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Opportunities and Pitfalls in International Trade: The View from 4,000 Feet. Dan Meyer Northern Regional Editor. Opportunities and Pitfalls in Trade with CHINA : The View from 4,000 Feet. Dan Meyer Northern Regional Editor. Overview. Observations about U.S. Log and Lumber Trade with China

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opportunities and pitfalls in international trade the view from 4 000 feet

Opportunities and Pitfalls in International Trade: The View from 4,000 Feet

Dan Meyer

Northern Regional Editor

opportunities and pitfalls in trade with china the view from 4 000 feet

Opportunities and Pitfalls in Trade with CHINA: The View from 4,000 Feet

Dan Meyer

Northern Regional Editor

overview
Overview
  • Observations about U.S. Log and Lumber Trade with China
  • Pitfalls
  • Opportunities to Avoid Pitfalls
  • Tracking Alder Pricing
chinese are price driven
Chinese are price-driven
  • Chinese are less loyal to N.A. species than other world buyers.
  • Difficult to remain low-cost leader.
  • There will always be a new supplier on the block with acheaperalternative
substitution
Substitution
  • Alder remains a relatively small player in most markets.
  • A small volume of a substitute could have large impacts in domestic and international Alder markets.
  • The higher Alder prices become, the more vulnerable Alder is to substitution
cyclical buying patterns
Cyclical buying patterns
  • Can you seasonally adjust your production?
  • Will your domestic and other export customers accept seasonal supply interruptions?
watch for shift to logs
Watch for shift to logs
  • No reason to believe Chinese won’t continue to work back down the supply chain, eventually owning U.S. sawmills or importing logs for sawing in China.
  • Gives them morecontrol oversupply & pricing
control log costs
Control log costs
  • Don’t get caught driving log prices so high you cannot absorb a little depression in lumber prices
  • Lumber prices will inevitably fall faster than log prices.
resist raising lumber prices
Resist raising lumber prices
  • The higher Alder prices become, the more quickly will come substitutes.
  • Higher prices benefit you in the short-term but hurt down the road
  • Rarely have we seen a species maintain high prices for as long as Hard Maple
diversify
Diversify
  • If you cannot diversify your species mix, diversify your markets
  • Consider limiting your allocation to China, even if it means forgoing short-term profits
diversify cont
Diversify (cont.)
  • Do not put more into China than you could quickly redirect if China were to shut off tomorrow.
pay attention to domestic customers
Pay attention to domestic customers
  • If supply issues alienate domestic consumers, they’ll turn to other species
  • Healthy domestic user-base critical to stabilize volatile export markets
standard grades
Standard grades?
  • Does it make long-term sense to be the only North American hardwood graded so differently from all the rest?
  • Does it make Alder more difficult for buyers around the world to work with, adding costs?
act don t be forced to react
Act, don’t be forced to react
  • Stay out of reactionary, defensive position
  • Extremely difficult to get back on offense when warehouses are full and cash reserves are tied up in logs that are too expensive to saw.
  • Pay attention to market signals
benefits of a pricing guide
Benefits of a Pricing Guide
  • Easier to spot market changes
  • Historic pricing—trend analysis
  • Weekly benchmark of industry prices
  • Can help you justify sales prices to customers
hurdles to alder tracking
Hurdles to Alder Tracking
  • Which Grades?
  • Whose Prices?
    • Two markets?
    • Do we track one or both?
which grades
Which Grades?

NHLAProprietaryProprietary

Sel&Btr Superiors Superior

No. 1 Shop Cust. Jacket Board Cabinet

No. 2 Shop Cabinet Cust. Shop

No. 3 Shop Cust. Shop A-Strip

Frame Grade Jacket Board B-Strip

Com/#2 C-Strip

Premium Frame Rip

Standard Frame Skip (x3)

Econo/#3 Stain

#3 Shop

slide51

Whose Prices?

  • 70% of production from one company
  • How many companies make up balance?
  • How many will participate?
  • Do we ignore or include Northwest Hardwoods?
  • Will they participate?
recommended actions
Recommended Actions
  • Core group of supporters contact me.
  • We’ll work with you to iron out details.
  • IF we determine we can work out grading and production issues, AND there are enough companies willing to share info (prices and comments), we’ll proceed.
alder comments
Alder Comments
  • With or without Alder price tracking, we will still welcome your comments about Alder markets for inclusion in our Weekly Hardwood Review and Hardwood Review Global publications.
thank you

THANK YOU

Dan Meyer

Northern Regional Editor