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Friday, March 25, 2011

Log and Lumber Demand in China

Here's a great article from the folks at Industrial Reporting on how log and lumber demand in China is helping to replace the business we're losing here in the United States due to the ongoing slump in our housing industry. It's at least a glimmer of hope for our softwood and hardwood lumber companies, who will be able to move some of their product overseas. Not so good for our homebuilders, or furniture and cabinet companies, who will have to pay raw material prices inflated by the Chinese demand.


Globalization of markets is confusing and difficult to keep up with. What looks good on the surface frequently is not so once your company gets involved. We've imposed tariffs on Chinese furniture, and now on Chinese wood flooring, but it's not clear that these tariffs have any real impact in the short term, and they obviously don't in the long term. And our international trading partners are gaining leverage on us, as this quote from the wood flooring article reveals:
"But China, and other countries have taken a harder line on the U.S. as well. Many of the world’s emerging economies are getting bolder, and are taking their cases to the World Trade Organization more and more often. Unfortunately, the U.S. does not always fair well at the international trading body."
Despite the inequities we struggle against globally (lower wages, government subsidization, etc.) we will have to depend less and less on political solutions and more on our own innovation. Which means we have to be on the cutting edge in technological investment and managerial innovation. It's a pretty big challenge, but anything that doesn't kill us will make us stronger, right?

3 comments:

li said...

US is much better than China in technology and management, but China is learning and catching up. Really interesting to see what's gonna happen in future...

Anonymous said...

We'll have to watch this closely to see how it plays out. Higher wood prices on the domestic side certainly will not promote domestic economic growth. The consumer is very price sensitive and domestic mfgs have little pricing power, but at the same time cannot absorb higher material prices. Do we see more wood being exported to China and then import cheap wooden products from China? One question I have is what is the environmental impact from shippping wood around the world - what harmful insects and bacteria are hitching rides?

rightwinggreen said...

The point you made about the need for innovation is critical. We NEED to be free as entrepneurs in America to innovate, be creative, and try new things. Not just new products, but new marketing techniques, no management systems, new technology, new almost anything. We can't compete with the Chinese on labor costs, so we need to find our competitive advantage. This is an area where I feel the wood products industry still has some catching up to do, bringing itself into the 21st century and fulling embracing the Internet and e-commerce (this blog is of course an exception; we need more wood products companies doing what this blog is doing!). Our wood products industry is also strangle-held by strong environmentalist interest groups on the left that believe any cutting of trees is offensive, in spite of clear evidence of how it can be used to restore ecosystems, allow for the next generation of trees to grow, provide wildlife habitat, and reduce wildifre risk. So not only do our wood products companies need to innovate, but they need to be freed from some of the overly burdensome legal issues that hold up timber sales for years and drive up costs unnecessarily. http://rightwinggreen.blogspot.com