THE JAPANESE MARKET FOR TROPICAL TIMBER: · 2013. 7. 31. · V. Impons of Timber Products by Japan:...

THE JAPANESE MARKET FOR TROPICAL TIMBER: .

An Assessment For

The International Tropical Timber Organization.

Prepared by:

John V. Ward Associates~ Ine 1738 N Street, NW Suite 300 Washington, DC 20036 USA

Assisted by:

International Research and Marketing Rosei Building, 4.2, Higashi Azabu, 1-Chome, Minato-ku, Tokyo 108 JAPAN

I.

Il.

Ill.

IV.

V.

VI.

THE JAPANESE l\IARKETFOR TROPICAL TIMBER: AN ASSESS1\1,ENT FOR THE

lNTERNATIONAL TROPICA.L TIMBER ORGAAlZATION

Inrroduction • Project Objectives • Study Methodo]ogy ,. :Terms Used

• "Report Outline

Executive Summary . • ,Primary Conclusions

TABLE OF'CONTENTS ;,.

, •. ,Major Recommendations

; ',".' , .

1- 1 1- 2 J-2

, 1-3

1I- 1 'Il- 3

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Japanese Timber Demand and the Imponance of Impons,.~ , . ""'.'. '.. . ,': ~

• 'Total De'mand ' ... -~- .

• Growth of Imports • ',Importance of Tropical Timber .' Overal1 Future Outlook

... - , .'

"!'l..

177e Japanese Timber Products Industry: Supply, Manufacturing",. , and Distribution

• Forest Resources • Japan's Lumber Industry • Japan's Plywood Industry ., Japanese Timber Distribution Channels

Iinports of Timber Products by 'Japan • Log Imports '. Lumber Imports • Imports' of Plywood • Veneer Imports

, "

~ Impoit:; of Value Added )

Products -- building Products

• Imports of Value Added Products -- Furniture

• Imports by Species • Imports of African and South American

End Use Markets for Tropical Woods • Housing/Construction e Furniture • Packaging

Products

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, II,I- L ,Ill - 1 , III- 5 IlI- 6

IV- 1 . IV- 3

IV:' 6 JV-ll

V-3 V-4 V-5 V-7 V-8 V-IQ V-14 V-19

VI- I VI- 8 VI-12

·TABLE OF CONTENTS· (continued)

VII. Japanese Trade Policies and Regulations Tropical Timber

• Tariffs • Standards and Codes

VIII. Producers' Policies and Positions Affecting Exports to Japan. • Japan's Suppliers • Japanese Trade Barriers Perceived • PrC'ducers' Trade Restrictions • Malaysia • Indonesia • . Philippines

IX. Compeiitioll and Outlook for Tropical Woods in Japan .• • Tropical Timber's Present Position • Inter-species and Other Competition • Summary Forecast for Year 2000

X'. MajnT Conclusions and Recommendatiom • Conclusions • Recommendations

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XI. Appendix • ITTO Request for Proposal • Index of Tropical Hardwood Species • Consultants' List of Contacts • Qualifications of Consultants

VII- 1 VII-5

VIII-l VIII-3 VIII., 4

. VIII- 8 VIII-16 VIII-23

·IX- 1 IX- 2 IX- 7

X- 1 X-6

XI-A XI-B XI-C XI-D

I. It,TdODUcnON

The Japanese Market for Tropical Timber: An Assessment for the International Tropical Timber Organization is the result of a project approved. by the International Tropical Timber Organization (ITrO) at its meeting in May1989: Thecontract for the study was awarded:; by IITO in February 1990 to John V. Ward Associates, Inc (JVWA) of Washington, DC, USA -- an international management consulting firm specializing in forest ·products -and agribusiness.

The study was undertaken by JVW A with its Japanese partner, International Research and Marketing (IRM) , an international . market research ,firm based in Tokyo. The latter

. ~ - .'. performed most of the research work in Japan. while"JVW A conducted the investigation outside Japan -- i.e. with the primary producing, countries -~ as well as providing overall project management and coordination. (The background of JVW A and IRM are described in Appendix D).

PROJECT OBJECTIVE..~ .

The objectives of this study in summary \\fere to:

•. Determine the size and trends in Japan's market for tr~picaI timber products. • Analyze Japan's trade and internal policies and their impact on the tropical

timber trade. • . Review summarily the trading poli~iesand practices of the major tropical

producers exporting to Japan. . _,_

The project had been initiated by ITTO as a follow up to its study of the European market "StudyoJthe Trade and Markelsjor Tropical Hardwoods in Europe" conducted in 1988. Japan was chosen as the second target market for such an in '.'estigation because of its immense importance as a customer for tropical wood producers. A third such study of the North American market is being considered for next year. . \ ' .

. The approach taken on this project was substantially different from that used in Europe. The Japanese investigation:

~ "?rcvides less statistical detail. • Is more geared to actual wood usage. • Presents specific conclusions and reco,mmendations.

Additional· information on the objectives and background to this study may be found in the lITO request for proposal included in Appendix A.

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STUpr MEIHODOLOGY

Most 0[, the work 01) this project was accomplished' during the period March - August 1990. This project was undertaken in two parts -- an intensive investigation of the' market in Japan * ,and a less extensive review of the 'exporting' policies and practices in the primary supplying countries*. ' ,

The study.in Japan involved:

• A review of available' statIStICS and other key data. • 'Interviews with key government,' industry "'and other officials involved In or

, influencing the tropical timber irade~' • A survey of 125 Japanese companies which import and use tropical, timber.

The .external review involved:

• Interviews in the three major supplying countries -- Indonesia, Malaysia and the Philippines -- with important company, association and government executives.

.. Attendance at two ITTO sessions --' a value added seminar for African countries held in Accra, Ghana, and the ,Spring 1990 ITTO meeting in Bali, Indonesia. Brief interviews were conducted' at" both these sessions with representatives of several other producing countries.

Progress 'reports were given to rrro management in Yokohama in Apri:t ,1990 as well as to the entire Council at the ITTO Bali meeting in May 1990.

TERMS USED

This report uses industry terms as they are most commonly referred to in Japan and in its supplying countries. Thus, we generally use: '

• Logs rather than roundwood. • Lumber rather than smvnwood. .. f\ojtv,Jood rather than coniferous. • Hardwood rather than broad-leaved.

JVW A and IRM hope this usage is clear to'aI] the readers of this report.

*See Figures I-A and I-B, maps of Japan and Southeast Asia, at the end of this section.

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REPORT 07J7LlNE

The reported is presented as follows.

1. Introduction H. ExecUTive Surnma7Y: A summary of the key findings of the report .. Ill. Japanese Timber Demand and the Imponance of lmpons: Key past and expected

future trends influencing' Japan's timber consumption from domestic and imported sources.

IV. The Japanese Timber Products Industry,· Supply, Manufacturing and Distribution: A review of the major segments of Japan's wood products industry including channels of distribution for its basic products.

V. Impons of Timber Products by Japan: An analysis of the trends in Japan's imports of tropical timber products.

VI. End Use Markets For Tropical Woods: The key markets for tropical woods and trends influencing them.

VII. Japanese Trade Policies and Regu!atior/s Affecting Tropical Timber: Tariff and nontariff barriers impacting the import of tropical hardwoods.

VIII. Producers' Policies and Positions.Ajfecfing Expons lO Japan: A review of the supply situation and government policies affecting exports in the major producing countries.

IX. Competition and Ourlook for Tropica1 Woods in Japan: A review of the competition for tropical timber coming from other speciesand products plus a possible scenario

X.

XI.

. for the future. . Major Conclusions and Recommendarions: recommendations from this investigation. Appendix

The major findings and resulting

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JVW A and IRM thank 1TIO for the opportunity to undertake this project. It has been a most interesting and challenging assignment. We hope the results of the study will be useful to the ITTO and its members -- both consunling and producing countries.

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Figure I-A . MAP OF JAPAN

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HONSHU

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SHIKOKU

500 Mi

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1-8 Figure ST ~SIA

SOlJTHEA MAP OF

(:' . V'· .

~~.Y1= ='CP . ...

n. EXECUTIVE SUMMARY

This st!ldy of Japan's tropical hardwood markets was conduc.ted for the IITO by John V. Ward Associates: Inc. of Washington, D.e.assisted bylnternational Research and Marketing of Tokyo. ,It was initiated in February and completed in September 1990.

, ..

,PPJMARY CONCLUSIONS

JVWA has concluded, regarding the following subjects, that:

Demand and Impons

•

• •

•

•

Japan's wood consumption is'f6~ecast over the next 15" years to be ,approximately 112 million m 3 , 67%'of which will be imported. .' Japan is the world's largest importer of tropical logs, lumber, and plywood.

, Japan's tropical wood supplies corm~ 98 % from Southeast Asia (or the South Seas as it is called). Its largest suppliers in 1989 were Malaysia ($1.3 billion) and Indonesia ($l. 2 billion), providing 89 % of a total of $2; 9 billion in imports .. Logs are Japari' s largest single tropical wood import. However, between 1980 and 1988 log imports declined from 19.1 to 12.7 million m 3 and from 89 to 43 % of its tropical import product mix (value basis). Imports of other tropical wood products increased substantially between 1980 and 1989.

Total lumber from $85 to $200 million (including planed/sanded products from $7 to $138 million)

Mouldings and Joinery' from $1 to $9 million Wood furniture from $58 to $255 million " ' Furniture, pans from $40 to $97 million

. ..' !

. As can be ~qted, a large pOItio'n of these gains are in so called value added ,produc.tc;; ho~ever, those which 'are furniture related are not being primarily . accomplished' by tropical timber producing countries, but by Taiwan poe, ' Thailand, Korea, and Singapore. About 20 species, mostly dipterocarps," account 'for the bulk, of imports; however, lesser known species are rapidly gaining market share. Nonetheless considerable confusion regarding tropical, species names exists in the market.

II-2

Domestic PrOduction

• Japan's domestic prod~ction of all lumber is deClining and shifting more- to softwood; its use ,of tropical logs has decreased as its imports of -tropical lumber have expanded.

• Japan's domestic production of plywood is growing moderately and has been sharply affected by imported tropical plywood from Indonesia which has gained a 31 % market share in the last five years. The domestic industry is 94 % based upon imported tropical logs and is jeopardized by increasing South Seas and world restrictions on their exports. -

• Although tropical hardwood lumber imports have increased, total Japanese consumption declined between 1980 and 1989 from 6.0to 3.8 million m 3 and from 15% to 10% of total lumber usage; this has occurred mainly because dom'estic prq~:{4ction has dropped due to log' unavailability. -

• -Tropical hard_wood'losses in lumber market' share have been picked up by 1) imported softwo()ds,' 2) domestic; softwoods, ang 3) imported temperate hard woods in that order.

• Japan's major markets In 1989 were -taking the followirig shares of basic tropical products.

Lumber, Plywood

1) HoiJsing/construction- 37% -66%-2) Furniture - 29 9 3) Packaging 13 4 4) Other -1L -1L

Total 100% 100%

• Japan is an open market to tropical woods with few trade barriers other than relatively high tariffs.

• Producing country strategies all appear to be: a) to limit the drain on their forest resources; b) to reduce exports of round wood and, to a lesser degree, lumber; and c) to increase exports of higher value added products. Producing country policies to reduce exports of logs, and more recently lumber, have largely stimulated tropical woods decline in market share.

• JVW A expects that by the year 2000: -

• Japan will be importing 50% less tropical logs. • Imports of tropical lumber and tropical plywood will have increased by

67% and 33% respectively. • Imports of selected value added products will have grown by 150% to

$960 million.

II-3

\!AJOR RECOMMENDATIONS

JVW A recommends that:

The TnO:

• Coordinate a project to clarify and establish consistent species nomenclature. • Assist the tropical producers to build species awareness. • Aid the producers in strengthening position in the Japanese building products

and furniture markets. • Sponsor a tropical wood investment seminar in Japan. • Monitor the impact of producers' restrictive trade actions.

The GovernmentlIndustry of Japan:

• Assist the ITTO to undertake recommended action~. in Japan. • Rccof,;nize that a major change in Japan's plywood industry is inevitable and

act accordingly. • Eliminate tariffs on tropical wood products and open up the Japanese GSP. • Assist tropical producers to meet Japanese quality requirements.

The Producing Countries:

• Recognize that export restrictions not only distort markets but may be diminishing tropical species' long term competitive position.

• Increase promotion of, rather than restrict exports of, planed and/or sanded lumber as mid-value added products.

• Consider the Japanese plywood, veneer, building products, and furniture markets as excellent opportunities.

• Explore joint ventures in the furniture field. • Work harder on meeting the quality requirements of the Japanese market. • Develop plywood certifying capability. • Support more actively ITIO actioii:;) to assist marketing. • Cooperate more closely with each other in marketing tropical woods. • Push Japan harder to reduce tariffs and improve GSP.

The following seven sections explaln the rationale for these major conclusions and recommendations. Section X explains and expands upon them in greater 1ctail.

ill. JAPANESE 17MBER DEMAND AND THE IMPORTAEC$_OF IMPORTS

This section summarizes the historic demand for all timber products in Japan and its supply from both domestic and imported sources, reviews the current demand and supply situati.on, and provides all overall outlook for the future.

TOTAL DEMAND

Japan's demand for timber has been irregular. Rising from a total of 71 million m 3 * in 1960, it peaked at 119 million m 3 in 1973, varied in the seventies, then hit another high in 1980. Reflecting sluggish housing, Japanese demand dipped to 92 million m 3 in the early 1980's but since 1985 has generally been increasing.

In 1989 total timber demand-- reflecting housing starts in the 1.7 mill.ion range -- totalled 114 million m3. Demand is expected to hit 115 million m3 in 1990, the second highest year in history.

Japanese wood consumption is heavily correlated to housing starts. This relationship is shown clearly in Figure IU-A on t,he next page which tracks for 30 years the trends in housing starts, lumber and plywood production, and lumber :md plywood imports .. Over 60% of all -logs are used for lumber, plywood and related wood products. Approximately 80% of all lumber and 70% of all plywood products are used in the house building and constIl,lction industries.

GROWIH IN IMPORTS

Imports have supplied an. increasing share of consumption. In 1960 about 87% of total consumption was supplied by domestic timber. By 1975, that share had declined to the 35 % range, with imports supplying 65 %. Imports' share of supply remained relatively constant

. for the next 10 years, but started increasing again after 198.5. Since 1987, imports have supplied over 70 % of the market, reaching an estimated 73 % in 1989. Japan's demand for timber and how it is being supplied both domestically and by imports is shown in Table III-B on page 1II-3. -

Japan is a well wooded country. Approximately 67% of its land area (compared, for example, to 28 % in the USA, 24 % in the European Community, and 42 % in the USSR) is covered with forests now estimated to include nearly 3.0 billion m:l of standing timber. Nonetheless its large domestic: demand, the declining supply of its own forestry labor, and the decreasing competitiveness of its timber -- costs of which are influenced by the high expense of logging in mountainous terrain and other factors -- have caused imports to dominate an increasingly greater share of Japan's markets.

*Demand statistics are expressed in terms of the volume of logs, lumber, plywood, chips, etc. converted into log volume equivalent.

Housl"9 Starts

@_L~it~l

4500

4000

3500

3000

2500

2000

1500

1000

500

ProclJct ion/ I ".,.,rts 1~

45 l I I

40 J .35

.30

25

20

15

10

Figure III-A THE RELATIONSHIP OF JAPANESE HOUSING STARTS WITH

I'tIOOUCTlON ANO IHPa!TS OF LltISER AIIV Pt YWrn OYER 30 YEARS

Jl>\-'--

fJ-B--a V··. . Er ./. "g--- --:J

o 0 IT-r-r- T T T 1 I'

--.-~----.-----

i

I .. I

.. ,~I R .

l3-a- .

I I

I

196(61 6263 G4 6566676869 7071 72 7.3 7475 76 77 78 79 808182838485 86 8~ 88 89

Year

- Total HOV!Ilng Start~ o lurber ProclJct Ion A ·Ptywood Production o lurbt-~ I".,.,rts v Pt ywood IlTpOrts

Sourc~: Ministry of Agricultur~, For~stry, and Flsh~ri~s (HAFF), Ministry of Construction

>-I >-I >-I I

N

Table III-B DEMAND AND SUPPLr OF TIMBER iN JAPAN

( 1960-1990) OOOm' log Equivalent

I .. ~ ~ .. ~ ~ ................ .. _' ............ .................... ' ....................... ~ .................................................................... _ .................................................................................................................. _'_ .............................................. I I ,

:: Demand: Suppl y** : I 1 ___________ .• _____________________________________ f ___________________________________________________________ .. ____________________________ .. 1 I , ,

:: :: lDomestic : I : rear : ,:: IProducts : Imported Products : : Total : lLJrber Plywood IPulp/ChiP: Other I Total 1--------- 1---------------------------------------------------------------------1 I Demand: Mills Mills Mills I Supply I I I lPlywood/ I I:

'1~rt Ratio

(X)

I I I :Subtotal ISubtotal I logs I LlJllber I Veneer I Chip I Pulp . I Other I : ---- ----- --------- 1--------- --------- --------- --------- ,--------- 1--------- :--------- 1--------- 1---·------ l---------'---~----- 1------·--- :----.----- :--~.------I 1960 56547: 37789 3178 10189 5391 56547: 49006 I 7541 I 6674 I 211: : 656 :-- .: B_3 , __________________ 1 ______________ .. ______________ .. __ .. _ .. __________ 1 _________ 1 .. _______ .. 1 .. ________ 1 _________ 1 _________ ___ ~ _____ I _________ I ____ ~ ____ ·I ___ ~ ____ _ , , . , , I 'I : ,. , I

: 1965 , 70530: 47084 5187 14335 3924 70530 I' 50375: 20155 I 16721: 1115 I 2 270 :2036 :. 11 \ 28.6: I --------- : ---------\- -------- --------- --------- --------- --------- \ --------- \ --------- 1- - ~,.- ----- \ --------- : --------- ------.- --1- -------- : -~ ------- , ---------: I 1975 I 96369 I 55341 11173 27298 2557 96369! 34577: 61792 I 42681: .2964 I 335 11340: 3688 1784 64.1 : I---------:---------\---~---~-\---~----- --------- --------- ---------:---------:---------1---------:---------\--------- -------~-:---------\--------- ----.----: : 1980 I 108964 I 56713: 12840 35868, 3543. 108964: 34557 I 74407: 42395: 6136 I. 199 15936: 7670 \ 2071 68.3 : ,--------- :---------\---.------ :--------- 1--------- 1--------- 1--------- 1--------- I---------l---~------ :--------- :--------- ---------\----.-.---- 1--------- ---------:

1985 : 92901: 44539: 11217 I 32915 I 4230 I 92901 1- 33074 I 59827 I 31391 I . 4994 I 613 11812 I 7892: 3125 64.4 I

*

---------1---------:---------:---------1---------1---------1---------:---------:---------1---------:---------1--------- ---------:---------:--~------ --------.: 1989 : 113859 I 55482: 14.702 I 42311: 1364: 113859: 30601: 83258: 35186 I '12882: 4312 19043: 11303 I *532 73.1 :

--------- :---------j---------I--------- :--------- :---------:---------1--------- I---------:--~------:---------l---------,---------:--- ------;--------- ___ M_MM_M; 1990 \ 114880 \ 55250 \ 14770 I 43520 \ *1340 \ 114880 \ 30450: 84430 \ 34355 I 13250 \ 4740 \ 19910 I 11650 \ *525 73_5 :

(Out look): I : I I I : I : I : : , : I I ---------------------------------~-----------------------------------------------------------------------------------------------------------------------------\

The major drop in the "Other" category is due to products being reclassified from Other to different categories, primarily lumber, due to the shift from the CCCN product nomenclature to the Harmonized System (HS) in 1988. •

** Supply includes withdrawals from inventory; thus figures do not directly compare with domestic production or import statistics.

