and growing competition from lower-cost suppliers, Northwest producers will be better off targeting the high-end, traditional niche of the housing market, according to a working paper published by the Center for International Trade in Forest Products (Cintrafor).
That would mean abandoning the push for continued Western-style construction techniques in Japan, which the industry and the U.S. government have promoted heavily.
Northwest producers should concentrate on fulfilling Japan’s preference for high-quality Douglas fir and Western hemlock for its traditional post and beam housing, the paper argued.
That style uses many different shapes and sizes of sawn wood and features more exposed wood surfaces. Thus, it makes aesthetic and structural wood characteristics highly important, and plays directly to the Northwest species’ strengths.
U.S. Department of Commerce, in a number of recent dispatches from Japan, indicated demand for wood construction housing is skyrocketing.
Western wood construction methods, known as the 2×4 style because of the dominant wood size used, have made inroads recently in Japan, but other countries, such as Chile and New Zealand, can supply cheaper 2x4s using Radiata pine.
In addition, traditional post and beam construction still holds over 85 percent of the Japanese market.
“It is this market segment which has maintained the high prices enjoyed by North American producers in the past and which will continue to offer some of the best market opportunities in the future, ” said the Cintrafor paper, written by Guy Robertson and Thomas R. Waggener.
Harvest restrictions and uncertainties surrounding Northwest forest land conservation and habitat set-asides–to protect the Northern spotted owl, salmon runs and the marbled murrelet bird–have made the future timber supply potential of Oregon and Washington uncertain.
“Timber supply constraints show up significantly in reduced market share,
with the Pacific Northwest export share of U.S. forest product exports down 24 percent since 1989,” said Bruce Lippke, Cintrafor director.
He said the harvest in Washington state has dropped from 6.3 billion board feet in 1989, prior to litigation to protect the spotted owl, to 4.1 billion board feet in 1994–a slide of 40 percent. It takes about 14,000 board feet of lumber to build an average house.
Oregon continued to lead the nation in lumber production last year, with 5.7 billion board feet, according to the Western Wood Products Association. Oregon, Washington and California accounted for 77 percent of total lumber production in the western United States.
But long-term supply “remains a significant challenge for the industry,” said Robert Hunt, president of the Portland, Ore. association. With little volume coming from federal forests, he continued, “western mills must scramble to find affordable logs.”
“The wood-consuming country most impacted by changing supply in the Northwest is Japan,” said Cintrafor’s Lippke.
Japan is Asia’s largest importer of softwood sawlogs and lumber, driven by one of the highest housing construction rates in the world. In the last 10 years, new housing starts in Japan have averaged over 1.4 million units annually, a level likely to remain that high for many years, especially in the aftermath of the Kobe earthquake.
Oregon and Washington are Japan’s largest foreign suppliers of softwood logs. But since 1990, U.S. export volumes have fallen to 7.1 million cubic meters (CUM) from 10.9 million CUM and market share for softwood logs has dropped to 52 percent from 63 percent. About 200 board feet equals one cubic meter.
While Northwest mills continue to close and a general air of pessimism abounds, the reduced supply of the high-quality product the region produces has boosted demand, resulting in big gains in the real price of Northwest wood products. In value terms, U.S. wood product exports to Japan last year reached a record of $3.2 billion, and most experts predict steady price increases well into the next century.
Lumber–logs sawn into boards, planks or beams–exports to Japan also have declined, with volume falling 22 percent since 1989 and market share falling from a peak of 48 percent in 1979 to about 24 percent in 1993. Those numbers reflect increasing market penetration by other softwood lumber producers, mainly Canada.
Chile, are emerging as suppliers of softwood logs and lumber to Japan, and they have great potential to increase their market share. Increased exports to Japan of lower-quality, lower-value Radiata pine from Chile and New Zealand will supply the packaging materials market and compete with lower-value products in the residential arena, said Cintrafor.
“Recently U.S. softwood volume is declining because of restrictions,” said an official in the Japanese consulate here who did not want to be identified. “Japan is starting to look at other sources, including Chile, New Zealand and others. The trend has been more imports from Canada.” He said one major worry is to maintain stable quality. Japan recently has focused on 2×4 housing construction because of its lower cost, he added.
“Japan can get Radiata pine from New Zealand cheaper, and it does the kind of job they want,” said Paul F. Ehinger, a forest products consultant.
Radiata pine is gaining more acceptance in 2×4 construction in Japan. Even though North American suppliers have monopolized the supply of 2×4 lumber, there is “no reason to believe that other producers will not begin to supply this market” with lower-priced Radiata softwood, said the Cintrafor paper.
Because the traditional post and beam housing market demands higher quality lumber, producers supplying that sector “will be more insulated from increasing competition from these other suppliers,” it said.
