RECORD HIGH PRODUCTION LEVEL REACHED IN FINNISH FORESTRY SECTOR
By William P. Bomersheim, Economist

Based on a strong economy and an abundant softwood raw material supply, Finland's forestry sector increased overall production by four percent in 1998. Production of sawn timber increased six percent, while pulp, paper, and paperboard production increased four to five percent. The output of Finnish sawmills increased 600,000 cubic meters (cum) in 1998, producing a record 11.3 million cum.

These record production levels in the forestry sector are expected to continue through 1999 and increase successively in the following five year period. Anticipated GDP growth of 3.5 percent in 1999, and a strong economy characterized by construction and housing growth is expected to drive domestic demand higher, while exports show no sign of slowing.

The value of Finnish forestry exports increased substantially in 1998, amounting to approximately $12 billion. Softwood lumber exports accounted for much of the growth, increasing 24 percent to 9.3 million cum. Exports to European countries, which account for the vast majority of Finnish exports, grew 12 percent. The United Kingdom and Germany accounted for almost 2.5 million cum of Finland's softwood lumber sales. And although demand in Japan has been soft, Finland has been able to hold on to most of its market in Japan even after the slow down in 1998. Finland exported 440,000 cum of softwood lumber to Japan in 1998, down from 550,000 cum in 1997.

REMODELING JAPAN
By Craig Jenkins, Economist

Japan's home remodeling materials market is hot, and growing fast. Despite the shrinking building materials market in Japan, the home remodeling market is taking off. Estimated to be approximately 1.04 trillion yen ($7.9 billion) in 1998, or about 15 percent of the size of the materials market for new housing, the Japanese home-remodeling market has grown steadily since 1990. Although very few imported building products are currently being used in the remodeling market, imports are expected to grow at an average rate of 10 percent over the next five years.

Why the Expected Boom?

Prospects are bright for several reasons:

- Japanese houses built after 1970, and particularly after 1980, are superior in terms of quality and structural integrity to those built during the earlier postwar years. Therefore, demand for remodeling is expected to grow while demand for new construction is expected to decline.

- Japanese society is aging quickly and demand for remodeling existing houses for the elderly and disabled is expected to grow.

- Interest among Japanese consumers in "healthy" (e.g. non-formaldehyde emitting) home construction is increasing. Demand for remodeling and renovating existing homes utilizing solid wood will grow.

An Untapped Market

Potential for imported building products in the Japanese remodeling market is high. Most suppliers of imported building products have been targeting only new construction, specifically the single-family housing market. This has left the large and lucrative market for building materials for remodeling almost entirely to Japanese suppliers. Japanese remodelers will likely become more interested in imported building products in order to differentiate their products from those of their competitors.

Wood flooring, windows, doors, and kitchen cabinets have particularly good potential in the home remodeling market. When marketing these products, exporters may find it useful to provide the customer with design concepts as well as product application and servicing information. Japanese homebuilders often are not familiar with American home design concepts and that extra investment in customer servicing will more effectively secure re-orders.

Market Access Difficulties

It is estimated that nearly 50 percent of remodeling jobs are conducted by small local homebuilders who may not be familiar with imported building products, which are usually different in style, specification, size and installation method from Japanese products. Therefore, these remodelers are more unlikely to use imported building products.

Currently, small local homebuilders have the largest market share, but the number and market share of remodeling specialty companies is increasing. Many of the major remodeling companies are subsidiaries or affiliated companies of large housing companies or building products manufacturers. Since their parent companies are often competitors to U.S. companies, it may not be easy to sell imported building products to these companies.

Best Sales Prospects

The Japanese home remodeling market may be divided into two major segments determined by the type of home: single-family homes and mid and high-rise concrete or steel frame condominiums. Owners of single-family homes, particularly wooden houses, are the most interested in remodeling and represent the best opportunity for U.S. building products. Among them, 2x4 homes, which are constructed using the North American style wood-platform frame construction method, may have the best potential due to the ease of entry of U.S. products into this type of housing. Homeowners of traditional post-and-beam homes and prefabricated homes, whose numbers are far greater than 2x4 homeowners, represent a tremendous potential market. Access to this market segment may be more difficult, however, given that the specifications of the products traditionally used in these types of houses differ from U.S. product specifications.

Remodeling: A Fast Growing Market

Opportunities in Japan's home remodeling market are excellent for U.S. companies over the long term. Though starting from a small base, imports from the United States for the remodeling market are expected to grow faster than the total market. The growth rate of U.S. exports for this market segment over the next five years could be greater than 10 percent annually if U.S. exporters and Japanese importers seriously target the remodeling market. Now is the time for U.S. companies to consider entering this growing market.

JAPAN'S SOFTWOOD LUMBER IMPORTS FROM EUROPE UP 89 PERCENT
By William P. Bomersheim, Economist

Japan’s softwood lumber imports from the European Union are growing again. Japanese imports of EU softwood lumber have grown 89 percent compared with the first half of 1998, and now represent more than 20 percent of Japan’s total softwood lumber imports.

European producers have been making steady gains in the Japanese market since 1993 when North American prices hit new highs. While suffering a setback in 1998, European producers quickly regained lost sales and are poised to make further inroads.

Japanese Softwood Lumber Imports

(1000 CUM)

European producers have been able to make gains in the Japanese market partly because of the strength of the U.S. dollar compared with European currencies. However, European mills have also carved out a solid niche by accommodating Japanese customers wherever possible. European mills providing kiln-dried lumber in metric dimensions have made special efforts to meet customers’ extra prefabrication and product packaging requirements.

Last modified: Sunday, March 17, 2013