Source: Ministry of Agriculture, Forestry and Fisheries (HAfF)

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III-4

This situation has caused Japan to become the world's largest importer of the three primary timber products -- logs, "lumber ~ and plywood/Veneer -- as shown in Table III-C below.

Table I II-C ~RLD'S TOP IMPORTERS OF M~JOR TIMBER PRODUCTS

1988

I---------------·-------------------~------------------------------ .. -------------------------------, I Total of Timber I Saw Logs and Plywood/Veneer I I Products Li sted I Veneer Logs I Ll.Jlber I Products i Count ry 1- ------------------ 1-- ----------------- 1- - - - - - - •. - - - - - -. - - - - 1- ------------------I i Voll.llle 11 Volune : : Volune : : Voll.llle ' i. lemitl m')1 Rank :(mill m'>1 Rank I(mill m'>IRank I(mill m'> Rank 1. _______ • _________ 1 _________ .1 _________ • ___ • _____ 1 _________ • ________ .1 _________ 1 _________________ _

, ""'" I Japan I 43.4 I , I 30.6 I 1: 10.~, I 2 I 2.4 I -----------------;~-----~--:-~-------I--_----_-I--_--- ---I---------I---------I-------ww ---------IUSA : 35.3 I . 2 0.3 NR I 33.~, I 1 I 1.5 2 1 __________________ I ________ ~t _________________ ~ _________ 1 ________ .1 _________ 1 ______________ • __ •

, I I ,,, I

IChina I 15.3 I 3 12.6 2 I 1.2 I NR I 1.5 3 I :------------------:---------:--------- --------- ---------I---------:----·-·--;--·---~-· ---------~ IUnited Kingdom I 10.8 I 4 0.1 NR I 9.~· I 3 I 1.3 I 4 I I __________________ I ___ ~ _____ , ___ • ________ ~ _____ --- ______ 1 _________ 1 _________ 1 ______ --- _________ 1

, I I " I I IItaly I 8.6 :. 5 2.24 I 6.,: I 4 I 0.2 NR I : _______ • __________ : •• ________ ; __ ~------ __________________ : _________ ; _________ : _________ --- ______ 1

IKorea I 8i NR 7.2 31 O.E;I NRI NR I __________________ I ___ ~ _____ I _________ I _________ --- ______ 1. ________ 1 ______ --- 1 _________________ _

I . I I I I I I

IGerm;,ny- : 5.4 I NR I 1.2 NR I 3.9 I 5 : 0.3 NR ,------------------:---------~---------:---.----- ---------:---------:---------:--------- ---------:Canada I 3.7 : NR I 1.7 5 I 1.E; 1- NR I 0.2 I NR I ___ • __ ~ __ •• ____ .~_I ______ ._., __ • ___ ~ __ I _________ _________ t _________ I _________ I ________ .I ________ _

I I I I· I I I I I

iSingapore : 2.7 l NR I 0.2 I NR I 1.~, I HR I 0.7 I 5 :---------------.------------------~------------------ ---------------------------------------------

NR - not rated Source: FA:)

In 1988 Japan jrnported 24% of the world's total imports of these three major timber products including 43 % of its logs.

Log Imporls Declining: It should be pointed out, however, that although Japan is number one, the ccuntry's roundw-ood -imports, as a share of total timber imp011s, have been consistently declining. This is clearly illustrated in the table' below.

Table III-D JAPANESE IMPORTS OF LOGS COMPARED TO TOTAL IMPORTS

:-----_._------------------ --------------------------------: : I Tota l - I I I : TimberProduct Log I Logs X of I I Year Il~orts {DOOm') Irrports (DOOm') I Total Irrpor,ts I .--------:---------~------ ----------------:---------------:

1960: 7541 6674 I 89 : ---------:---------------- ----------------:---------------:

1965 I 20155 16721 I ,83 I ---------:---------------- ----------------:---------------:

1975 I 61792 42681 I 69 I _________ 1 ________________________________ 1 _______________ 1

I I I

1985 I 59827 , - 31391 I 52 I :-------:-:----------------:-----~----------:--------- -----.-: I 1989, I" 83258 I 351~ : 42 : I _________________________________________ :~ __________ ____ -.1

I I

- SO'Jrce: MAFF

IlI-5

_ Japan. is importing an increasing share of added· value products, not only lumber and plywood, but also building components, furniture parts and other processed wood products.

J},fPORTANCE OF TROPICAL TIMBER

At present, oyer 98 % of Japan's tropic3J woods come from the countries of South East Asia, referred inloeal terminology as the "South Seas", a term which will be used frequently in this report. This tropical timber is of major importance to Japan in its supply ·picture. In 1988 tropic?J timber accounted for 19% of JaPan's total log supplies and 93% and 7% of the raw material required by Japan's plywood and lumber industries, respectively.·

In aqdition in 1988 imports of tropical timber products accounte.d for 6% of Japan's lumber usage and a 19% share of the country's plywood consumption (a share which increased to 31 % in 1989). Although tropical log imports are declining -- as will be explained later -lumber and e~pecially plywood made from tiopi"cal woods, .have been growing dramatically.

. .

The importance of tropical timber in Japan's import mix and to its wood processing sectors is shown in the table below.

Table III-E IMPORTANCE OF TROPICAL TIMBER IN JAPAN

1988 :-----------------------.--------------------~---------~------------------------------\ : ' .. Logs ::: : ................ - .. ------ ........ _ ... _ ..... _-----_ ........ :... ..... -1 ~ ; : I For . For IFor Chips: LLrnber : Plywood I I Total I LLrnber Plywood land Other\ \ \ : ________________________ .. _________ : _________ ---------:---------:---------:--- __ .. ___ 1

ISupply (OOOm') 67043 I 43891 10472 \ 12738 \ 27273 \ 9004 :% of Supply 100 \ 100 100 \ 100 1 100 1 100 I------------~------~--"·- ---------1--------- ---------:---------\---------\---------:Total Imports (OOOm') 36113 1 25680 10090 : 943: 8462: 1713 :% of Supply 54 : 57 \ 96 \ 7 \ 3.1 : 19 : _______________________ ._: _________ : _________ : ___ ~ ___ __ ; _________ : __ w ______ I ________ _ : Imports of Tropical \ 12805 \ 2883 \ 9784 1 145 I 1519 \ 1683 : Tirrber Products* (OOOm'>: : : : : 1 1 (South Seas) :: \ : \ :%ofSupply, 19: 7: 93: : 6\ 19 1 % of Imports \ 35 : 11 \ 97 \ 15 \ '8 \ 98 , I-----------------------~----------------------------- --------------------------------:

*Includes primari ly tropical hardwood products ar-d a small amount of tropical softwoods. Source: MAFF, Japan Tariff Association

As can be seen:

• Tropical logs are primarily for plywood production. • Japan's plywood industry is virtually totally dependent upon these logs. • Tropical logs for lumber are important, but not critical. • Imported lumber of tropical timber is similarly important, but again not a major

factor in the marketplace. • But imported tropical timber based plywood has become. a significant portion of the

supply of that product.

In summary, tropical timber dearly plays an important role in Jap~'s wood supply picture.

III-6

OVERAlL FUJ7JRE OlTlLOOK

There is debate within and outside Japan regarding its future consumption of all wood produ~t:; Si1d, particularly, from where that consump,tion wil{be supplied.

As will be seen in later· sections there are also many variables that will affect Japan's future consumption of tropical timber. That consumption will be influenced not simply by Japanese demand, but by the policies of its suppliers. -

JVW A believes tha.t in the future Japan will continue to be highly dependent upon wood imports. The primary Japai'1eSe agency responsible for forecasting timber demand and supply, the -11inistry: of Agriculture, For~!stry and Fisheries (MAFF), fore.cast in 1987 that Japan's import dependence would decline- sharply in the mid-1990's. JVWA beiieves this offi~}al long term forecast is incorrect.

MAFF's forecast for the next 14 years is shown in Table III-F below. Because -it is at such variance with current consumption of 114 million m:1 and imports accounting for 73 % of that amount, JVW A has included its own forecast as well.-

_ Table III-F FORECASr OF DEMA~D.AND SUPPLY FOR_TIMBER PRODUCTS BY E~D USER SEGME~T

OOOm' . (lo~ equivalent requirements)

I. _____________________________ d _______________________________________ _

I

l : 1989 1994 : 2004 : I Actual --------- --------- 1-------------------: : HAFF J~A: MAFF 1 J~A , ______________________ 1. _________________ _________ f _____ ~ ___ I ________ _

, I I I

IDemand for:: 1 1 I LlIrober : 56 43-45 47-50 42-45 I

I Plywood & Panels 1 15 17 17 18-19 1 Pulp : 42 35 39-41 40 1 Other : 1 4 2 4-5 1 Total 114 99-101 105-110 104-108

46-48 18-19 41-43

3 108-113

:---------------------- --------- --------- --------- --------- ---------:Supply from: 1 : Imports 83 59-58: 75 59-56 I 72-75 : Domestic 31: 40-43: 35 45-52: 36-38 I Total 114 1 99-101: 110 104-108 1 108-113 I ___

a __________ • ________________ , _________ , __________________ 1 ________ _

I I I I I : J~OI-t Ratio_ I 73~: 57-60% 1 68-69% I- 52-57".4: 66-67% :-----------------------------_ .. _--------------------------------------.-

Source: MAFF (forecast dated July 1987) and estimates· by JVIJA.

• J\~A'S estiwates -are based upon several major assumptions: average housing' starts in the 199[.-2004 period of 1.45 million annually; wooden houses accounting for 45% of all units (-,ersus 43% tcday); and the size of the average woo-d based home cont i nu i ng to increase (see Section VI)_

JVW A, like MAFF, believes d'cmand for plywood, other panel products, and pulp and paper will continue to grow whereas lumber requirements may ease off slightly. However, JVW A forecasts that:

1II-7

• . Total demand, both 5 and 10 years in the future, will be higher than that estimated by MAFF.

• Domestic supply will increase, but far less than that estimated by MAFF. • Imports will continue at present day total levels, rather than decline as forecast by

MAFF.

MAFF has historically over estimated how much future demand will come from Japan's forests. JVV" A believes that is true of this estimate as well and that imports will continue to account for over two thirds of supply in the foreseeable future.

Where these imports will come from is still a moot question. We suspect -- as will be indicated· in the following discussion -- that imports of basic tropical timber products from ~he South Seas will decline -- in logs certainly and probably in lumber. 'rVe also believe they will not be significantly replaced by greater consumption of domestic woods; instead, wood imports will include more:

• Value added tropical wood products from the South Seas. • Tropical hard woods from Africa and South America. • Temperate hardwoods from the USA.

I

• And softwoods from Chile, New Zealand, North America and the USSR.

In sum, the beginning of the 21st century will see Japan contHlue to be heavily dependent upon imports, but the mix of species and products will be one that is different from what exists today.

IV., 11fE JAPANESE TIMBER PRODUCTS INDUSTRX;. Supply, ManuflU..-ruring. and Distribution

As we have seen the Japanese timber industry cunently consumes approximateiy 114 million m ~ of '~-V\..'"'<l of which 73 % is imported. Thus, as we consider the industry, we must look both at domestic resources and producti?n as well as import supply.

This section describes. the Japanese timber products industry, its forest resources, major manufacturing sectors, and channels of distribution. The next section covers imports.

FOREST RF~OURCES

Japan's timber resources are extensive, totalling nearly 3.0 billion m;' on 25 million hectares. Its forest resource is summarized below. -

Table IV-A JAPAN'S FOREST RESOURCE

:---------- __________ ~ ______________ ~ _________________ ~ ________________________ 6 _______ ~.--------:

1 1 1 - : I '1990 1 1 11970: 1980 : 1986 : (estimcH,d) 1 : :-------------------:-------------------1-------------------:-------------------; 1 1 bi l L rn' 1 % : bi L L rn': :'4 : bi L l rn' I %' : bi t l rn' I % I 1----------------:---------:---------:---------:---------:---------:--------- 1---------:---------1 IConiferous 1 1.0 : 53 : 1.2 : 55: 1.8 : 62 i 1.9 : 63 : : (softwood) I : :, : I ' I : I I I------~--------·-:---------:---"-----:--~------:---------:---------:~--------:---.-----:---------: ~ :Broadleaved : 0.9 : 47 : 1,.0:' 45: 1.1 I 38 1 1.1 I, 37 I i (hardwood) l i - : : : i ! I , : :----------------:--~------:---------:----~----:---------:---~-----:---------:-'-.------:---------: :rutal I 1.9: - 100 : 2.2 : 100 : 2.9 : 100 I 3_0 I 100 I 1------------------------------------------------------------------------------------------------: Source: MAFF, JV'WA (for 1990 oestimcte)

As can be seen, Japan's forest resource has expanded by more than 50% in the last twenty years. After World War II an extensive conversion occurred from natural to plantation, or cultivated, forests-- the latter of which now accounts for 40% of the timber area and 55% of the resources.

Most of the planting which has occuned since has been in soft wood s, especially Japanese cedar (sugi) and cypress (hinoki). Thus hardwoods have declined sharply as a percentage 0f t:u;' tUL.:il forest base.

Future Timber Availabiliry: Much of the Japanese timber is still too young for harvesting. Approximately 88 % of the cultivated forest resources' consists of trees under 35 years old. However; as this timber comes to harvestable maturity over the next 10 - 20 years, Japan's potentially usable timber resources will expand.

IV-2

Timber o\vnership will also affect how much domestic timber is cutin the future. That mix, weighted heavily to the private sector." -- about 60% ;-- is shown below.

Table IV-B JAPANESE TIMBER ~NERSHIP

1986 ";:

,-.--.----"-.-- ... --.- .. -.- .. ---.----.--~---------.-.------------_ .. _._-, I I Timber (million m') I I Area 1--·---····----··--·---·-·--··---1 I (mit l ha) I I I I % I IConiferouslBroadleavedl Total I I-·---·--·--·---·-··~-- ... ---- .. ·_---·----1-----··----1---··--·-1-_·_· :Private Sector I I I I Subtotal 14.7 1212 I 540 I 1752 I 61 :----.---.-----~------- --- .. ----- ---------- -----------1---------:-----:Publ ic Sector I I I Federal* 7.9 406 423 I 829 I I Prefectural 1.2 69 57 I 126 I : Cities/Towns/Other 1.5 98 56 I 154 I I Subtotal ,10.6 573 536 I 1109: 39 1-------_··_·_·_·--·_·-1------·_- -·--------,-----------1-··------1-----po<.:al : 25.3 I 1785 I 1076 I 2861 I 100 I~ _____ ------------.-------------------~-------------- ____________ •• ___ _

"' *28% O"lnE'd by Forestry Agency of MA,FF Source: MAFF

How much of this timber will be cut in the future depends upon relative forest economics at that point. Japan's ti mber plantations are largely on steep mountain grades. Its logging wage scales have sharply escalated while available _ -labor has declined. Its timber is predominantly o\vned by the private sector which should be expected to respond to economic motivation*. Whether Japan's domestic timber in the future. will compete with that from the world's other supply sources is yet to be determined.

Present Cut: As was shown in Table III-B the overall domestic timber supply has declined substantially, down from over 50 million m 3 in the sixties to about 31 million m 3 in the 1987 - 89 period. The cut by species, though declining in total, has been maintained in roughly the same proportion during this period as can be seen in Table IV-C on the next page.

* A potential analogy here might be drawn with the forests and prosperous economies of Scandinavia. Although timber is certainly plentiful in this region, the world price on many spe-eies has in recent years not been sufficiently high enough to motivate many private owners to sell. Thus Sweden, Norway, and Finland have been forced to import a growing percentage of the wood requirements in spite of their vast resources they have availabJe in country. Such could well prove to be a future scenalio for Japan.

.

Table IV-C . JAPANESE LOG PRODUCTION BY SPECIES

:---------------------------------~-------------------------------: : 1967' : 1985' I 1-------------------:-----------------·-I I I X of: I X of I. : mill m' I _ total \ mi II rn' \ total

---~-.-------------: 1988 1

1

-------------------: % of :

mill rn' total \ I----------------------~·--:---------:---------;---------,------~-- ---~--~-- --_.,,----: IConiferous I I I \ Japanese Cedar \ 12.3 \24 \ : Japanese Cypress : 5.1: 10 I : Pine/Spruce : 7.6 : 15 : : Fir, Other Pine, Larch: . 5.7 I '11: I Others I 2.5 I 5 I 1 1 I I I 1 1 1

7.8 3.3 3.8 4.6 1.1

I Subtotal I 33.2: . 65 I 20.6

24 10 12 14 3

63

8.6 3.4 3.1

, 4.2 1.0

20.3

1 1

28 \ . 11 :

10 : 14 3

66 :-------------------------:~~-------:---------l--------- --------- --------- ---------I Broadleaved I : :

I Oak 1.1 I 2 : 0.6 2 : Beech 2 • 5 : 5 I . 0.8 2 : : Others 14.9 : 28! 10.9 33 I I I I I

0.6 0.6 9:4

1 1 I 1 ,I

2 2

30

I Subtotal 18.5 : 35 I 12.3 1 37: 10.6 I 34 1

,--------~---------------- ---------:---------:---------~---------I---------:---· ____ M: ITotal 51.7 I 100! 32.9: 100 I 30.9 I 100 I 1-----------------------------------------------------------.-------------------~-----:

Source: MAFF

JAPAN'S LUMBER INDUSTRY

IV-3

Japan's domestic lumber* industry is distributed widely throughout this well forested country. However, though still important to the domestic economy, it has gradually contracted over the last twent:y years. Lumber demand itself has remained reasonably strong; however it has been increasingly supplied by imports rather than by domestic mills.'

To illustrate in 1960 Japan imported almost no lumber; it was all produced domesticaIly. By 1980 imports totalled 6 million m:3 and accounted for 11 % of the market; and by 1989 imported lumber of 13 million m:3 held a 24% market share. In 1980 domestic production totalled nearly 40 million m:3; but, by 1989 it had declined to 30 mi1lionm:3.

, "

*Lumber or sawn wood is classified in Japan as: (a) squares -- having both thickness and width exceeding 7.5 cm; (b) strips -- having a thickness of less than 7.5 cm and width less than 4 times the thickness; and (c)' boards -- having a'thickness of less than 7.5 cm and a width of more than 4 times the thickness.

IV-4

Paralleling the decline in prOduction, the number of mills and number of industry employees has been declining consistently over the last twenty years as shown below.

Table IV-D JAPAN'S D~ESTIC LUMBER INDUSTRY

Production and Productivity : __ • ___ ~ ____ w __ ~ ________________________ · _____________ ___________________________________ _

I IProduc;tiori Total I NU1ber of : NU1ber of IPr,xluction Per IProduction Per I Year l (million m') I LU1ber Hills IEn-ptoyees (000)1 Per Hill (m') ElIl'loyee (m') :-------:-·--------------1---------------:---------------1--------------- ---------------: 1965 ! 32.8 24425 I 275 1 1310 120

. 1-------1---"------------ ---------------1---------------1--·------------ ---------------1 1975 I 40.3 23924 1 233 1 1680 160 :··------f··--------··----- ---------------1---------------1--··------------ ---------------1 1985 1 28.8 19512 : 147 : 1480 200 1-------:---------------- ---------------1---------------1--------------- ---------------I 1988 1 29.8 17831 1 133 1 1670 220 :-.-------~------------------------------------------- -----------------------------------

Source: ~AFF

Nonetheless, as can be seen, Japan's industry has become increasingly more efficient, increasing its productivity both per mill by 27 % and per employee by 83 % during the period shown.

