U.S. Log Exports to India Surge in 1997
by William P. Bomersheim, Agricultural Marketing Specialist

As a result of India's December 1996 Supreme Court ruling limiting the harvest of logs from Indian forests, India's domestic wood industry has begun to rely increasingly on imports in order to meet rising demand. While it may be too early to gauge the full impact of the ruling on future U.S. exports to India, since the ruling, U.S. wood product exports have risen from $900,000 in 1996 to $6.3 million in 1997. In 1997, U.S. log exports accounted for $5.2 million of the $6.3 million total. Hardwood veneer and hardwood lumber accounted for approximately $500,000, while all other categories accounted for the remaining $600,000 in U.S. exports.

More than 90 percent of India's forest product imports are logs. This is due in part to the make-up of the Indian lumber industry which is characterized by thousands of small-scale mills and low-cost labor. However, the tariff structure also favors log imports over other wood products. Logs have duty-free status in India. Effective tariff rates for higher value added wood products are as high as 60 percent. Members of the trade and the U.S. Embassy have petitioned the government to lower tariffs on wood products.

Despite the high tariffs, in 1995/96, the most recent year for which detailed Indian data are available, Indian imports of higher value added wood products from all sources totaled $23.3 million. India imported $7.0 million of plywood and veneered panels, $6.2 million of veneer, $5.8 million of sawn lumber, and $3.9 million of particle board. Total wood product imports were approximately $267 million, including approximately $243.7 million of logs.

Additional information on the Indian wood market, including Indian contact information, can be sourced from attache reports and market briefs prepared by the Office of Agricultural Affairs at the US Embassy in New Delhi. Reports are available on the FAS home page (http://www.fas.usda.gov). To order reports that are not yet available from the FAS web, contact the Trade Assistance and Promotion Office (TAPO) tel. (202) 720-7420 fax (202) 205-9728 or email tapo@fas.usda.gov.

Outlook for U.S. Wood Exports in Calendar Year 1998:
Reduced sales in Asia will outweigh gains to Europe and North America
by Roseanne Freese, Agricultural Trade Economist

U.S. solid wood exports are forecast to decline from last year's total of $7.19 billion to $6.65 billion in 1998. Sales to the U.S.'s number one export market, Japan, and to Korea and Southeast Asia are expected to face declines as their weakening currencies and economic woes impact negatively on import demand. Strong competition from other suppliers will also limit U.S. exports to these markets, especially in Japan. Record U.S. sales to the rest of the world, however, are expected.

U.S. exports to Japan in 1998 are projected to be down again, falling to $2.1 billion, as compared to $2.5 billion in 1997 and the record $3.3 billion exported in 1996. Low housing starts, a weak yen, high wood inventories, and growing third-country competition are expected to constrain demand for U.S. product. Hardest hit will be U.S. exports of logs and chips to Japan, which are forecast to fall to a ten-year low. U.S. sales of softwood lumber, builder's carpentry and other housing products to Japan are also expected to fall. The notable exception is exports of structural panel products, which are rising off a low base for new uses in Japan's post-and-beam sector. Japan's housing starts are forecast to reach only 1.30 million units in 1998, slightly down from the 1.39 million units of 1997 and significantly lower than the record 1.63 million starts of 1996. The yen has weakened, falling from 110-115 yen per dollar last August to current levels of 125-135 yen per dollar. U.S. product is also facing increased competition from a greater diversity of major softwood suppliers, including Sweden, Finland, Austria, Germany, Canada, New Zealand, and Russia.

Slower economic growth and the sharp currency devaluations resulting from the Asian financial crisis are expected to lower exports to Korea and Southeast Asia, but which combined account for only 6 percent of U.S. wood exports. Due to sharply limited credit, a much devalued won, and lower consumer demand, U.S. exports to Korea are expected to fall to $200 million in 1998, significantly lower than the $300-million annual sales of the last few years. Nearly all major exports, including logs, lumber and builder's carpentry, will be adversely affected.