Japan's lumber mills can generally be divided into three categories: those primarily sawing domestic logs; those sawing both domestic and imported logs; and those sawing primarily imported logs. The statistics show that the domestic mills and those using a mix of domestic and imported logs an~ quite small, converting an average of 1500 - 2000 m 3 in logs ann!lally. However, in contrast, those using impolted logs consume over 6000 m 3 per year in raw material. . ~ .

Log Supply for fru: Lumber IndUstry

i

. Until recently Japan's domestic lumber industry had been increasingly supplied ,by these imported logs. In 1970,53% of its supply came from imports. By 1980, that share had incr.eased to 60% of the industry's needs. However by 1988, reflecting a tightening wood supply picture, that ~ha.re had diminished to 57%.

It is importa.nt to note here that tropical hardwood (South Seas) logs supply a small a:ld declining share of Japan's lumber industry needs --accounting for 12%, 11%, and 3% of the industry's requirements needs in 1970, 1980, and 1988 respectively. The trends in Japan's lumber industry supply picture are shown in Table IV-E on the next page. ,.

Table IV-E . SUPPLY OF LOGS FOR DOMESTIC LUMBER MILLS

:------------------------- -----------------------------------------------------------1 , , , , I I I I

1970. . I 1980 1 1988 1 -------------------:-------------------1-------------------1 Volume IShare of [Volume IShare of I Volume :Share of I

(mill rn' )1Total eX) r (mill m') 'Total (X) (mit l rn') ITot;>[ (X) 1 ;------------------------- --------:I---------:----~---- ------.-- ---'-----1---------1 'Dorr~stic Species

Coniferous Timber Broad Leaved Timber

" " I: I I 22.3 I 38 I 17.8 34 16.8 1 38 1 5.1 9 1 3.2 6 2.0 1 5 1

I I I I I I

Subtotal 27.4 47: 21.0 40 18.8 1 43 : ------------------------- --------- --------·1-·---···· .. -- .. -_. -"'-"--)-"-"'-'1 Imported Logs I I 1

South Sea 9.5 16 I 8.3 16 3.0 ) 7 I North America 13.5 23 1 15.9 31 16.4 : 37 1

I North Sea 6.6 12 : 5.9 11 4.7 1 11 ! ! Other* 1. 0 2 1 1. 0 2 1. 0 : 2 : i :: : : Subtctal I 30.6 53: 31.1 60 25.1 : 57 I t-------------------------:--------- ---------:---------1-----··--- ---------:----.----: !Tctal 1 58.0 100 1 52.1 1 100 43.9 1 100 1 ;_~ ___________________________________________________ _______________ R ________________ ;

·Other as a category;:; estimated at 1.0 million rn', virtually all softwood Source: MAFF ,

Several interesting trends are apparent from this table:

• The sharp drop in use of imported South Sea logs mentioned.' • The decline in supply of domestic broadleaved logs.

IV-5

• The growing importance of North America as a log supplier to Japan's lumber industry ..

.• And the rather dramatic shift in approximate* Japanese consumption shown in this chart from 75 % softwood in 1970 to 89 % in 1989 (based upon domestic coniferous plus shipments received from North America, North Sea, a'1d others) .

. The last two trends will be discussed in' greater detail in- the next section.

Lwnher End Uses

As indicated previously, domestically produced lumber (and imported as \veU)is primarily used for the housing and construction markets, a total of 82 % of that produced. Other markets such as furniture and packaging are important, but on a greatly reduced scale. End use markets for lumber are summarized in the table on the next page.

*"Approximate" assumes all lumber coming from the South Seas is hardwood and all other imports -- from North America, the North Sea, and other -- are softwood (neither is correct, however, but the amounts of the opposite species group are small enough to make this "approximate" stat~ment correct.)

IV-6

I mill m' 1980 1---------

I I ! ..... _ .... _---

Total

28,3

TABLE IV-F . MARKETS FOR DOHESTlCALLY PRODUCED LUMBER

Housing Materials. - . '.IConstructionl 1 1 -----------------·-----------� and Civil IPackaging'Furniture l Other Total Bc:ards 1 Strips 1 Squares IEngineering : .. ---------I~--·--~--I--------~I------------I--------- --------- ---------

6_4 1 9_6 1 12.3 1 1.2 1 3_2 2.5 1.7 36.9 ---------I---------I---------I------------I------~-- --------- ---------

. I I n 1 . I. I. . 3 I. 9 7 4 I 100

---------t·--~-----I---------I------------I--------- --------- ---------1---------4.8 : 8.B.: 10.3 I 1.0 I' 2.8 1.6 1.0 1 30.3

--------~I---------I--------~I------------I--------- --------- ---------1---------

---------1---------1 mill rn'

198B ! - . -- --- -- I - - - • - - - - -

23.9

I X .1 79 :1 1 I 3 I 8 I 5 3 1 98 ._M . • __ • __ M _____ • _______ • ___ • _____ ~-----------_----------- _____________________________________________________ _

Source: MAFf

Although domestic production of lumber has declined, its uses have remained relatively the same. These end use markets will be discussed further in Section VI.

JAPAN'S PLYWOOD INDUSTRY

Japa.'l'S plpvood ind.ustry is; currently in a serious transition:- . The industry, paralleling housing, had a period of growth in the seventies, then dippe,d in the early 1980's. Since 1985, even though housing has recovered, the industry has faced a two-fold challenge -- the ,-. restriction of its log supplies, virtually all of which is tropical timber from the South Seas, and growing competition from imports, especially fro~ Indonesia. A discussion of the supply problem follows shortly and the import issue is covered in Section V.

I

The plywood industry in Japan is divided into two types of producers -- those manufacturing what is kn<;>wn as "common" plywood and those producing "specialty" plywood. Common plywood is that which is produced for the mass markets, e.g. core plywood (to which a finish veneer is added), floor underlayment, sh,=athing, structural applications,· concrete forming. Specialty plywood, usually coated or veneered, is for the smaller segments, often high quality end uses, e.g. ,paneling, furniture, specially treated or coated plywood.

Common plywood manufacturers, like those producing lumber, are scattered fairly evenly throughout Japan \vith some concentration in the major port areas. The specialry producers are mainly in the large cities and high consumption arf"...as, especially in Akita Prefecture and in the Hiroshima and Fukuoka areas which are major producers of furniture.

Japan's ply\vood industry, like lumber, has also decreased .in terms of manufacturing plants and employment; however, its productivity has increased significantly as shown in the following table.

IV-7

Table IV-G . JAPAN'S DOMESTIC PLYWOOD INDUSTRY

:--------- ------------------------------_ .. _--------------------"------------------------------------------------------: : Total Produ~tion :' Nl.Ilber of I Nl.I1t>er of: Production I Production : i Year (mill m')* I Total I Plyloiood Mills I E~loyees jPer Mill (mill rn') I Per E~loyee : I -------- -- - -- .. ------------ --- IProduction'----·---------------: ---------- - :---------- --- --- ---: ---- -- - -- - -- -- - i 1 Common :Specialtyl Total 1 OOOm' Common ISpecialtylTotal (000): Common :Specialty: Total I :--------- -.------- :--------- :---- -.----1-··-------- ---·------1---------1----------- :--- .. -.---- :---------1--------------- I : 1975 1542 I 412: 1954 I 7642 308 I 417 I 64 1 5.0 : 1.0 I 31 : :--------- ---------:---------:---------1---------- ---------1---------1-----------1---------1---------1-- ____ DD_DD_ODD: : 1985 1673 I 297: 1970: 7063 201 1 353 : 33 I 8.3 : 0.8 I 60 : :-:-------,---------I---------:--~------I---------- ---------1---------:-----------:---------:---------:-- ____ DD_DD_ODD: : 198e : 1822: 353 I . 2175 I 6669 184 I 3441 31: 9.9 : 1.0 I 71 1 1-------------------------~-----.--------------------- ______________________ . ________________________ M __________ a_ea_ea:

. . *Measure converted to standard 4mm thickness Source: Japan Plywood Manufacturers Association, MAFF

Japan's plywood industry has grown more efficient as its mills have increased in size and production. And this has occurred in spite of, or perhaps be.cause of, supply and cOmpetitive stresses.

Log Supply for the Plywood Industry

The lapa.TJese pt"ywOod industry has historically relied almost entirely upon tropical hardwood logs from Southeast Asia for its raw materials .. - This region. -- especially the \. countries of Indonesia, the Philippines and Malaysia -- has been the primary source for trees of the Dipterocarpus family which are most suitable for peeling into veneer -- the thin sections of wood fiber glued together under pressure to form plywood.

I

Japan's dependence on this region and these species has developed since \VorId War H. Until recef!tly, an abundant, low cost supply of these logs had been available from these South Sea countries whereas domestic species with less attractive properties were more expensive and less available. .

Table IV -H illustrates this dependence.

Table IV-H LOG SOURCES FOR THE JAPANESE' PLY\oIOOO INDUSTRY

I __________________________________ ~ __________________ ----------- ______ 1 , , : Year :Log Cons~tion (OOOml):I~)rted Logs* (X)IOomestic Logs (X): 1---------:-----------------------:------------------:-----------------1 : 1980 : 13731 I 95.7: 4.3 : ;---------~-----------------------;------------------: ----------------- I : 1985 1 10291 : 95.5 : 4.5 : 1 _________ 1 _______________ • _______ 1 __________________ 1 _________________ 1

" , , I : 1989 : 10201 : 96.3 : 3.7 : ' ______ --------------------------------------,----------------_ .. _-------, , , *Almost all from South Seas Sources Source: MAFF

IV-8

This virtual total reliance on South Seas logs has placed the Japanese plywood industry in jeopardy.

Two factors are causing the Southeast· Asian countries to increasingly question whether exporting logs is in their own interest:

• Recognition that their timber resources are being depleted by a number of factors, log exports being one ..

e The desire to build a stronger industrial base by adding value in country , to an abundant resource.

These factors have already caused several major supplying countries to ban log exports. Indonesia phased out its activity between 1978 and 1985. The Philippines took in.effective stops to restJict log exports in the early eighties, then finally virtually banned them'in 198.6. Peninsular Malaysia went out of the log export business in the eighties. And most reCently, in May of this year, Papua New Guinea, currently Japan's second largest supplier, moved to restrict the export of its logs by 1992.

In the South Seas, only the Borneo states of Malaysia -- Sabah ,and Sarawak -- still have the capacity to significantly supply Japan with logs. And they. are under considerable enVIrlmmeilW and industrial pressure' to curtaj1.

The withdrawal of Sabah and Sarawak from the log export business could cause a major demise in the Japanese plywood industry. It would, at the least, stimulate a major shift in Japan's raw materials base.

A few Japanese mills have already started to explore' the latter - they are using softwood logs from the USSR as raw material, or in some cases softwood veneer from the USA. Others are experimenting with radiata pine from Chile and New Zealand.

Japanese manufacturers say there are technical problems, however, in using softwood - in bonding and drying with the rougher, more defect prone (e.g., knots) surface of softwood. And most importantly the end users still have a strong preference for tropical hardwood surfaces. Nonetheless the search for alternative materials is proceeding vigorously.

Product Treruls

The two product groupings -- common and specialty plywood -- have widely different end uses and trer.ds which affect them. Product end uses are covered i'n Section VI and trends are discusse-d below.

Common Plywood: The most important trend affecting Japan's common plywood industry -- other than its competitive and supply problems -- is the expanding use of more "thick" plywood, i.e., that which i's over 12mm in thickness. The growth areas in plywood are for thicker panels, e.g., -- roof sheathing, floors, exteriors, concrete forms. This trend in thickness is shown in Table IV-I.

IV-9

Table IV- I . PRODUCTION OF COMMON PLYWOOD BY THICKNESS

:--------------------- -------------------------------------------------1 I : Total X By Area Basis : I Year 'Production --------------------------------------- .. --------- i I (mi It m')· Total !Under 3nm: 3 - 6mn :6 - 12nm 'Over 12111n: 1 _________ ----------- ---------:---------:---------: .. ------- ---------1 I 1970 1388 fOO I 45 I 35 : 6 14 i 1--------- ----------- ---------1---------1---------1--------- -"-------1 I 1980 1183 100 I 43 I 27 I 5 25 I 1--------- ----------- ---------1---------1---------1--------- ---------1. I 1985 1094 100 I 43 I 23 I 7 27 : 1--------- ----------- ---------l-:-------:---------:--~------ ---------: I 1989 I 1033 I 100 I 44 : 18 I 6 32 : I-------------~---------------------------------------------------------:

·Actual surface measure Source: Japar Plywood Manufacturers Association (JPMA)

Viewed in 2. yolume rather than area perspective, the growing trend to "thick" plywood is even more important. Note the table below,

Table IV-J PRODUCTION OF COMMON PLYWOOD BY THICKNESS

Area and Volume Basis Compared 1989

1---------------------------------------------------------------------------,----1 I :Under 3nm1 3 - 6nm '6 - 12nm IO .. er 1211111' Total I l------------------------------:---------:--------- ---------:--------- ____ M_A_M: :VollMTle by Surface Area I 454 :186 62:.. 331 1033. I : (mi 11 rn') . l I I I I------------------------------I------~--I--------- ---------1--------- ----~----I IShare by Area (m') I 44 I 18 6 I 32 100 I 1 ______________________________ 1 _________ 1 _________________ .1 _________ u ________ r

, "" IVolune by Thickness (mill m')*1 1.12 I 0.74 0.65 I 4.92 7.43 I 1------------------------------:---------:---------.---------:------- .. w--------1 IShare by Volume n:) : 16 I 10 I' 8 : 66 I 10C: l 1--------------------------------------------------------------------------------1 Source: JPMA. *JV'JA calculations'

• Using conversion factors from area to volume of .01 rn' = .0025 m' for under 311111 (311111 mean); .004 for 3 - 6mm (4mm mean); .01 for 6 - 12mm (iOmm mean); and .015 for over 12mm (13,5mm mean)

Tnis trend is important to those considering the supply equation for the Japanese plywood industry. If the resource is cut off, domestically produced thick tropicaJ hardwood plywood -- which is primarily used for structural and heavy duty applications -- is the most likely plywood to be produced in the future using substitute species. possibly southern hemisphere I

or Nortf, American softwood ..

And, as we shall see in the next section, thicker plywood has already been targeted by imports.

Plywood End Uses

The uses for plywood are widely divergent ranging from concrete forming to furniture to musical instruments. Its current uses and trends are shown on page IV -10.

IV-IO

Table IV-I( . CHANGES IN DEMAND OF PLY~ BY END .USE

... (

------------------------------:~------.-~----.--- •• ---------·----1 , p968 Share (X) 119BO Share (X) 11987 Share (X) 1

-----·--------------r-----~--------I~-------~-----I--~--------~--; lIousing/Constructionl 45.4 :' 55.4 54.8 : Fu:-niture . : 27.4 : 30.2 25.8 : Fixtures : 11.71 5.16.51 Household.Appliances: .4.8 1.3.4 2.8 1 Displays . : 3 .• 8 : , 1.4 1.8 : Pallets & Packagi.ng.-: 2.1.1 2.3 . 2.8 1 Others : 4.8 : 2.2 3.7 I --------------------:--------------1----------·--- .-------------: iotaL : 100.0 :. 100.0 100.0 I -_._--------------------------------_._----------- --------------:

Source: JPMA

The greatest changes in plywood applic.ations has been its expanded' use in housing and construction combined with declines in relative usage for fixtures and household appliances. This, we believe, is due to more housing being built, an increased propensity to use plywood rather than lumber in its construction, and the increased use of plywood for concrete forming in heavy construction.

Wnat is caUed "concrete forming" plywood in Japan now dominafes the thick, or over 12mm, plywood category. This is a bit of misnomer, however,since much of the "concrete forming" plywood is consumed for other uses. These uses are shown in Table IV-L below.

TabLe IV-L ACTUAL USE OF CONCRETE fORMING PLYIJOOOIN JAPAN

I--------------------------------------------~-I :Consl.mption 'Share of T()tal : End Use :(000 sheets) (%) 1------------------1------------ --------------IConcrcte Forming 1 86000 5':.5 ISheathing ! 55000 33.4 :Civil Engineering '12800 j'.7 :Furniture 6500 4.0 [Fixtures 1000 0.6 IPackaging 1000 0.6 I IDisplays 18001 ';.1 : IOther Uses 2000, I ".1 I' 1 ______ • _____________ . ________ .I __________

M ___ •

, I, ,

ITotaL 166100 I 100.0 I 1----------------------------------------------: Source: JPM.4.

Clearly "concrete forming" plywood is used for many other applications.

There has been some criticism that the use of plywood for concrete forms is wasteful -- that it is used once then thrown away, This is incorrect. Not only does the product have a wide variety of other uses as shown in the prior table, but for actual forming of concrete it may be reused 6 - 10 times with careful cleaning and maintenance· between applications.

IV-ll

SpeciaZry Plywood: SPecialty plywood is a smaller, .more specialized segment of the industry. Its products are primarily coated for decorative purposes or treated for .fire proofing' or some other application. The production of specialty plywood by type'of treatment· is shown in the' tabJe below."·· .,

Table IV-M PRODUCTION OF SPECIALTY PLYWOOD BY TYPE OF COATING

�--------------------------------------------------------------;--~-----------------:---.--I I I I I. .\. Coat'l'ng' :0 I .' I I I I I I .' . I· I I

I I I-------~----------~-~------------------I Natural I I I' Total I Total I . I Vinyl' I' I . I \iood I Other I

Year I(mill m')1 (X) IPolyesterlChloride I Printed I Painted I I I I I I------------------~--------------------~--------------~----I

·1 I '. 1 '. .. . 2 ·(X)·· I ----~----I----~---~l~----~-~-I-~-----~~-------------------~----------------------~---~---

1980 I 395 I 100 I 6 1 4 I 39 I 6 I 21 1 24 ---------I-~-------I---------I---------I--~------I---------1---------1---------1---------

1.9851 297 I· 100 1 8 I ....... 4 .. 1· . ,351 . 10.L20 I' 23 -- --.---- -1-- -~~- --- -1- ---'- -- -- 1- -- ------1--: --.- ---1- -- -7----1--.-- -- ---1-- -- ---- -I--~- ---'--

I 1989 1 .' 354 1 100 I 8 I '" , 4 I .c. . 35 1 .... .. 10 '1 . 16 I '. . 27 . , r ; "'," _ ..... -_ .. -.- .... ~.,:", ~ ~ .. -,"" ~"- .... -_ .. ~ -_ ............ : .... ~ ~ .... ~ .................... ,_ .......... ~ ~ .. --~ ~ -_ .. -~- .... ;- ~-: -_ ....... -, ..................... ~.r~

.... Source: JPMA 1::

The specialty plywood mix and its production has changed little'in the . last' 8 years~ Because , of its. sm.aJ.1sca,Ie. and, specialized; nature, we expect the speciajty plywood market will be affected the least by tli,e 'growing' import compditi~~ or 'potential' shortages of logs in the next several years. . .. .. !. r'

.. J: ..

JAPANESE TIMBER DISTRIBUTION CHAliNELs'

The distribution channels for timber in Japan vary depending upon the type of product. This section describes the distribution 'Of the basic timber products used:. . . .: . .'

. . ! • • ~ _., "J.1. ; . :'.: ~

.' Logs, domestic. and imP9rted • . Lumber, domestic and imported

.'

• Plywood, common, specialty and imported .: '!

The distribution channels for logs, lumber, and plywood include a number of players. The trading companies -- unique factors in Japanese distribution. -- have a. major role in both the importing and distribution - of. wood products.:' There are about 300 in total_., with 10 - 15 handling the bulk o{the' busi·ness. . .. ; . I

In between these trading fIrms and the end users are a variety of middlemen. According to MAFF in 1984 there were 4887 wholesalers '(primary, secondary, tertiary), 12,198 ",' retailers, 556 auction markets and 57 distribution _ centers handling w~ products. Their roles, and· the. distribution channeis in which they' function," are 'described below.

. " ",. '. '.:.. I

Trading Companies: These are the well known major international firms which also play an important role in importing and distributing timber products throughout Japan. They include the very large trading houses with offices throughout the world

IV-12

" ' '.: (e~g., C~ .Itoh, Mitsubishi, Mitsui; Marubeni, Nichimen;' Sumitomo, Nissho Iwai, Toyo .. "- Menka:,. Kannematsu.,Gosho) ,as well as ,many· smaller trading ',firms specializing-' to one :-' . , _ degree,;-or another)n the timber bllsiness~:) Trading companies, themain:-suppl,ler of "

information between the producing ~untries and Japan, function in a'varietY ofwa:ys in the wood business, e.g.,as the:

" '

• Primary importer. • 'M:,jor intermedIate' trader in the domestic market.

. • Wholesaler . with' distributioneenters. ; 1.-,

Trading companies are 'most important" in the -log and plywood b~sinesses and play a lesser role in lumber and, as value is added - to a timber: prpductj ,

.:' : _ : ". . .' .. ; '. '.: • "h;~ :. .' ~ :

Wh~l~s~ler;: Th~ mai~' iu~~tion of -whole~e~s is -t6 purc:has~ w~~i prOducts from producers .. or importers --and sell them -to' n~tai1eis. 'It is' often: difficult to distinguish

; between primary -wholesalers', who purchase- in' bulk tlien tesell-'~rnaiilIY to other wholesalers, and the secondary wholesalers who buy from them then sell to retailers. Most of the major wholesalers of lumber maintain sawing facilities of their own in order, to meet their customers' s~!fic, requirements. .' . ;. ' . :~'.' .: .. _ _ i. _ _.;'.o,.: i ~ _ "," . ,~_,.,,:,.;. ~ .. :" ""'.' 4' * .:.:

. Adction JlarketE )~u~~bn'hlarkets-are;iypi6allY·0\Vn~. b~~u~ti~ri:' m~k~t' fii~s-- ~h'o''-bririg' together:" grc)upsof 10 - 15 wh6ieshlers

J

al1c(anu'mbe'r of m:embe~' retailer~~ aI1d : brokers. Products are held on consignment and trades are made at 'a:udion -()n,a' specified 2 - 3 days per month. Auction markets provide an opportunity for buyers to inspect a variety of species and,gr,ades" of logs ,and "lumbe~ .. ~efore actually,' purchasing them. " '. : " " "'- ' ., ',' ,,', ., ,1,,,_ ',," ",

, " ,_:" " , ' ," ' , ; _, , ' " " ' , ''-~ ,- , " _: ' '.. ; - i:, ' "f." -, ' , '

Distribution Cen,rers: 'T.hese"centers are '~toc~ng-locatio~~ normaJ~yestablished, tn areas at some " disilirice - from' \vheie' 'major' suppliers of lumoer 'and plywood are located. They are usually formed by major wholesalers or, in ,some cases, trading companies. Sales are made by direct bargaining amorig lO'~, 20J~e~ber. wholesalers and several hundred retailers. ,. :;' .,'~ , ., "

*********** . ',." ... :,' .. ,,'- ,

Foii~"wing fu-e~ the 'explanatioDs', _of ~he" d,istri.butioii"~ha;nels," thel!1~dves.- ,'fof; -tkch prOduct. A t ·th~ ~nd of thiSseclion 'we have inchidecl' severaI'charts (FJgures', I\/_N through ' IV-V) which describe each of these channels. . .

Distribution 01 p~j,zesti~: Loks (Figure IV-N), : ~,: ,',-'of • ! ~, ( ...... "-.Jo •

'"

:." ;. 1.1. ~ '. '; .. t.. "

... '. .., . , .'. . , ',' "; .. i r~'" > ,~,.' - • I 'i . _ .. ::. .

Domestic logs' are sold from either pnyate, ot' 'p~bIic fo~ests a) directly or thro'ugh the logging firms toiumber mills, b) through the ~niction in'arket to' the mills, or c) through .log dealers or wholesalers.

..~ . ...' ~.' .....

.. : .•. " , ;.

, .... • J . • ~ ..

'-";1

....• _ .," .•••••. ,'M' .... ,

IV-13

Distribution of Imported Logs (Figure IY·O) ~

The i~pOrt of logs is -big busine~~ in Japan .. ;Typibtily:, logs will be -bought'.ove;s'easbY the.' trading comp~ies: th~n .. sold to either -(a)" sawmills, .(b) wholesalers;-who in turn .Sel~. to' sawmills; or (c) °directly to plywood mills:' '. - .. ' .. 0 ,'. 0

The _major 10 - 15 tradIng firms account for the impOrt of about _ 60% of all logs impOrted. However the smaJierand "inedium sizeq'trading firms' are. increas.ing .. their- share of this business.

Distribution lots for imported 'logs are large, as are the sawmills or plywood mills psing most of them. A miniinal pori unloading may be 6.000 ill-3 ,. ., o ... ' ~.O .• _.' '0. '_0... - ....

. - .. .. , !.... _,',1" '. l, '

·::':.:i

": . is

As to payment,fue tradingfirms sell.logs· to- pri~arj~'~holeSaIers~Coply~ood ~~i~mb~rmi11~ usirig 120-, 150 day notes payable; wholesalers -in 'him "are °selling .10- the~ills using 90 day ; .. ~; notes.

Distribution of Domestically Sawn Lumber (FigurelV-P and lV-O). <' ,~ • • ", ,','.. • ".'

The bulk of domestically produced lumber using local logs (Figure IV -P) is sold throughout Japai1 ~sing ·wh-61.~salers; distribution centers;'_ and '. auction 0 markets.: '_ AsmaIieL share .is moved locally,'sold directly by the sawmill acting as'its own disiribu'tor';t~lietailerso 'ancfend" users. " ... , .. ' '.~: .. ,.J 0 ........ ' •• , '" ..... ...; • ,...... ;\.

0,

The distribution channel for domestically produced lumbero using imporiect 16gs <Figure 0 IV

Q). is similar. However, in this case a smaller. share is moved through the auction markets, which handle primariiy domestic species:. ~ .0'" _'.> ", I ' 0 o .. 0 " ' 0 ..

Domestically produced l~mber manufactured: fro~domesticlogsOis handled 'by:th~ log wholesalers arid, more recently, by the saw mills themselves. Both in t~rn extend 'long term credits to the buyers. In the case of domestic lumber sawri"fromimported logs,'the'trading company is more frequently both the seller and financier of the sale~ ~raI1saction.

Distribution 0 of Imponed Lunyber (Figure oIv-Ri" . ,

The initial importing step fOf-Iumber, as with logs, is handled primarily _ by trading firms. Mo;e th?on 90% of the imported l~mber.moves from these firms throug~ .th~, hrrge sawmills, wholesalers, and retailers .. However, as,lumber}s.being increasingly i!D:Po~ed _o--,especially>., . the non-commOdity va1u~e added products 'such as planed or semi-finished hirnber of tropical.:._o .. ! :0:':

and temperate hard woods -- specialty wholesalers who aTe more attuned 'and geared to deal." . with th,e specific needs of the market are becoming cdirectly involved~s im~rters.

. . . ""

IV-14

The major difference between the distribution of imported and domestically pr<>dllced lumber is that the former rarely are sold through the auction and distribution' 'center channels. Trading, firms dislike using those channels because it is difficult Jor, th~m to ' influence ~prices ::.- major sWIngs of which OCcur in' auctions when' the' market is heavily, over, ' or under 'supplIed ,,-,-'and because 'they cannot u'Se their, most ir:npottant,¥tiestool:cr~it: to influence their customers. ' " , ' 'i, ' ", ,',.

In the, imported 'lumbe~' business, traciing fmns:~oftenact as "banks":'for,th'eirprlniary wholesaler and sawmill customers .. It is' not unu'sual' for trading companies' to sell QIl 180 day notes payable terms. Indeed, even longer terms are available. '

In fact, the entire imported'lumber' distribution" ctlannel is a financing chain: The trading" firms, with their extended terms, form" the firstiinkusing ~e exteridect' terin~ described~ , Prim.ary wholesalers and distribution sawmillers then sell ,to secondary, wholesalers oz:1 a 30% cash,'6Q -120 day,notes' payable"on the balance,~b~sis.~These wholesruers then typically sell to retrulerson aparti3J' cash~payment, balance ',30 - 60day notes,"tenris: And retailers" g'ive' 60 - 120 day terms to contractors and other end users.

, • ~ - r

Distribution of Plywood (Figures IV~S, IV-T; Iv-tT, IV-V)" , \

Therole;of th'e'~tr~dirig firm ,i~m()st importaht, ,in"piY~oOd 'tiistribution.' ,For plywood manufactured in )apan, t"hf{ tradIng company 'plays :both an intematioIlal~ ,'role' as the primary " supplier of logsand"'a, domestic role as the industry's primary distributor of prOduct This' isparticularly true for common plywood where over 60% of the distribution is handled by tradi,!g companies (see Figure IV -S). ' .

-" - '-:;.' . ; . '.- >~:r'," -~'I • - "' I ,";:" ":':' {y~ .. ':; ", 1 ,:.-.'J ~.

".. • - • ',' :' ~' ... " ,",", 'f - .:. t I .:. : -~. . • ..:' r ".:" -, ' .. ' .' • ' '. • ~- : ~ .. '",'. . . In thelrtole of both seller of raw matenals 'and buyer of product,' the tradmg firms help stabilize the industry. They not onlyendeavor to provlde'a constant' supply' of10g5; but they become the primary customer and financier of the plywood mill'sproduct~on. TradingfIrms " also' organize groups "of affiliated 'wholesalers in-an effort to' reduce risk'and secure 'smooth ' distnbution of their :plywood produCts>" , " " " . ;, "

,~" :. i n· , . . ,. i. .:.~:' ,:' ". . '.'.. ::;; , " ,

As in the lumber business,' the distribution' of domestically produte,( comm'on' plywood is,', also a financing chain. The trading firms use promissory notes when they both buy and sell, sometimes receiving minimal cash downpayments "ori their' extended riotes" " ,";,'

~. ", ..'.; -. -, - .... . " -,~.,. ,.:, ' \' ;." .. ,.." . . . ~r; r .. · ; . The.: , flmctinn of trading . firins in the distribution system differs between' plywood mills, producirlg only specialty plywood' (see figu're, IV-U) and' corTnnb.n' plyy.,6<Xl,mills' pr~~cing. and' selling' s:pecialfyplyw()()«((s~efigure 'IV~VY:: In; the latter ; 'they 'are a major' factor'. In ' the former, ':their role is much smailer. ,', ,;':. "'; ::: ",. ',>.' " ::,:;",," ,:,", ::

....... / • 1,'_' • " •.•• •• " •• ··~i :~.~" ;~",.~ }~ ., ' ; .,r ,.1.. ",,,,!;:,:.

As for imported'piywood, It'hianothe{'story''hltogether (see"figur~'IV-T)." Littie:-plYwood .. had been imported' until 5 years ago; now it accounts for 31 % of the total market. 'Most imported plywood is coming in from the private sector cooperative of Indonesia's manufacturers -- APKINDO through its own distributor and NIPPINDO. These organizations are discussed further in Sections V and VI.

~ ... !

IV-IS

Figure IV-N - , , DiSTRIBUTION CHANNELS OF DOMESTIC lOGS

r-------_ 30~{ 36%

~--------------------~~------I

Public a.nd Priva.te Fores1s

;,

5%

"------_--J 100%

Source: MAFF

Importer [mainly trading

27%

firms) 47% ~----.....

f--Wh(l!~so.ler i--

2,4%

Source: MAFF

16% Log Producers

_ .... - -,'. ,

34% Lo g Auction lA aT ket

, ~{,. Plywood Mills .~ .............. -

100%

Figure IV-O ' DISTRIBUTION CHANNELS OF IMPORTED LOGS ".

Sawmill'

Auction Ma.rket

3% Distribution " ...------t Cente!

28%

..-

Retailer

•. 1.

" -,' . L:==:::~ L---1-:--~~~~---1 Others

Ply\:?Ood . mill

Lumber Mills

, "

Consumer

58%

4%

. ,

Sawmill

Source: MAFF

Sawmill

37%

23%

iO%

8%

8%

43%

5% r t

3% J I

Figure IV~P • , DISTRIBUTION CHANNELS OF DOMESTIC LUMBER (Using Domestic Lurber)

. I ' Auction Market

Distribution Cente!

Wholesaler-·

\.l:

'x

Others

Figure IY,Qi' DISTRIBUTION CHANNELS .OF LUMBER '(From Imported Logs) ,

I' Auction M dl' ket f,

I ' Distribution Center I

52%

4% -

40%

2~% r ,.'," Wholesdler I ,-/ .. ,- -- ,-~

3%

IL-___ .r-i '.

'----r----:-"71!1 56%' ~18_%_o _.--;..--,-____ }_" _'_' :._. -.. ----i\.~' -"'-"'--"-'--"'---ti .'" Retailer 'I

., (----~~~f -"Others 7%'

Source: MAFF

,.; I 1% , I

IV-16

Consumer

.;'

Consumer

Figure.IV-R' DISTRIBUTION CHANNElS OF IMPORTED LUMBER'

16% saWmill

2% t----~ Auction Mdl'ket

Importer

(mainly 1% tr ading fh~s) ...-__ -1

~B%

33Yo

Distribution' Center

Wholesaler

\

" \

Source: "Mokuzai no chishiki" by T. Kamilrura

.'. ;.

,. Retailer

Others

Figure IV-S DISTRIBUTlOI/ ,CHANNELS OF COMMON. PLYIJOOO

3% , .. , 0 "

"

3% r

Retau3r (3%) >-

59% (2%)

TT dding Firm I Common c--Plywood (12%)

Mill ,

, (83%) < .. .. --

.. ., --, ... (90%)

~ ~

" 28% Wholesaler l "

.... (l()<'/o

7%

'.'"

Source: MAFF

IV-17

35%

Cpnsumer

5%

59%

I 1%

I

. . .. " ~ . '. ...~ ..

(100%)

Consumer

' .. '.

~ .... . - ~

-", .".: ."

. . <

Specialty ·PlyWood

... , Mill

.. .. '.

; ..

Importer (Tr ading finns and NIPPINDO)

10%

Source: Estimates by IRM

Specialty Ply..t.'ood Mill

"

~8%

1%

13%

_8%

20%

,

:.

Figure IV-T ' DISTRIBUTION CHANNELS OF JMPORTEO PLY~

20% : .,",-,, -.

Wholesaler 70% , ...--

10%

70%

Specialty Plywood

MiU

20%

10%

Figure IV-U

Retailer

"

DISTRIBUTION CHANNELS·OF SPECIALTY PLYloJOOO PRODUCED BY SPECIALTY PlYloJOOO MILL

(20%)

- (90%) Wholesaler (2%) , ... -"- I-- '"

, , I (78%)

\ I

_., "

.. ~ ..

Auction Market "

-.. -(100%)

Trading Firm

IV-18

Consumer

i . ;

-r---------, ~ .... -

C,onsumer'

(10%) ; (lOOO/Q)

Retailer

i ~

i

.~:,:" r-------,

~--..;..-.--------..;..-....;....-_1 Other Industry t-(100% L-____ .......

10%

Source: MAFF

IV-19

Figure IV-V· DISTRIBUTION CHANNELS OF SPECIAlTY PlY~ PRODUCED BY COMMON PLYWOoo HILL

1%

j2Yol 56% (13%)

Trading Firm

l (85%) (20%)

1 I Common Plywood 37% (80%) Wholesaler

Milr Consumer

3% (100%) Retaller

2% Distribution CenteT (100%)

.'

1% (100%) Auction Mdrket

Source: HAFF

V. IMPORTS OF TIMBER PRODUCTS BY JAPAN

This section reviews Japan's wood imports; 'particularly , those -of major tropical timber products. In addition, imports-by species and imPorts -of value 'added products are covered.

, . -

Japan has become a nation dependent on imports of timber products of all types (See Table III.:C). And it appears there' will be minimal change in that'dependency in the near future (See Table Ill-F).

The country is not only the world's largest importer of all major wood products, but as might be expected, is the largest importer of tropical wood logs, himber and plywood. Overall statistics on plywood (see,. Table. III-.C) Cal1not. be separated betw'een hardwood and softwood; however the table below ~hows ~he lineup for all hardwood logs and lumber, most of which, in the case of the countries listed, are tropical"timb(!T.

Table 'y-'A IJORlD'S TOP IMPORTERS OF NON-CON'IFEROOS'l'OGS AND LUMBER

1ge8

------------------------------------------------'--- ... ' _ ,1

, : ,Saw Logs ... _:. : . "r and Veneer~,logs: .,~ Llnlber, : ------ ______ I __ ~ ___ -----.- ______ I ______ ------- ______ I ,1 • ' J

: Volt.rne. : : Yolt.rne - :,_.' " I country :(ll1ill m'):"RanK;.·,:(mill,m'): Rank :

......... ..; ................... I ....................... I .:. ....................... I ' ............ '_ ......... I .......................... I . . . -. . .

Japan :12.2 : ',. 1: 1.9 : 1 : China ' :4.4 : 2 : --·1.1: 4 :

.R.O.Korea: 3.6 :. 3 : 0.6 :JNR : iJtalY' : 1.5:' 4: 1.1: ;3: iJndio' : 1.1: 5: 0.1: .NR: : Singapore: 0.1: NR : '.6: ,2: ~---------------------------------.--.---------------~

_. '. IIR - not rated Source: FAO

" . Japan now buys tropical· wood products -'-- logs, lumber, and plywood -~ from sources throughout the world. Although South Seas sources account for 99 % of these imports, the country purchases tropical wood products from Africa and Latin America, and even tropical hardwood veneer from Italy. '

These imports are essential' to Japan. Tropical timber accounts' for 40% of Japan's log imports, 18 % of its lumber imports and 98 % qf it~ plywood imports. Tropical hardwood logs provide Y3% and 7% of the raw materials for Japan's plywood and sawmilling industries respectively .. And,'althoug'h 5 years ago Japan imported almost-no tropical plywood, imports of that product today account for 31 % of total plywood consumption, a share which may expand further. Japan's current mix of imports by major product and supplying country is shown in Table V-B on page V-2.