Indonesia, while not a major U.S. export market, is the wildcard in the current Asian economic crisis. The weak Indonesian economy may overwhelm its wood processing industry's ability to take advantage of currency devaluation and IMF regulatory reform, assuming that Indonesian firms can continue servicing their debt. However, the 75-percent devaluation of the Indonesian Rupiah against the U.S. dollar since August and the still-uncertain reform of Indonesia's plywood cartel in coming months may also combine to weaken U.S. competitiveness in Asian lumber and panel markets.

Record U.S. sales, especially of value-added products, will be achieved in many regions around the world. For the first time in U.S. history, hardwood lumber has displaced softwood logs as the number one solid wood export commodity. Total U.S. exports of hardwood lumber were a record $1.4 billion in 1997 and are expected to expand slightly to $1.5 billion in 1998.

The European Union (EU) is entering into a period of relatively strong economic growth which should strengthen demand for U.S. wood products to service the construction and furniture markets. Chinese furniture and paneling manufacturers are expected to purchase record volumes of most major U.S. value-added wood products as China continues to lower its tariffs and dismantle its internal trade and construction monopolies. Mexican and Caribbean processors are also expected to purchase more American products for furniture, construction, and further processing, such as shutters, and window and door frames. Trade opportunities are on the rise north of the border, too. Despite the weakened Canadian dollar, strong housing construction in Canada is fueling strong demand for U.S. wood building products.

U.S. Solid Wood Imports Expected to Decline, But Remain at
High Level in 1998
by Roseanne Freese, Agricultural Trade Economist

The United States has increased its solid wood imports by nearly $3 billion since 1995. U.S. imports reached a record level of $12.9 billion in 1997 or nearly double the $7.2 billion exported that same year.

Total solid wood products imports in 1998 are forecast to fall slightly to $12.5 billion due primarily to expected lower housing starts in 1998. U.S. housing starts were 1.477 million units, in 1996, remained basically unchanged at 1.476 million units in 1997, and, in 1998, are forecast by the Census Department to fall sightly to 1.42 million units. Import demand, however, will likely be maintained near record levels due to a strengthening dollar and robust domestic economy. Low sales from federal forests due to expanding harvesting restrictions will continue to constrain growth in the U.S. domestic softwood supply. Canada's share of U.S. softwood imports is expected to fall slightly as Chile, New Zealand and Brazil seek buyers outside of cash-strapped Asia for their expanding plantation surplus. U.S. imports of hardwood plywood, lumber, and veneer may increase slightly from a total of $1.1 billion in 1997 to $1.2 billion in 1998 as currencies in Southeast Asia and Canada weaken, making their hardwood plywood and other products more attractive to U.S. furniture and panel manufacturers.

The leading import commodity in 1997 was softwood lumber, valued at $7.0 billion. Over 90 percent of this product comes from Canada and is destined for U.S. construction. Other leading 1997 import commodities include other value-added wood products (includes statues, ornaments, moldings and other miscellaneous processed wood products) at $1.4 billion, builder's carpentry (includes windows, doors, and their frames) at $901 million, hardwood plywood at $724 million, and oriented strandboard (OSB) at $595 million. These commodities are expected to remain the top import items for 1998.

Canada is our leading supplier of softwood lumber, veneer and plywood. Imports of Canadian softwood lumber in 1998 are expected to fall slightly due to lower U.S. housing starts. Imports from Indonesia and Brazil consist mainly of tropical hardwood products. Mexico provides other value-added wood products, such as windows and doors and their frames, blinds, shutters, and softwood molding. New Zealand and Chile are also significant molding suppliers. China is also a major supplier of other value-added wood products, but these consist primarily of statues, ornaments, and frames of wood. These countries are expected to remain the leading U.S. suppliers, and all (except Canada) are likely to increase shipments to the United States in 1998.