Table V'B JAPAN'S IMPORTS BY MAJOR PRODUCT ·AND SOURCE

.................................................................................................................................................• , , I, .:. : 1989 1 I 1980 I 1985 1-·················-········-···-·······-············· •....•...... : I (OOOm') I (OOOm') I (OOOm') I (Smillion)..: I~····~~··-···-·····-····-I·················-·······I·····-·-········-········I··~~······~·-······--····~···'··"'·r··:

, I Logs ILl.IIlber 1 Plywood: Logs :Ll.IIlber: Plywood: Logs :Ll.IIlber I Plywood I Logs, : LlIIber I Plywood 1 Total' 1

..••• - .••••..•••. - .•••.•••• 1 ••• - ••• 1 - ••••• - ···-·····I-····--I-······I·.·······I·-·~- •• I.······I •• _ .••••• I· __ ····~·I·········f ••••••••• f ••••••••• ,TROPICAL TIMBER 1 I I I 1'1 1 :. -: Malaysia 1 8373 198 10 I 11402 I 261 I 2 : 11323: ,596 I 4 1067 1 261 3 1331, I Indonesia 1 8904'. 126 17 I. 202 I 455 I 269-· I· 887 1 2940 * : 301 943 1~44: : Philippines : 1166 192 : 559: 225: 52 I 165 11 5 : 69 1 .75 : Papua New Guinea I 438 25 : 734: 3 I 891 I: 93 :' 93 : Other South Seas I, 207 56 I 348: 13: 294 I 144: . 3 36 : 62 98 : Africa I 76 1 I 100 I I 148 I 1 I 45 11 46 I La tin Amer i ca : 4 5 : 15 I 2 : 27 : 3 I 5 : 6 11 I 1 '" f f f , f I f I . I I I

: Subtotal : 19168.603 27 I 13360 I 959 I 272 12735 I 1796: 2948 1251: 700 947 96

2898 36: I % Of All Supplier' Totall ·52 11 I 28 I 46 I 19 I 94 I 40: '181 98 32 : 22

:'"" ..................................................................... : .................. I .................... : ........................ : ................ : ................... : ..................... I .................. : ..... ," ........ : .. ... ... ... ... ... ........ .. ........... -,"" 1'.0:'" _ ....... : .............................. i .................. .. 'OTHER SUPPLIERS : I: : I :' : :

USA : 10279 I 1550: 4 7812 I 1398: 4 11003 1 2944 I 8 1901, 728 7: 2639 Canada I. 472 I 2564 I 15 1381 I 2168 1 13 964: 3748: 26 '141 875 11 1 10271 USSR I 6158 I 138 I 5565 I 153 I 5246 I 263 I 517 40 : 557 I New Zealand I' 795 I . 340 I 294 I . 155 I 762 ~ 107: 66 14 : 80 : Others I 76: 458: 51 493:""1",: 772: 1212: 19 68 757 14 : 839 :

····················~-·····I·······l-···-··:········· '·""'1'" ····1········· ···-·-~I······-I········· ..... - .•.•• - .....•. -····-···:·········1 TOTAL ALL SUPPLIERS : 36948 15653 1 97 28905 1 5,.,4: 290 31482·1 10070 :. 3001 3947:' 3114 979: 8040:

..••................................... __ .... _ ........•...•............•...... -.- .............•..... -..........• ~" ... -........ -.. -.... -~ ....••..• : *Insignificant Source: Japan Tariff Association

, < 1 IV

V-3

The key trends impacting tropiCal timber,~hich this 'ciibleclearly' show are:

• The shift in', 'tropicru log supply' from sev'eral countries to prin1arily one --Malaysi2.. . , '" .

• • •

The steadily growing imports 'of tropicru lumber. Thesfiarp increase in plywood imports,·primarily }romIndonesia. The growing dependence on North America for other logs and ·lumber ..

Each of these trends will be expanded upon in,the ensuing analysis.

LOG IMPORTS

Japan's sources for tropical hardwood lcigs-- the primary raw material for its plywood industry -- are both disappearing and shifting. In the 70's, Indonesia, Malaysia, the Philippines were the big suppliers. Of these -~ due to forestry concerns, logging bans, export taxes and restrictions, and aggressive industrialization -- only Ma,laysia remains.

. '

Malaysia's eastern states of Sabah and Saraw~ now account forover 85 % of Japan's log purchases. Papua New Guinea (whose pOsition as a ,supplier ,will diminish over the next two

'ye'.cJ's), the Solomon Islands, several African countries, and a few other small sources have accounted for the remainder (see Table V -C). The poliCies within the major supplying countries which caused the shift in these supply sources -- and may cause additional changes In the· future -- will be discussed in Section VIII .. , . . . '. . . .~ ~ .

Table V-C JAPAN'S IMPORTS OF TROPICAL LOGS BY SOURCE

1975 - 89 1 _____________________________________________________ ____________________________________ ~_~ _______ ~ ___ ~ ___ ~ __ , , , , , , ,

: 1975 : 1980 : 1985 : 1989 1 ______ ------- ______ 1 ______ ------------- I ___________________ I~ ___________________________ _

: "': : ",:.,",," . , '" : ,'. % I "" - " 10 , •.

: ... : DOOm', lof Total: DOOm' :of Total: OOOm' :ot Total: .. OOOm' 'of Total :$Mi llion I ___ ~ ________________ ~-----:~--;-----.---:---------:-- -------;----_" ____ 1 ______ ---:--------- ---------;~--------

:Molaysia : I i . I',: --. . : : : Sabah : 5957: 34.3: 6206: 32.3: 5992 44.S: 464~ 36.4 : NA : Sarawak : 702: 4.0: 2153: 11.2: 5404 40.5: 6682 52.5 : NA : Peninsula/olalaysia:, : : 14 : 0.1: 6 • , : _, '.' NA : ,Total Malaysia: 6659: 38.3:' 8373:. 43.n: 11402 85.3 11323 88.9: 1067 :Philippines' : 2853: 16.4: 1166: 6~1: 559 4.2 52 0.4 : 5 \Indonesia.: I' 7299: 42.0: .8904: 46 5r'~ 202, 1.5 I !Paoua New Guinea : 308: .1.7: 438,:, ,).3 i 734 5.6 891 7.0 : 93 ISulolllon Islands : 167 : 1.0: . 192:" 1.0: 299 2.2 233 1.8 : 23 I Burma : 5 : " : : : 3 1< 17 0.1 : 10 :Vietnam : 45: 0.3 : 5: 1< : 11 0.1 12 .0.1 : 1 : Cambodia t·.: : : : J:; : 10 0.1 9 0.1 :1 :Other South Seas .. ,: 22 : 0.1: 10 : 0.1, I 25 0.2 23 0.2 : 1 IAfrica"· : 25: 0.2 : 76: 0.4: 100 0.7 148' 1.2 :45 :LatinAmerica**; : 1 ,: " : 4: 0 ·:15, 0.1 I 27 0.2 : 5 :-------~------------:--------~:---------:---------:-- -------:---------:---------:--------- --------~:---------: : TOTAL , : 17384 : 100.0: 19168:' 100.0: 13360: 100.0: 12-:-~5 100.0: '1251: :---------------------:---------.----.---------.-----------------c---------------------- -~ -------------------: *Under 0.05% ··See page V-20 for discussion of African and Latin Americ.an shipnents, Source: Japan Tariff Association .

V-4

One would certainly conclude from the foregoing that, Japan is at significant risk for its supply of logs. However, surprisingly to us at any rate, Japan's attitude toward the potential lQ~S of it~ major log supply sources, appears to be one of minimal concern. To illustrate this lack of concenl, the Southeast Asian Lumber Producers Association (SEALPA), an organization of the producers of logs in the region which i~c1udes Japan as its pri~ary association member, made the following forecast in early 1990, purported to be the expectation of tropical log supply and demand during the current decade. '

Table V-D SOUTHEAST ASIAN LOG SUPPLY/DEMAND ,IN THE,90'S

(OOOm')

1---------------------------------------------------I Suppl y I Demand 1---·---------------------1-------------------------IMalaysia I Japan 12000 I Sara~ak 13000 IS. Korea 3000 I Sabah 5500 ITaiwan " ·3000 I Burma 2000 I Thailand . 3000 IPNG 1500 IChina/Hong Kong 1600 I Cambodi a IPhilippines 700 IVietnam } 500 ISingapore 150 ILaos I I I, I ,I .,

I Total 22500 I TotaL.. '23450 . I-------------------------------------~-------------Source: SEALPA

Considering that the PNG is already beginning to shut down and that Sarawak and Sabah are a( risk, the foregoing forecast appears a bit optimistic.

LUMBER IMPORTS .

Imports of tropical hardwood lumber, until recentI'y, have been trending strongly upward. They' have been buoyed ,by sales efforts from the supplying countries, the upsurge in yen value, and producing countries' log export restrictions.

. .' '. . ,.

Indonesia has been the largest exporter of lumber to Japan with Malaysia in second position and the Philippines a distant third .. Only the latter has not shown .significant growth, and that mainly due to a lack of timber. Other South Seas countries supplied the balance. imports of lumber from Africa and Latin America' have been minimal.

A trend of interest to a1l suppliers has been the success of value added lumber exports to Japan, in this case of "planed or sanded" lumber. This trend is shown in Table V-E. Whereas overo.ll lumber imports have trebled, "planed or sanded" lumber imports have increased fourteen fold since 1980. Planed/sanded tropical lumber grew from 4% to 20% of total lumber imports between 1980 and 1989. By 1989, total lumber imports from these tropical producers totalled $700 million of which $138 million was planed/sanded stock. Both Indonesia and Malaysia have been very active exporting this value-added stock.

Table V-E JAPANESE IMPORTS OF LUMBER FROM TROPICAL PRODUCERS*

19S0 - 1989 (OoOm')

:-----------------.----------------------~--------- .. ------------~-----.--------------------------: : - _ -1980 : 1989 :. ---------------:-----------~-------~-~---------------- -1----------------------------- ---------: i: Planed/ :: : Planed/ : : Country i Rough -- : Sanded - : Sleepers- : Total Rough: Sanded -:Sleepers Total : - - - - - - - - - - - - - - - - : - - - - - - - .. -_ : - - - - '_ - - - - : - - - - - - - - - I _ _ _ _ _ _ _ _ _ _ ________ : _________ : _ _ _ _ _ _ _ _ _ _ _______ _

: I ndone<;i a : 87 : 1 : 38 126' 691: 175 : 21 887 :Malay!.ia : 114 : 12 : 72 198 455: -,121: . 20 596 iPhi I iPf-ines : 187 : '5 : 192 134 : 31 : -, -- 165 :Singapore* : ,- 8 : -* : 15 23 42 : 19 :' 16 77 : Tha i l and* : ' * : 1 : 1 15 : 101 _ 25 :Taiwan (POC)'" :15: 6 : 21 21 : 3 r 24 :Others : 42 :: 42 18 I 4 : I 22 1- '" ...... -............ -- ............. 1-" -..... ..: ....... : ...................... : .............. "- ... - ...... - ... ... ... ... .... .. .................. " .. -: ......... -......... : ..... ' ................... : ..................... ... :Total (OOOm'): 1,53 :25: 125 603 - 1376 : - '363 : 57: 1796 ITotal ($Million): 37 :7 : 41 I 85 550 I 138 : 12 : 700 :% :75 : 4 : 21:, 100 77 : 20: 3 : 100 I ______ --------------------·-·-~----------------~----- __________ ~_·_~ _______________________________ I I I

*Singapore, Thai land, a'1d i'aiwan (POC) are net "producers" in the technical' ITTO sense Source: Japan South Seas Conference, Japan Tariff Association

IMPORTS OF PLYWOOD _ r _

V-5

1:-

As we have discussed, the Japanese plywood industry is threatened not~nry-by apotenti~l shortage of raw material, but by aggressive competition from tropical, timb~r plywood prOducers.' ,- ' "', ,

The"penetrati6n of the Japan~'se plywood ,m~rket"by Indonesia" is an ,ex~mple' or' how a developing country with a strong resource -base "can successfully combine active domestic -industrial development with aggressive international marketing.

.. ." .. . . !( • ,.. •

In the 70's an'ct"early 80's,Japan's total imports of plywood were small -- 10 - 15 millionm2

worth less than $46 rriillion,and under 1.0% of the market.' The Republic of Korea was the country's primary sourc~ of tropical hardwood plywood (See Table' V-Gon page V~6)' for import markets which at that time were quite small. "-

•• ' !

Table V-G JAPANESE PLY~OOO IMPORTS BY SOURCE

:-------------------------------~-------------------------I : : Plywood I~rts : : : (million ml) I I 1--------- -------------------1 I· . . 1980 1985: 1989 .1

1--------------------------- --------- --------- ---------pndonesia 2_6 41.7 455.2 IR. Korea 7.4· 0.3 ITaiwan (POe) 0.1 0.1 1.4 IMalaysia 1.6 0.2 0.7 ISingapore * 0.1 0 .. 5 :*""USA 0.7 0.6 1.3 : ""*Canada 2.3 2' 4.1 :Others ·0.5 0.2 1.1 I I ' :Total (million un I 15.1 45 464.6 IX of Cons~tion/Area Basis: '.1 4 31 \Total $US mi l Uon \ 46 98 978 :OOOm' : 27 : 272 I 2948 I 1---------------------------------------------------------I ·Under .05 million m' **Virtually all coniferous plywood Source: Japan Tariff Association

V-6

In the late seventies, Indonesia initiated two major actions. It '-restricted its exports of logs phasing them down between 1978 and 1985 to zero. Concurrently, it began to expand its plywood production. The country then had fewer than 10 plywood mills; by 1985, tha: number had increased to over 80 on stream with more to come. ~.

At about' the ~m~ 'time, the USA had been pressuring the Japanese to reduce tariffs on plywood, veneer, and a variety of other wood products. In 198\ Japan agreed to bring its tariffs OIl hardwood plywood down ,over a three year period from .2.0% to 15% on hardwood plywood under 5mm thick and from 17% to 10% on that over 5mm. . .

• ' .1

During this period Indonesia launchect a massive campaign to penetrate the Japanese market. Using a combination of incentives and low prices, the country moved from being a nonentity in the market' in 1980 to a 4 % market share in 1985 to an impressive 31 % in 1989. ' Bi1989, Indonesia was shipping 465 million m 2 worth nearly a billion dollars to Japan, 98 % -of all the plywood entering tliat market from foreign sl.lppliers.

Indonesia's strategy at home has been to stimulate production and coordinate its plywood industry under a strong centralized private sector association -- APKINDO. In Japan, as mentioned, it has set up its own distribution arm -- NIPPINDO -- through which the bulk of its plywood has been channeled.

Indonesia has also targete.d the most popular sizes and thicknesses of plywood. Although exact statistics are not available, knowledgeable sources estimate that a minimum of one third of Indonesian plywood is entering Japan in approximately 3 x 6 foot (900 x 1800mm) panels, the most popular Japanese size. Its exporting competitors are shipping primarily a 4 x 8 foot (1219 x 2438 mm) panel, the size which is most common in other world markets but minimally used in Japan.

V-7

Indonesia has initially carved out a share of Japan's.business in thinner plywood, that under 6mm in thickness. However, as it has expanded its 'exports it has increasingly penetrated the markets requiring a thicker plyw~. This acti~ity is illustrated in the table below .

. Table V-H JAPANESE IMPORTS OF AND SHARE OF MARKET FOR INDONESIAN PLYWOOD

BY THICKNESS

�-------~--------------------------------------------------------------~-------------------I I IUnder 3nm' 3 - 6nrn 16 - 12nm lOver 12nm' Other I Total I I--~---·-----------------------I--------- ---------1---------1--------- ---------1---------1 \1986 million m' \ 4.1 51.3: 21.9: 5.9 1.3 I 84.5 I I X of Shipments : 5 61 : 26 : 7 1: 100 : ;---------------------------"---:--------- ---------:---------;--------- -~-------:---------: j1989 million m' \ 90.1 140.4: "158.8: 14.7 51.2: 455_2: : X of Shipments \ 20 31·1': 35: 3 1i: ,100: :------------------------------:--------- ---·~----:---------I--------· ---------:---------: 11989 Approximate Japanese I 548.9: 324.2: 224.2: ~2.1 NA: 1439.4: IConsl.lllJtion* of Comnon Plywoodll .1 I· : I :------------------------------:---------:---------f---------1--------- --~------:---------: \Indonesia -- Share. eX) of I 16 \ 43 \71 : 4 NA I 31 \ lApproximate Consumption I : : : : : : :-----------------------~---.------------------------- --------------------------------------:

.,-"'Japanese· coomon plywood production plus Indonesian imports'by thickness NA - n6t'available " ,

.. Source: Japan Plywood Manufacturers AssoCiation ';_1:

As can be _seen Indonesia's 31 % overall share of the market varies considerably when ' considerE'.d on a thickness basis. It ranges from a low of 4 % in the thickest and 16% in .the thinnest group to 71 % in the 6 -12mm segment. Indonesia's concentration in this range is partially explained by the fact that its NIPPINDO distribution agency is primarily selling "concrete forming" plywood -'- currently the most popular type of plywood which, as. explained, is used for a variety of applications. Indonesia's high market share in the 6 -12mm thickness group is ,explained by the fact that it is selling a concrete forming panel which ,is 11.2 - 11.5mm ,thick., In contrast, a similar Japanese produced concrete forming panel is J2.0mm in thickTIess or over. !. ;

:.

VENEER IMPORTS

Imports ofveneer:by)apan represent a totally diffet:ent picture from plywood. Growth,has been, steady but not dramatic. A variety ,of supplying countries :participatein the business. And. two distinctly. different products are involved: ,core veneer, essentially a lowvalue, commodity product; and face veneer, a product highly valued for its appearance, as the exterior of plywood Oi another base material.

Table V-Ion the following page shows the history of Japan's veneer imports by country. Growth has been consistent and was probably helped in part by the tariff reductions in 1985 which on veneer were reduced from 15 % to 5 %.

Table V-I JAPANESE IMPORTS OF VENEER BY SOURCE

(mtll m') .' .

l---------------------------~ --------- -----~---I I 1980 1985 1989 :------------------;--------- --------- ---------ITotal I 27.8 77.4 123.2 I I I I

IMalaysia I 6.9 37.1 66.4 I Indonesia 1·6.9 18.6 9.4 IPhi l ippines I 4.8 12.8 8.2 IBolivia I 4.5 0~30.9 I*USA I 0.9. 5.4 I 25.5 I"Canada I 0.4 0.7 I 4.1 IOthers I ·3.4 2.5 I 8.7 1------------------1--------- ---------1---------ITotal ($mill) I 38.0 59.0 I 77.0 I-------·---·-----------------------~------------

"US and ca~ada are supplying 'an estimated 80% softwood ve~~er·, balance temperate hardwood.

Source: . JPMA. Japan Tariff Association

V-8

Malaysia -~ primarily the state of Sarawak -- has become the largest supplier; 'shipping primarily core but also face veneer. Until 1983, Indonesia had .been Japan;s . major source fG. "~ileel; however, certain export restrictions (see Section VIII) limited its participation in the market. The United States and Canada supply both coniferous core veneer and temperate. hardwood face veneer. And the other countries, are supplying mainly face veneer.;

IMPORTS OF VALUE ADDEDPRODUcrs -'- BUIWING PRODUcrs

As' with planed and sanded lumber, Japanese imports of other further processed lumber products, such as certain building products;; have been growing apace ::.:" though; remain rather small. This development has been stimulated not just by favorable exchang'e rates and pressure from the developing countries on Japan to accept more value added products, but by trends in Japan itself. The country's strong economy has caused a shortage in construction and housing labor. This in turn has helped accelerate' the import of semifinished and finished wood building and housing parts.

The next three tables show the trend in imports of major products used in construction Beading and Mouldings, Builders Joinery : and Carpentry Products, and Doors; Windows, Sash and the Like .. Although none yet represent large shipments', their growth has been dramatic.

Imports of beadings and mOUldings of tropical wood -- the largest share of this product category.-- have grown by a factor of ten since 1980. Few of the' tropical countries were shipping this product 10 years ago. Now they are building a budding business.

Table V-J'"-IMPORTS OF BEADIHGS AND HOULDiMGS FROM SELECTED TROPICAL COUNTRIES

:---------~--------------------------- --------------------: : 1980 - 1989 : 1989 : : I (HT) (HT) \(SUS mill) :·~-----------~-·-----------I--------- ---------:----------:Total -- All Countries : 190 1508 ': - 2.6 :---------------------------:--------- ---------1----------: Indonesia I * 737 I 0.5 IMalaysia I *, 86 I 0.2

'ITaiwan (POe) I 75 188 : 0.8 \Singapore \ 38 116 I 0.2 IThailand I 3 20 I O~ 1 I-·-----~-------------------:--------- ---------1----------1 ITotal -- Selected Tropical\ 116 '147 I 1.8 : 1% Share Total All Countries: -61 76 I 69 I :% Share of Producers** onlyl 0 72 :- 39 I I (of tropical): I I 1------·_--------------------------------------------------1' *Insignificant **Includes Indonesia, Malaysia, Philippines Source: Japan Tariff Association

V-9

Builders Joi,nery and Carpentry is a significantly larger business -- $118 million In 1989 -. and tropical wood producers have a sma1l and slightly declining share of it. Nonetheless, growth in shipments of these products has been substantial and"it would appear that future

'opporamitiss for value added products in this segment(ll'e important.

Table V-K IMPORTS OF IJOODEH BUILDERS JOINERY AND CAKPENTRY** FROM SELECTED

TROPICAL COUNTRIES (metric tons)

I ............................. .................................. _"_ ....................... ... ,"_ ........... -._ ........................... '~ ..... ~ ....... _ .. I I I

: 1980 1989: 1989 : : I (MT) I (MT) I ($US mill) I ;------- .. -- .. ~~--------------;------- .. - .... -------:-- .. -------;~" lTotal -- All Countries, : 3457 77908 I 1'8.0, I I .. _ .. __ 0 .. __ :. ___ ...... _ .. _ _ " ____ .. ___ 1 _ ............... _ _ _ .......... _ .. t ... _ .. _ .... __ .. _ I r I I I

, : Indonesia : * 1890 : 2.6 I IMalaysia : 158 522 : 0.6 : IPhi I ippines I 95 10 I I ITaiwan (POe) _ I 271 1248 : 4.1 : \Singapore : * 27 I 0.1 I :Thai land : 62 748 : 1.6 ! 1 ______ --------------- ______ 1 ______ -- ____ .... __ .... 1 ___ .... _____ I I I J J

ITotal -- Selected Tropical: 586 4445 : 9.0 : :% Share Total All Countries: 17. I .6 I, 8 : : % Share of Producers on I y: 73 I 54 I 36 : . I (of tropical) I : : :'

,1--------------------------------' ~ .---------- .. ---------- I

*Insignificant **Includes for 1980 CCCI/ 4423.90 and fOI' 1989HS 4418.30, 4418.40,

4418.29.229 and 9406.00. Source: Japan Tariff Association

Doors, Windows, Sashes and the like represent another important building products category. This product category has nut demonstrated such dramatic gruJ. th (in part we believe due to the Harmonized System reclassification in products going into this category). However, it is a sizeable business and the producing countries are gaining an increasing share of the tropical portion.

Table Vel IMPORTS OF-DOORS, ~INDO~S, SASHES AND THE liKE FROM

SELECTED TROPICAL COUNTRIES (metric tons)

1-------------------------------------I I I 1980 I . I (HT) :---------------------------1---------ITotaL • All Countries - I 6246 I-·········-----~--·--------I·-·--··--I Indonesia I· 22 IHalaysia 531 IPhilippines 675 ITaiwan (POC) 2945 ISingapore . ., - 44 IThailand 1474'

1989 : 1989 (HT) I (SUS mi ll)

·--------1---·-··-·-8804 : 40.9 ._-_ .. _.-: .. _._ ... _.

227 : 0.5 722 I . 2.6 327 : 1.2 917 : 4.0 169 0.5 610 1. 9 : ... _ ... _"_ .. _._ .... _ ..... _ .......•..••.......•... -... -.

:Total . Selected Countries 5691 2972 10.7 IX Share Total All Countries 91 34 26 :X Share of Producers Only 20 15 11 : (of tropical) : I 1 ••••••• _ •• _______________________________________________ v' I - I

*lncludes for 1980 CCCN 4423.010 and for 1989 HS 4418.10000, -.20000, ·.90210

V-lO

Clearly. none of these tables are conclusive, but they all indicate that tropical woods are making progress with finished building products and that t.here is potential for future growth in these markets. \-

IMPORTS OF VALUE ADDED PRODUCTS - FURNITURE

Developments in Japan's furniture industry and its sources _ are of importance to tropical wood producers. The wood sector of that industry, though a mature business, is becoming increasingly dependent not simply on imported raw materials but parts and completed furniture itself. Although growth in the overall Japanese wood furniture industry -- which will be described in the next section -- is modest, imports of furniture and parts from foreign sources have grown at a rapid pace with Asia taking the lead.

Wood furniture imports have increased from almost nothing in 1970 to a substantial business -- totaling over $400 million currently. There are several reasons for this growth.

• Japan's overall booming economy and the resulting increase in disposable income. • The expansion of housing as well as commercial and institutional construction in

the latter half of the eighties. • The sharp appreciation of the Japanese yen since 1985. • And the government's policy of promoting the expansion of imported goods.

v-u

Wood Furniture

Imports of wooden furniture, paralleling the overall furniture trend, have grown rapidly and totalled $434 million in 1989. The history of supply is shown below.

Table V-M SOURCES OF WOOD FURNITURE IMPORTS

;------------------------------------ ---------------: I I 1980 1989 I I l---~----------- ---------------: : I $ mill I. % $ mill : % I 1-------------------- ---------1----· ---------1-----1 lAsia Total 58: 51 255 I 59 I I Taiwan (POC) 36 I 32 114 I 26: I Thailand 1 1 I 42: 10 I : R. Korea 5 4 I 34 8 I

I Singapore 1 1: 27 6 I Indonesia * * I 15 3 I Philippines 1 I 1 * I Malaysia * .. I 4 1 I Other Asia 14 12 18 5 IEurope Total 50 43 151 34 INorth America Total 6 5 26 6 !Other iotal . ! 1 I 1 2 I 1 i---------·----------i---------·~----- ---------~ .. ----I Total I 115 I 100 434 I 109. I __ ~ ___ w ____________________________ _

I

"Insignificant Source: international Deveiof.fflent Association 01' the Furnitur'e Industry ef Japan !ADAFIA)

Taiwan POC, which has become a major factor in world furniture markets in the last 10 years, is Japan's largest supplier. Italy (14% in 1989) is second. However the next three major suppliers are all Asian. Except for Thailand, none of the top four Asia suppliers are known for their tropical timber resource!;. Of interest, all are growing importers of both tropical and temperate hard woods, reportedly buying those woods which are necessary to meet the demands of their customers in Japan and the other developed countries. .

In' spite of the demonstrated growth, imported furniture is still a small share of total consumption. For example in 1989, furniture imports wer~ only 5% of the total market. In contrast in the United States in the same year furniture imports amounted to an estimated 13 % of overall consumption. The low comparative rate of penetration in Japan may indicate there is plenty of opportunity 1for growth.

Exact statistics showing imports of furniture by clearly defined products are not obtainable. However ba~;ed upon available data wooden furniture imports appear to be broken down as Jollows:

Table V-N IMPORTS OF ~EN FURNITURE BY TYPE

1989

1------------------------------------------\ I Product IX of Totail 1-------------------------------:----------1 II:itchen Cabinets & Furniture: 6 I I Beds I 3 I 1[lressers and Similar Furniture I 3 I I Cha i rs and Sofas I 30 I IShelving and Case Goods I 22 I IDesKs and Tables I 25 I IOthers I 11 I 1 _______________________________ 1 __________ 1

1 -. 1 1

: I 100 I 1-·----------------------------------------1 Sc.urce: JWA Est imates

V-12

Japanese statistics do track wooden furniture in several broad ca,tegories_ This is shown in the table below_

iable v-o IMPORTS OF \oIOOOEN FURNITURE BY STATISTICAL CATEGORY

1989

1 ______ -------------------------I

: Item I X 1-------------------------:-----IKitchen Furniture 1 5 IBedroom Furniture l 6 :Seats and Chairs : 34 :Office Furniture : 2 lShelving l 1 :other ~ooden Furniture : 52 I_~_.~.------------- ______ I ____ -I I

: l 100 1 ______ -------------------------I

Source: International Development Association of the Furniture Industry of Japan (IDAFIA)

In summanzmg this section, Japan's furniture imports are a ·highly significant and growing market. However, to date tropical producing countries have played a minimal. part in that growth.

Furniture Parts

Although Japanese furniture manufacturers are certainly concerned about furniture imports, they are becoming equally aware of the need to source parts abroad for their own industry. Thus the import of furniture parts is becoming a big business.

Although the Japanese furniture industry is still made up of literally hundreds of small businesses, it is becoming increasingly internationalized. Moreover, shortages of. raw materials and skilled labor, plus the improved level of technology in Asia's furniture producing countries, have made it imperative that these companies look overseas to supplement their domestic operations.

V-13

Although the import of parts as a portion of total production is still s~al1, it is growing rapidly .. Parts imports, which totalled $22~ million in 1989, are shown by source in the table below.

. Table V-P IMPORT OF FURNITURE PARTS BY SOURCE

1-·--------------------·-- --------------- ---------------: I 1980. 1989 . I I ______________ • ______________ .1 , , : $ mi it :. XS mi II I X : :-----.-----------~------- ---------1----- ---------J-----I 'Asian Suppliers - Total 39.9: 80 97.2 44:

R. Korea 17.0: 34 31.3 14: Thailand 9.9 I 20 34.0 15 I Taiwan (POC) 5.9 12 25.6 12 I Indonesia 1.1 2 , 3.0 1 I Malaysia 5.4 11 I 1.6 1: Philippines 0.6 -1 I 1.7 1:

USA 2.6 5: 94.3 42: ,west Germany 0.8 2: 13.2 6 I litaly * I 7.3 3 I IOthers . , .6.3" 13: 12.6 5 I 1-------------------------1---------:-----:--------- -----: : Total I 49.6 I 100 I 224.6 100 I :---~--------------------.-------.-----------------------eel

"Insignificant Source: IDAFIA

As can be seen, Asia's share of Japan's furniture parts declined. However, total volume more than doubled. Unfortunately, as with furniture, tropical wood producers did not share in these gains.

Of course, ~Jl of these pa...rts are not made of wood, but a large portion of them are. The composItIOn of imported furniture parts is shown below. We believe the first three categories include a high share of wood parts.

Table V-Q IMPORTS OF FURNITURE PARTS BY TYPE AND COMPOSITION

1989 ,- _ .... ____ .. __ .. _______ ~ ~ _ .. _ .. __ .. ______ .. _______________ .. _____ - I , , I I Amount .: I

: Item I($US mill)IX of Total J-------------- .. --------- .. ----------:-- .... ------,----------IParts of Chairs -- l~ather covered I 82.5 I 37 IParts of Chairs -- oth(~r materials I 51.7 I 23 10tner furniture parts -- wood I 65.8 : 30 :Other furniture parts .. - I 23.6 I 10 : metal & other materials I I I ______ --~--- .. ---------------- ______ I __________ I _____ -~ __ _ I 'I petal I 224.6 I 100 , ______ .. ____________________ .. ___ • ____________ .. ____________ I

, . , Source: IDAFIA

V-14

IMPORTS BY SPECIES

Accurate information on imports by species and product is difficuJ.t to obt~jn. The following summanzcs what has been learned through an analysis of available Japanese statistics, data from the exporting countries andJVW A!s survey of end users. In addition, this section covers imports from Africa and Latin America which are shipping completely· different species to Japan.

One of the greatest difficulties affecting the use of tropical species is the trade's understanding and recall of tr.:eir names. This is tlUe even for major species. For example, with South Seas woods, most are frequently· called simply "Lauan to or, less frequently, "Meranti" .

Confusion in the market on species names is rampant. Forexarnple, both Red Meranti and Tangile are referred to variously as Red Lauan, White Lauan, Red Seraya, or Philippine Ma:lOgany. And Apitong is the vernacular name in the market for Keruing; however, m~y in the trade believe they are different species.

Similar problems exist regarding African species in Japan. For example Moabi is referred to as Njabi, or Dimpampi depending upon whether it is from Gabon, Cameroon, or the Congo. And the trade is totally unfamiliar with the vast number of species from Latin America. .

The Association des Bois Tropicaux Technique Internationale (ATIBT) in Paris has made some~.ttempt to group tropical species in a systematic manner; however, as yet not much progress has been. made in the acceptance of these terms in the Japanese market. For this study, we have included in Appendix I a listing of species according to common usage in Japan.

Two points regarding species are clear. There are many -- well over 100 are imported by Japan. And the Dipterocarpaceae family of trees -- the high quality, tall trees that dominate much of South Seas forests -- also dominate Japan's imports. Dipterocarps are the primary species imported as logs, as well as veneer, plywood, and lumber.

Log Import Species

The most accurate indicator of what species are being used comes from a study completed in 1987 which analyzed a large sample of Japan's log imports frorTl Malaysia, Papua New Guinea and the Solomon Islands. This study, summarized in the table shown on the next page, lists the major South Seas species in order of amount importe.d.

-Table V-R TOP 20 lOG IMPORT SPECIES

-1987

f ••• -------.---.-.-.- •.. - .•••••• ~· IRankf Vernacular Name - f X ·---f···-······-····------·I····· *1 fRed Heranti Group 154.9

2 IKapur- 8.4 *3 IKeruing 4.6 *4 I~hite Seraya ; 4.2

5 ISegon laut 3.9_ *6 IYellow Meranti Group 3.8

1 7 fJongkong 3.4 I *8 ITengkawang 2.2 I *9 I~hite Meranti 1.9 I 10 ITaun 1.6 I 11 INyatoh 0.7 1 12 IJelutong 0.5 I 13 IBintangor 0.5 1*14 IMersawa 0.4 f 15 IPerupok 0.4 I 16 IDi llenia 0.4 1 17 IPulai 0.3 I 18 Isinusng 0.3 I 19 ICanarium 0.2 1 20 IAgathis 0.2 : :Other I 7.2 I 1 ______ --------------- ______ 1 _____ 1 1 1 1 : _ 1100.0 I ' ______ --------------------- ______ 1 1 1

*Species of the Dipterocarp family. Source: All Nippon Checkers Corporation

V-I5

The Red Meranti group includes very similar species referred to variously as Red Meranti in Malaysia and Sarawak and Red Seraya in Sabah. Although few logs are coming from either. country nO'N, this common grouping also includes Red Lauan, Mayapis and Tangile from the Philippines (the original source of the broad use of the term ItLauan It) and Light and Dark Meranti from Indonesia.

Lwnher lmpon Species

Even less species information is available regardipg lumber. Japan's own import data (see Table V-S) does show that, as with logs, the Dipterocarp family dominates but is declining -- 57% in 1987,46% jn 1988,.and 37% in 1989. )The sharp drop in Dipterocarp share is interesting, however, because it shows that other less popular species are becoming more important.

V-16

Table VAS IMPORTS OF DIPTEROCARP ROUGH LUMBER

; __________________________________ . __________________ . ---------------~---------~~--------------------------- _a:

, I 1980 I 1985 I 1989 I 1-----------------------------1----------------------------,--------- --------- ____ A_A_A: : I Diptero: "X _:" Diptero: X Diptero X I : Total I carp I Diptero: Total carp I Diptero Total carp Diptero I I Imports I Family : carp : "Imports Family 'carp Imports Family carp 1 I (OOOm' > : (OOOm' >l (OOOm' > (OOOm') (OOOm') (eOOm') 1

----- _______________ ; _________ 1 _________ 1 ________________ •• ____________ 4 ___________________ ._. _____ we_we:

,Total SQuthse~s I 409 310 65 844 487 57 1373 505 37 : , , , I I I I Indonesia : 82 32 39 419 158 37 691 192 27 : :Malaysia : 118 87 74 202 149 74 455 201 44 1 IPhilippines I 186 176 95 203 180 89 134 103 77 I IOther 1 23 15 65 20 I 0 0 I 93" 9 I 12 I l------------------------------ --- .. ----- ---------------------------------- .. _---------------------------------: Source: Japan Tariff Asso~iation"

Supplementing this data, JVV</A's end user survey gave some clues as to what species were being imported as lumber. Respondents of the survey were asked to identify the top five major tropical species used for lumber. The results indicated the ten most popular in total listed in order of most frequent use were:

Table VAT JAPANESE USERS SURVEY OF SPECIES POPULARITY

1------------------------: *1 IMeranti. I 2 IPerupok I *3 IKeruing I *4 ISeraya I *5 IMetapi (~_ Meranti) 1 6 IKapur I *7 l~hite Lauan I *8 ILauan I 9 lNyatoh I 10 :Ramin I r ______________________ ~. I

, I

*Spec i es of" the 0 i pterocclrp farni t y. Source:' lRM Japanese Users Survey

Many of the foregoing were on the log list. And again most were diplerocarps.

Tbc cvnfusion cn species mentioned earlier was apparent in the responses from this survey. Meranti -- which actually includes Red, Yellow, and White, all very different species -- was strongly in the number one position. Lauan" and Seraya -- each of which have several categories -- were also shown as one species.

V-17

Plywood Species ..

Since plywood is primarily supplied by imported logs, we .would expect-the. domestically produced portion of this product to parallel those species indicated in Table V-R.·- Domestic producers, in interviews and through our survey, told us the most popu1ar species used were:

. The Meranti Group (including Seraya and Latian) , Kapur Keruing Melapi

Others mentioned included Taun, Apitong, Segon Laut, Nyatoh, Sapelli and Okoume. In Japan most mills for common plywood use the same species for core and face veneer for thinner plywood. However for thick plywood, an inexpensive species such as Jongkong or a lesser known species is frequently used from the core. .

Indonesia.'1plywood, as would be expected, is also made up primarily ofDipterocarp species. However, Indonesia is also mixing fl substantial amount of lesser used species in its core veneer, providing 'the customer with what he wants primarily through the species

. specification -for the face veneer.. Because Indonesia is targeting mainly commodity grades -- e.g., concrete forming where species control is of minimal value as long as a certain strength level is maintained -- this strategy can. be quite effective.

Veneer Species

The species for core veneer would be similar to those indicated for logs and plywood. Face veneer, however, utilizes a variety of special types of wood. The most popular, based upon qualitative interviews undertaken in this study would include:

Red Meranti group Melapi Keruing \Vhite Lauan

Of course, many species, some quite unusual, are used for face veneer, especially for decorative products where appearance is important

Imports of Lesser Knn~vn Species

Imports of Lesser Known Species (LKS) are increasing in Japan. Many end users are working hard to find and adapt them to their products. However little is being done by the producers themselves to encourage their acceptance. I

V-I8

In actuality LKS is a misnomer. In Japan "Lesser Known Species" means "Mi-Riyou-Jyu" or "species which are not popularly used". In Japan) and probably worldwide~ LKS are species not simply whose name is not familiar but those whose characteristics are not well known and for which, the most effective or economic use has not been found.' Many of the South Seas mixed ligh~ hardwoods, considered to be LKS, are known by name; however, because their characteristics have not been thoroughly studied, determined and publicized they have not yet found their most efficient· usage.

For example) in Indonesia it is said that there are more than 4000 species of wood, only 10% or 400 of which are known. Of these known species less than 100 have been exported to Japan. Certainly, the 300 which have not been exported would be categorized as LKS; however; at least 75 % of those which have entered the country would be considered as LKS as well.

The acceptance of LKS has been slow in Japan for several reasons.

• . Toe most desirable species -- the Dipterocarps -- have been readily available at reasonable prices.

• Information, though often available about LKS, is not familiar to users. For example, such important characteristics as: volume and availability; production potential; . physical and mechanical, properties;; working characteristics; machinability, ease of nailing and gluing; finishing ·'Characteristics. . \'

,. Certain LKS have gained popUlarity but availability has been inadequate . to sustain their growth.

• And for most suppliers there is minimal motivation to promote LKS. Production costs are often high; LKS cost as much or more than It ;e popular species to cut, and frequently cost more to transport. Yet market prices, because of their unkno\\'n characterislics and consequent limited demand, are usually low;

Nonetheless acceptance is increasing. Many which were LKS ten years ago are now widely accepted, e.g.,

Agathis Jelutong Jongkong NYCl.toh Perupok Pulai Taun

All of these) as shown previously, are now on the lists of the most popular species for both logs and lumber.

LKS work going on in Japan includes that of the Japan Plywood Manufacturers Association which, through a grant from the Forestry Agency of MAFF, has conducted a study of the possibilities of LKS for plywood.

V-19

MAFF itself has an LKS Application Development Program which is conducting projects on:

• Resources and distribution • Growth conditions-• Cutting methods • Shipping and transportation fI Log pe.~ling characteristics • Bonding response • Testing of plywood produced from LKS to JAS requirements

In its interviews of end users, JVW A asked what should be done to build the acceptance of LKS in Japan. Ideas included the following: -

• The producing countries should continue to study the properties, characteristics, and' availability of each LKS -- especially compared to those of well known species ..:- to determine what would be their optimum applications and potential for substitutability.

• The consuming countries, especially Japan, should continue to evaluate these species, especially related to end uses, and should sh'are this technology with the supplying countries.

• Definitions of LKS, essentially the same or nearly the same, coming from different countries, should be determined jointly by the producers, processors, and end users.

Given reasonable commitments to these activities theaCcep1.ance of LKS should continue to -grow.

IMPORTS OF AFRICAN AND SOlTI1I AMERICAN PRODUCTS

Although Japan is now completely dominated by imports of species from the South -Seas, there is a growing belief that, with log shipments becoming increasingly constrained,' the country may turn to Africa and South America. In fact, in 1989 Japan imported 148,000 m 3

in hardwood logs from -Africa, mainly from Gabon, Moreover 27,000 m 3 were brought m from Scuth }\merica, primarily Brazil. I

However, the amount is still minuscule compared to Japan's needs. Moreover, these regions, like the South Seas, have limits on what they can cut and export. Details of imports from Africa and Latin America are shown in Table V-U on the next page.

Table v-u IMPORTS FROM AFRICAN AND LATIN AMERICAN COUNTRIES

(OOOm')

1-------------------------, , 1-------------------------'Logs

Gabon Congo Cameroon Ivory Cc'ast Other Africa

Total Africa Brazi l . Other Le,t i n Amer i ca

Total Latin America

,Lunber I Total Africa I Total Latin America 1-------------------------

--.-.-----------------------.~: 1980 I· 1985 . 1989 I

---------1--------- ---------1 , ., , , 15 I 68 121 I 13 ' 8 17 I 37 9 10 I

3 9 * !

8 4 ! 76 98 148 !

2 13 25 i 2 2 2 I 4 15 , 27 I

--------- ---------:---------'" , , , I

1 - - : 1 I 5 2 1 3 I

_________ --- ______ 1 ______ ---, . , .1,

Source: Japan Tariff Association

V-20

There is no data available regarding import species of African logs -- small by comparison since they account for only 1.2% oflog imports. However, JVWA survey interviews indicate that the m<?~t popular species listed in order are:

1. Ok.'1lome 2. Makore 3. Moabi 4. S ape lli 5. Sabinga I

Since Lati~_ American log and lumber imports. are minimal, no comparable information on species is available. However, species reported as being used include Balsa, Mahogany, Purplehart, Tatajuba, Walleba.

At present, prices from either Africa or Latin America are reportedly still not competitive with those from the South Seas. Moreover, they are considered remole as supply sources, and most end users are unfamiliar with the available species. In a sense species from these regions suffer from similar problems as the South Seas LKS.

We found in our survey that almost 85 % of the respondents said they vy'ere familiar with some of the South Seas LKS and had had some trading experience with them. In contrast, only 50% of the end users surveyed indicated they were familiar with any African or South American species. .

~,

' .. ', ...

V-21

Some of the problems, other than unfamiliarity, facing producers in Africa and South America are:

Delivery time: South Sea logs take only a month for delivery after an order is placed. Shipments _ from Africa and South America take 2 to 4 months. - .

Freight: The perception is that freight is much more expensive. S.urprisingly, It may not be. JVWA's brief investigation showed that currently freight costs for logs from South America or Africa would be about $36.00/m3 versus approximately $32.00/m 3

froin most South Seas countries.

Pricing: Prices of African timber fluctuate depending upon conditions in Europe. Moreover they are based upon the French ff""dIlc which has been gaining value and which, in comparison to the US dollar, is not as familiar in Japan.

Quality: Japanese buyers have the perceplion that African products are of poor qUality. They say that frequently a lower grade level is shipped than ordered. Moreover there is often deterioration in quality due to the shipping time. Some buy~rs believe. that most African species cannot be used for plywood because they . are ·toc)·-hard- and easily warp and distort when peeled" for veneer (an incorrect assumption since several, e.g., Okoumc, have -excellent properties).

Availability: Most importantly, buyers lack knowledge about -long term availability -- a primary Japanese concern -- of either African or Latin American species.

Despite the foregoing problems we found Japanese buyers and users receptive to the potential import of African and South American timbers. They suggested the following would assist their acceptance in Japan.

• Determining, through joint evaluations by suppliers and users, the optimum applications of relative species.

• Promoting extensively the characteristics of the species including exhibiting examples -of products using them and providing samples of the woods.

• Holding seminars and exhibitions at trade shows to explain the species and their availability and workability in Japan.

• -Providing .li.terature 'on the species and )their end uses in Japanese. • Bringing producers to Japan to learn about its wood uses and applications. • Providing substantially more information about supply availability by species and

product. • Pricing to meet the needs of the Japanese market, i.e., being competitive on an

ongoing basis with species for similar uses from the South Seas and hardwoods and softwoods from North America. I

• Building distribution to provide greater availability of products.

To the degree most of the foregoing could be accomplished we believe there could be a growing market in Japan for products from Latin America and Africa.

"

, .

, ;

VI. END USE MARKETS FOR TROPICAL WOODS

I . ~ ~ '.

This section reviews the end use markets fQrWood products_Eenera11y and tropi~ .," ~!!. ..

hardwoods specifically.

The primary markets for ,.·tropical hardwoods .in Japan are housing and construction, furniture, and packaging~ We e~timate' the tropical hardwOod uSage in these markets' as, follows. . .

Table VI·A. . .. :-:;-TROPICAL HARD~ C~SUMPTIOH BY PRODUCT AND PRIMARY END USE

1980, 1989 ;~~ ~:~~. ,-. ;.,,-;" ..... .:i.

I----:----~--------~------------~>--~·---·------~----~------7--------~---~--~-------------1 :' : Housing! 1 ""I'" ':' " .. : ,., : 1 1 Construction: Furniture : Packaging 1 Other -'c" :' ,TotaL' : : 1 ______ ---------:---------------:---------------:----- __________ : _______________ :

: ., OOOm' 1 % I OOOm' : X : oOOm' : X : OOOm' : % : OOOm' : % I

: - - - - - - - - - - - - - - - - - - : -, ~ - -'- - ~ - -- - - - - : - - - ,- - : - - - -. 7 - - ~ - : -.- - - - ': - - - - - ~ ~ - - : - - - - - : - - - - - - - - - : - -, ~. - -

I LlIlDer 1 I: I: : 1 : 1 1989 1390 1 37 1100 I 29 1 500 1 13: 810: 21: 3800 1 100 : 1980 2430 1 41 1300: 22: 550: 9: 1720: 28: 6000 1 100 : Plywood : ::: ': :: : 1 1989 6400 1 66 900: 9: .400: 4: 1980: 21: 9680: 100 : 1980 6300 1 68 800 I 9 I 300: 3 I 1900 1 ~1: 9300 I 100 I--------------~---------------------------------------------------~:---------------------f .

',' .. ' 50urte:", JWA Esti'mates

As can be cseen, the usage of tropical hardwood; lumber in Japan has declined' sharply, largely due, to the drop in the availability of logs. As we will see in the following discussion, the species have -largely been supplanted by imported temperate hirdwoods and especially imported softwoods. Tropical wood: based plywood, 'however,' reinforced by rapidly increasing imports has maintained its position:

The following explains these markets and how tropical hardwood is used within them.

HOUSINGICONSTRUcnON

We have already noted that Japanese lumber and plywood consumption closely follows the housing market (see Figure HI-B). Let us now review housing and construction in some detail. }

Trends in Housing .f.' .

Japan's housing market -- now in its second highest period in history, 1.6 - 1. 7 million units annually --' is forecast: by various sources to average 1.3 - 1.6 million housing starts annually during the 1990 - 2000 period. JVW A forecasts an average of approximately 1.45-1.50 .' ',' . .. I million units over the next 5 - 10 years.

:.:~

,I:.

" VI-2 """" ~

Japanese housing for years had been increasing in average size but in the last several years has reversed that trend .. Unit" floOr space inereased '"fr()m 68m2 In 1970 to a ~of94 m 2 ' '

': " ':. : " " " ~",,;" ." , in 1982. It has declined since to 81 m2 in 1989. :,." . ",:'

Th,e • major Teasod, for this dip has' been the, dramatic "growth iti :multifamily housini'~' which, " by its nature is signifiCantly smaller in size'arid, due to building code requirement's; uses far less wood. In 1980,33% of the 1.3 million housing units built were multifamily; however, by 1989 that had increased to 61 % of 1.6 million units.

t",

Single family housing, primarily of wood construc'clonand the major user of wood products, has consistently increased' in si:t;e. The average unit built in 1970 was 80 m 2 in area: and by 1989, it had grown to 127m 2." •

These housing trends illustrating the shift to l11uUifamily housing' are shown in the table below.

Table VI-S MAJOR HOUSING TRENDS

" , , 1 ________________________________________________________________________ ~ ____________ ~ __ •••• ___ J.~.

I ' I I Single Family I Multifamily I Total I----~----:-----------------------------:------~------ ----------------:--------- ----~------~-~----"-I I # of I I I "of I 1 1 # of 1 1 Year 1 Units 1 "of 1 Average Units 1 "of I Average 1 Units "of 1 Average 1 1 (mill) 1 Units ISize (m') (mill) ! Units :Size (m'): (mill) Units :Size (m') I···· -~. -. : ...... -.. 1- -~. ---,- - : -. -. -.". -- ....... -, , .. I······· -. I c ~ •• - - - •• :......... • •••• - - - -1- -.... -.. : 1970 : 961 I, 65 1 80 523 f 35 1 ' 46: 1484 100 1 68

,f 1975·"1'10141' 71/ 95 4131", 291 54'1 '1427 1001"71 I 1980 I 843 : 66 I 110 424 : 34 : 63 f 1267 100 1,.89 I' 1985 I. '609 I 49 I 117 626, :51 : 51 f 1235 100 !,' 83 f

,: 1989 I' ,644 I " .• ' 39 I' 127 987 I 61 I' 52: 1631 . 100 : 81 f' 1----···_·_-_·····_-_······_-_··_-_·_------_·_·_---_··-·-·-··--····-·------···-·----···········-·"·-1

Source: Ministry of Construction

. : ":, ~. i, .' . ' 1._ .

Wood usage in housing is very dependent upon the type of housing being built. As indicated single family housing is primarily wood-based; multifamily is usually built of-steel, reinforced concrete, concrete blocks or some combination thereof. This mix of housing by type of construction is shown in Table VI-C.

. "" "

Table VI'C " HOUSING START. SHARES BY STRUCTURE TYPE.

AND 1.'000 USAGE

--.----_. _ .. _._--------- .. _----_.--_._---. _ .... _ ... __ .. __ . __ ._ .. _-_._-_ ... _-_ .. _ ..... _ .. : Total I Steel/ I Concrete I

Year Housing ": 1.'000 Reinforced I Reinforced I Steel I Block ': Units (000) : I Based Concrete I Concrete IStructurelAnd Others l

•• - •••• -. ··_--_··_···-1---------1------··· ·······:····:·---····-·--1----·----1--····--·-1980 1267 : 100 :' 59 : : 8 I 19 I • 13 1,1 1985 ". "'235 I 100 : 48 7 : 24 .1 21 : *

I 1989 1631 I 100 '1 42 I 9 1 , 25 I 24 : ,* I---··-··········--···~-·-·--·-·-~I·······~·I········----I-····--···--I-·-~···~·l--·······-11.'000 Usage in m' per m' of floor I 0.224 I 0.038 I 0.052 I 0.049 I 0.089 I space by type of construction I : 'I l I 1 •• __ ••• _------_._ •• __ • __ •• _----_.-------_._._- ••••• _- •• _______ ••••••• _ ••••••• __ •• _____ •••• I

*Under 0.5" Source: Ministry of Construction

VI-3

As can be seen above, wood-based housing, as a share of the tota1~ has declined while :other construction methods have gained. Since·wood-based housing uses much mQre wood per

" unit of area,. the overall impact, of this trendh~s been forlcss wOod to be uSed. ,

Heretofore; almost all multifamily housing m'ust be non-:-wood based as' reguired by the Building Standard Law. Recently, underpressiJre from 'the United, State~: Japan agreed to ' modify building restrictions so that 3-story attached, townhouses could be wood framed, thus

'allowing greater use of timberin a market, heretofore' closed. Such three story units are an important' 'portion of the total multifamily market.

Although most of the wood "'hichWill be used in this new application will be structural, and thus predominantly soft\yood,!his breakthrgugh potentially expands the overall market for woo~ 'i~;housing and opens up ~opportuhi~ies', for tropical timber as well.

; ~. ~

-Another overall trend. influencing the use of wood in housing is the', shift to more prefabricated ,housing, and "vhat is'called 2 x 4' h6'using., The latter'~ emulates North American, orbaIloon frame, construction and is called 2 x 4 because of its use of this comm9n North, Am'erican nominal lumber size;(i inches by 4 inches!51mm by 102mm). It,

, too, is freq~cntl y ,prefabricated. This trend is' shown below. . .

. ' . Table VI·D 'GROlolT7: IN PREFAB,RICATED ANOZ,X 4 HOUSING

(000 uni ts)

.---.--.- .... -------.- .. -.. ---.-.- .. -.. -.--.- ... --.-- ... -- ... -- .. --.- .... -··----···-1 I ' : % \1600-' ".Pr-efab I

I Prefabricated Housing I I : based of and 2 x 4 I Year 1----·-------····-----------------·--: 2 x 4 I Total I 2 x 4 & of Total :

I 'I : I I Housing I I Prefab Housing: I \lood I Steel : Concrete: Subtotal I I I Houses", Units, ,I

------1------1-----·-1---·_··_·-1-·····----1---------:----·--1---·-·---- ~------~--~I I 1980 I 26 I 76 I 25 : 127 I 13: 140: 28 11: : 1989: 33: 164: 18 : 215 : 48: 263: 18. I 16 : :-~-----------------------------"-.-.------------~-:----------~~--------~------~7·--·:

Source:' Ministry of Construction

'. As can be seen, prefabricated units increased from) 1 % of total housing construction in 1980 to 16% in 1989. At the same time wood-based, 'as a proportion of total prefabricated

,.un~ts" declined from 28 to 18%, reflecting' the growth in multi family housing as a share of ,"th'e total,' . \ " . . r

'. ",:" t 1"" ;'. ,~.

;Pr~f~bricated housing is important to the tropical wood producer interested in supplying , flpished o~ partially finished building products ,to ,the housing industry. Standard housing,

,I '.. , "

largely-built on site, uses a vast number of parts and fixtures of many sizes and varieties. Parts for the prefabricated industry are far mc:re standardized and thus, from a tropical producer's viewpoint, far more practical to compete for.' .

VI-4

Wood,Usage .~~ ....

'WOOd-based h,?using -~ primarily' single family-- is' the • single . largest ,consumer of wood products in Japan, accounting for an estimated 74% of all wood used for construction. The use of wood by housing sector, based upon a Ministry of Construction (MOC) survey of wood usage uridertaken'.{in 1986; shows. this ~reakdown. - . _

Table VI~E' USAGE OF TIMBER PRODUCTS .BY CONSTRUCTION SECTOR

. . 1986'

1--------·---------------------------------------------------------------------------1 I . -" I " ,I, Yood Usage (DOOm') I I I I·" I-----~---------- -----"-.----------- I Share I I I Flool' Space I .! .• ,-'. Plywood I " I of Wood 1 1 1 (DOOm') 1 'luii>e'r and & Other 1 - I Usage " : :. "':'" " :....,: I 1 I' Other Products Board " ,·Total·, (X) I \ \ . Products : \ 1-·------ -- ----------- -- -- : --- ---- ------\- ---- --- --- --- -- ---------- : ~---- -- : --- -----'-IResidential* -,Total I 122704 I·' 15791 2047 I 1n44 I 87 I , Wood-Based. I: 67844 13908 1256 I 15064 I ." 74 I . Steel/Reinforced' , .1., 7368197' 111 I', 308 12 I Reinforced Concrete I . 23475 - .732 I"~ 441.1- 1179 -: 6 I 'Steel Structures I 23627 927 I 222 I 1149 1 5 : 1 Others \ . 390 .", 27 I 17 1 44' I *: I I "i - - I~; i .. : .. ·· .. : ~ .1 IUon-Residential-- Tetal: 84951 1881 : 746 I 2627 I 13 I 1------------------------1-------------,----------------1----------1-------1---------: 1 TOTAL I .. 207655: . 17672.1 279;3 : 20371 1 100 1 :--------------------------~~---------"~----~---~------~--------~-----~--------------I

*Including about 25" Residential/Commercial Sou;--ce: foIiDistry of ' Construction (HOC)'

Use by Housing Application ',l

In the following discussion, we have' tried to identify tropical timber usage by housing' and cO,nstruction application. As we have seen, most wood is used in single family construction. And most of that is consumed in building typical Japanese wooden houses using post and beam construction. An estimated 80% of all single family hO,uses are built in this traditional manner shown in F:igure VI-F oil page: VI-5.. " "

Structural:jhe use of tropical,',Woods for . structural applications -- either;in the post and beam type, the prefabricated or2 x 4 house -- is minimal. Over 95 % 'of lumber demand for this usage is provided by softwoods, especially imported westem hemlock and Douglas fir.

As mentioned, ,exact information on speci~s use, especially :by application, is difficult to determine. H~wever, two sources provided some' indicators.

A study in To1c)ro by the Japan Housing and Wood Technology Center conducted in 1986 (See table on page VI-6) gives some idea of the use of tropical woods in typical Japanese post and beam house. It is clear that tropical woods are used mainly for "fixtures" (doors, windows, dividers, etc,).

r"

VI-5

Ridqe . """ ....

lath .(

:ten

Ji

Source: Rinzai Lumber Oa11Y.News

L •• : Figure Vl-F TYPICAL SINGLE FAMILY JAPANESE HOUSE USING POST AND BEA~ CONSTRUCTION

VI-6

Table VI-G USE OF UOOO PRODUCTS IH POST AND ,BEAM CONSTRUCTION

-1986. ' , (m' per,100mt .of floor space)

. . ~. -.~ . .: -.'

1- --------------------------~ -------------~ ~ ~ ------'-': ,: :'- -~"~ ~'-:- -, ~ ---- ~,-,- --:: ~'-~~ --------'- ----------I I' . , I Structural Use ISheathinglFixtureslFinishinglTotal I Total % I 1- ----- ------ -- -------- ------ -- ,---- --------- --- ,-- --,-"-- 1 -- -:- ---- -1 -- -~ ---'--f---'-~---- ------- ---I Ilauan (tropical nardwoods), --- 1 "1.45 I I _ 1.45,8 I IDomestic Softwoods (Cedar, 4.05 1.90'1" 0.441 0.10' r 4 •. 49 36 I I Cypress, Pine) . I I I'" : Ilrrported Softwoods (Douglas' '3.80 .~0.07 1,3.05:: 3.12 " 39 I I Fir,. Hemlock.) -'~'.' .. f' I .... >. .. :-: I 10ther.. 2.240.13 \ 0.62: 0.02 \.3.01 , .'17 I I-------------------·----~:----,---------------- ------~-~I~--~--~:~I---:~----I~-------- ---;~--~-I

:Total '~""', I 10~092.1o.1 :5.56. I '0:12 112':07 100 : I--------------------~~----------:----~-~----f---f-~~- -~:-~:----~:~;--------~--~~-·-~---~--~------I

Source: Japan Housing aoocTechnolo(lY CP.nter , '

,"!" .

'"

"Lauan" -- as mentioned 'the Japanese term foral! h;opical woods -.~ was indiCated here as accounting for 8 % of the 'total consumption·: of woOd in post' and Qeam' hquses for Tokyo -a percentage we believe to be somewhat less today. It also'showedt:ropical woods'being used primaril,Yfo!fixtiires, an assessment we believe, to be correct . ..: TabIeYI::H' details other, results of that study showing ~se by species andepd use:' . .-., .-~ ... -:~'.:".._ .

. ~- ',. ~,.. _ . .,....... ~. -. -:': ~'.

'" '~'Table'VI-H:' " , ' " \lOGO PROOUCTS USAGEPATTERNINPOS'T :& BEAM CONSTRUCTION

- .... ':. " •...

", .::~.~. :' "' _. . . .... '. - .

I-----------------~~~~-----------------------------------:--~----------------~-------------------------.--~-~---: 1 .' He!iber ,:... , Sped es '. ' r . ' , Feature Requi red-".' ; : I ___ ~· __________________ I ___ ~~~ _________ ~ _____________________________ •· __ = _____ ~_~ ________ ~~ __ ~~ ___ M __ ~ _______ ~~_J

" "" ,,' . ' , IStructure ;' 1 - , ',., -:-'" , ' .,;, ,',f ' i : Sill IJap. Cypress, Cedar, larch IStrength,'DurabHity • I i Post IJap. Cypress, Cedar, HemlockIStr-ength,'Durability ':: i Floor Joint ILarch, Jap. Red Pine, Jap. Cypress iStrengthi Ourabi,l ity ,_ ,.· .. i : Rafter .' l\.lest. Hemlock; Cedar, Yezo Pine IStrength,. Durabil1ty .: ' , .' i : -- ------- -- --- ---- ~'---I ~ ---- -----,-- -------'- -- ~-- -------- --- ------ -- -1- --- -- ----'-~ ---~- ~,-, ,,' ---- ----- ---~ -.- ~. --": ;Sheathing . I' ."_. . :,,' ~, I I Roof Sheathing ICedar,"Yezo Pine, , i _ .; t : Floor Sheathing iJap. Cypress, Yezo Pine, Morni Fir :Strength, Dur'abh ity 'L. I . \.la II Sheath i ng : lauan PI ywood*, Doug I as Fi r Plywood: ". ' ' i ,--------------------_.,-------------------------------------.-------,------------------~-----------------------" ',I I ,

: Fin i sh i ng I . . ',. I ' " i I Flooring 10ak, Beech,. Birch, Douglas Fir, Lauan* ·IStrength, Durability, ,Hardness' i : Parquet F;looring iZelkore Tree, Maple, Teak*, Mahogany* i KwariniAppearance '. i : Ceiling :Jap. Cypress, Cedar, Plywood* ' : Appearance, light \.Ieight, No \.Iarpage : : Framing (interior) :Jap. Cypress, Hemlock, -W'est. Hemlock :Appearance, Minimal Shrinkage . . '. : : Threshold iCherry, Maple, Oak, Jap. Cypress iAppearance, Strength, Hinimal Shrinkage : , Skirtin!l B02rd :Yezo Pine, CediJr, \.lest. Hemlock, lauan* I Appearance;' Minimal Shrinkage . ,;, :

\.leather Board IJap. Cypress, Cedar, Yezo Pine ., jDurabil ity : ,Veranda. IJap. Cypress, Hemlock Cedar INo \.Iarpage, No Shearing : ----------------------:------------------------------- ______________ 1 _________ " _____________________________ ---I Fixtures: : :

Closet i\.lest. Hemlo~k, lauan*, Plywood* i\.lorkability : Stairsteps : Lauan*, Zelkore Tree IStrength, Appearance, \.Iorkability : Doors ILauan*, \.lest. Hemlock, Jap. Red Pine l\.Iorkability, Appearance, Minimal Shrinkage: \.Iindow Frames :lauan*, Hemlock, Douglas Fir, Cedar, iIJorkability, Durability i Partition ILauan*, Plywood* lEase of Use i

---------------------------------------------------------------------------------:-----------------------------I

*Indicates tropical wood species Source: Japan Housing and Technology Center (1986 Study)

VI-7

JVW A's survey of end users showed somewhat· similar results. Except for a small usage of Keruing and Pulai for. mainly structurai. and sheathing . applications, virtually all tropical hardwoods were indicated as being used for fixtures. The major species used are shown in the table below. .. . .

Table VI-I SPECIES USED FOR FIXTURES

\-------~----------.------1 Species 1 X \-------------------1-----IRed Mp-ranti Group··: 27 IAgathis .'. 1 ·15 INyatoh : 10 IPerupoK : 10 IKeruing I 8 :Ramin' : 5 IOthers* : 25 1 . 1-------------------1-----: ITotal 1 100 : :-------------------------:

*Others include White Seraya, Helapi, JongKcng, TengKawang, Taun, "'eabi, Mersawa, Perupok,· Red lauan, Matea, Segen laut. So(il'ce: . JWA End User Survey, 1990 ....

\ The uSe of tropical hardwoods for fixtures is primarily because of their good workability, dear and attractive appearance, and minimal shrinkage. The species,as lumber, are mainly used for skirting boards, door and window frames, c1osets,and stair steps;· They are normally lacquered or sometimes painted to coordinate with th~ surrounding :material ..

Tropical hardwood plywood is mainly used for sheathing. Although most plywood is Meranti/Lauan based, Keruing is used as well for sheathing applications where high strength is required.

~ .. " .

Housing/Construction Consumption by Sp~cies

Although there are no statistics which clearly define wood usage by species in the construction area, we estimate this sector's consumption -- and tropical hardwoods within it -- is broken down as follows.

t',.::'.

·Table VI7J HOUSING/CONSTRUCTION INDUSTRY CONSUMPTION

. . BY SPECIES CATEGORY '.. . .

.c � -·----- --'--~- -;; ___ -- ___ -- ----- ~ _ ---~ ---- -~---- --'~'- __ ------- -- __ I I I 1980 I 1989 I I ·1--------------- ---------------1 I I OOOm' I X OOOm' 1 X I l------------------------------l-------~-I----- ---------1-----: Lunber I: I:

Tropical Hardwoods : 2430:· 8 1390: 5 I Temperate Hardwoods : 500 I 2 300: 1: Softwoods: 273701 90 28410: 94:

I. I I I I I I I

Total ...... .: 30300: 100 30100: 100 ----------------------: ------- I-.~ -. ------ : -----1- - - - - - ~ - - : - - - --

I Coomon and Spec i a l ty Pl ywood' : ::. : : Tropical Species I 6290 1 100 I 6450: 99 : Other (softwood) 120: * : I 50 I 1 I I I I I I I I I I

I Total. I 6310 I 1001 6500 I 100 :--------------------------------------------------------------* Not significant Source: JVYA Estimates

. VI-8

ASG'J1 be seen, tropical lumber plays a small role in the huge 'housing ·market Moreover,' that position has diminished in the last 10 years as tropical lumber uses have increasingly been limited to decorative fixtures within the home and as parts of windows/doors, etc.

In contrast, !he construction market is the primary one for hardwood plywood." . That position .has only been minimally affected in recent years even though softwood plywood has gained a small position in housing through its use in 2 x 4 construction.

FURNITURE

Furniture is an important market opportunity for imported tropical hard woods. The table below illustrates the growth in this husiness. . ,

'0 Table VI-K

JAPAN'S IJOOO BASED fURNITlJRE INDUSTRY GROIJTH ($Million)

1------------------------- --------- -------------------: I 1980 1985 I 1989 I : __________________________________ ---------:--- ______ 1

:Total furni ture Industry 10354 11219: 12905 1------------------------- --------- ---------:---------IIJood-Based 8488 8614 I 9611 l------------------------- --------- ---------:---~-----:Average Increase/Year (X) NA 1.25: 1.28 : (past period) : ,-------------------------------------------------------I

Source: Industrial Statistics Bureau, MITI

"J \.

. ~ . . : .... ".... . . : . . .

VI-9

Japan's furniture industry" reflecting both an expanding housing industry and trends to .Westernmodes of livin.g::-- which require -more chairs, tables, beds -- grew rapidly in the seventies. In the last 10 years thaf rate has moderated and domestic production is growing at the rate of 1.28 %,£er year· .. There are trends which may affect this rate both negatively and positively in the .future. .;

In the overall, housing starts have the largest single impact:on furniture demand, influencing an estimated 20%~ o{purchases.: We have noted .earlier that overall starts are expected to ease back somewhat;:over the next 5 - 10 years from the current level. In addition, the average size of new homes has been declining.

A further negative point is that solid wood usage' in furniture -is decreasing mainly because of the increased use of plywood, reconstituted board products, Meciium Density Fibreboard (MDF) and other products. . -

Contrary to these trends is the strongly increasing disposable income of the Japanese consumer and his increasing propensity to have a more Western manner of living in the _ home --, bqth of wnich mean increased use of furniture, especi~ly 0 that made of wood.- .'

. .., ~ : . . . . ' .

On balance, we conclude that the Japanese furniture' industry will continue to grow at the same rate over the next S'-lO'years -and that wood consumption for furniture will increase with it. In addition,we have already -noted the sharp increases which are occurring in the imports of both -furniture and parts (fable V-P).We would expect this growth to continue as well.

Wood Usage

Official statistics on the use of wood in furniture are unavailable. However, the' Japan Wood Products Stockpile Corporation (JWPSC), based upon an extensive survey conducted in 1987, estimated that approximately 1.3 - 3.7 m3 (JVWA used an average of 2.44) of timber products were used for each ¥1.0 million ($6700) in domestic furniture shipments in that year.

On this basis, the amount of wood products' used in furniture totalled 3.5 million m3 in 1989 based on furniture s.hipments· of $9.6 b.i11ion in th~t year. Using the JWPSC's factors, the wood market by type of furniture is estimated in the table on the following page.

VI-10

Table VI-L FURNITURE SHIPMENTS AND. TIMBER PRODUCTS OEMAND

- .'~' ,

-'- --- -----------------------~.~---'-------~ -------~ ~ --~---~'- -'- --: ". ::';-:"l..;;

: 1980 : '1989' : ~ ... ; . ;:: ::" .-~

�------~------------I---------~----:----i \Furniture\ Tirrber \Furniturel Tirrber :. 'Shipnentsl Demand IShipnentsl Oemand :

(Srnill) I (OOOm') : (Srnill) : (DOOm') : ------_ ... _._- .. __ .. -·-------:--·-~--·-:·-----·--:--·------I

. Footed Furniture· 2383: 960 1 2891:· 1165 I·' . IStorage Cabinets·* -: . I· 1 2053 1 857 I : . . . } . 5049 :'} 1479: I t IShelves. & Racks . I· 1 2000 I - 865 I

. 'Beds . 317, . 175: . 343 : 189 , IOther 739 I 308: 2324 I ,451: :-------------------- _·_------:· __ ·_--_·:·_---·---1----·----1 : Total 8488: 2922:. 9611 I : ~527: :-~---.~--,---------------.-.~---.--------------------,-_.---:

*Fb~ted 'furniture includes' chairs, table;, desks, etc. -**Storage cabinet~ include chests of drawers, dressers, etc. In 1980, it also included shelves and racks and part of "Other"

.Source: HITI, Japan ~ood Stockpile Corporation

Of interest is the rapid growth in footed fumiture -::: chairs, .!.abIes, -desks . and 'beds compared to the more sluggish demand for storage cabinets -- chests of drawers and dressers. In the first case, demand is reflecting a more Westemtype of living: In thesecQnd,- chests of drawers have long been the single major furniture purchase for newly married Japanese couples, so growth siinply reflects marriages and housing.:: Moreover, an increasing number of homes have this type 'of furniture built into. the-' wallS, thus wood demand here is retlected in housing market usage, rather than in the furniture market. .

The {urniture industry consumes a variety of wood products with lumber being the' most important. Wood consumption by product is shown in Table VI-M which is based upon ,a -,' study conducted in 1987.

Table VI-H FURNITURE I~DUSTRY ~OOD CONSUMPTION BY PROOUCT· AND SPECIES

1987

1.- ____ ----------------------------------I I I 1980 I : (DOOm') I ____ • _________________ .~ __ ~ ___ 1 ______ ---

I· I I Ll..iOOer I ILogs I ILaminated Veneer Lumber (LVL) : : Coornon l' l ywood I ISpecialty Plywood I IOther ~ood Products (e.g., I I particleboard) :

1198 468

88 468 175 525

-----_·_· __ ··---·--1 1989 1989 :

(DOOm') I _ (%) I -··----··l------~·-I

1446 I 41 : 564 16 I

-106 3 _I: 564 16 I . 212 6 : 635 18 :

I I

1 ______ ------------------ ______ 1 _________ 1 ______ --- _________ 1 I I I I ITotal I 2922 I 3527. I 100 I 1--·----------_·------_·····_------_··_·_----------_·- .. ---.-: Source: Japan ~ood Products Stockpile Corporation

.' I

...

VI-I 1

Use by Fumiture Application ' . f , ..

Now, how much of thiS',material was tropical timber? And what is the trend?

The table below (Table VI-N) shows the i ten most pdpular woods used in the furniture industry listed in order of preference and indicating their typical appliCation, i.e. whether for surface material, solid surface or core, plywood/veneer or laminated-' veneer lumber (LVL). In recent years, the Japanese species -- oak, tamo, elm -- are beginning to be replaced by imported materials, especially similar temperate hard wood s from North America.

Table VI-N TEN MOST POPULAR SPECIES BY TYPE OF FURNITURE APPLICATION

.. ~... . I ______________________________________________ ~------ _______________________ ~ _________________________ _

I i Storage Cabi nets . i ,Shelves and Racks .. i , ' Footed, Furni ture i Beds, I ................... _ ................................ I ...................................................... I .............. ~ ........ ,;. ..................... ' .... I ................................................... _ I I I I

i Species! Appl ication i Species i Appl ication : Species \ Appl ication : Species: . Appl ication 1 .. - _______ 1 ______ --- ______ 1 _________ 1 ______ --- ______ 1 .. ________ 1 _______________ 1 _____ .. ___ 1 ______________ _ I I· I I I I I I IOak \Sol id Surface IOak IPlywood/Veneer IOak ILVL IOak ISol id Surface : \ : :Sol id surface : \Sol id Surface .• : : 1 _________ 1 __ •• ___________ 1 ________ .. 1 _______________ 1 ______ . ___ 1 _______________ , _________ 1 ______________ _ I I I I I, I I I :Elm :SQt id Surface :"Lauan :Sol id Core, iBeech, iLVL IDouglas :Surface for LVL :: : :Surface : :Solid Surface : Fir : :- ... -------: --------------- :----... ----:-----_--.---- .. --.- :--------- :------.--.. ------- t----- .......... :-------- .. ------1 :*JongkongiSolid Core :Beech :Plywood/Veneer :Elm :LVL' :*Nyatoh ISolid Surface :: : :Sol id Surface : :Sol id Surface : i :---------:---------------l---------:-------------~-:- --------:---------------:--------- 1---------------:Alder \Solid Core :*Jongkong:Solid Core. :*Nyatoh :Solid Core i*Lauan :Solid Surface \ \Surface i : ' : :Sol id Surface: . : :---------;---------------:---------:-----------,----:---------:---------::----1---------:---------------iBirch IPlywood/Veneer :*Nyatoh :Solid Surface i*Teak :Solid Core :Beech iSolid Surface \ i :: ,: iSol id Surface :. : • _________ 1 _______________ 1 _________ , .. ______________ 1 .. ________ 1 _______________ 1 _____ • ___ , _______________ 1

I I I I I I I I I

\*Lauan \Sol id Core iAlder ISol id surface :Tamo :Core for LVL, :Hemlock :Sol id Core I :---------:---------------1--------- ----~~-------.--:---------:---------------:--------- :---------------:*Nyatoh :Solid Surface :Tamo Solid Surface iBirch, iFor,acy Veneer :spruce :Solid Core :---------:---------------:--------- ------------.---:---------:---------~-----:--------- l---------------iDouglas \Solid Core :Elm Plywood/Veneer \"Taun/ :solid Surface :Tamo iSolid Surface i Fir:' : Ma t oa : Core : i :---------:---------------:--------- ---------------:---------:---------------;---------:---------------:*Teak :Solid Surface :*Teak Plywood/Veneer \Douglas :Solid Surface :*Jongkong\Solid Core :: : solid SlIrface I Fir : i: :---------:---------------J--------- ---------------J--- .. -----J----------- ... ---:---------J---------------:Hemlock :Solid Core \Douglas ,Solid Core iHemlock :Solid Cere :Alder :Solid Surface :: : Fir: :: :: ' ______ -------------------------------------------------------------------------------------------------I

klndica'te~ primzry t'ropic2l hardwoods. 'Others popular in the fu~niture· industry inclucie p'enlpok, Sepetir,' Moal in, and Sapell;-"

Source: Japan ~ood Products Stockpile Corporation

;, .'

VI-12

This table shows oak, -- the Japanese anq North American varieties of this temperate hardwood species -- to be the most popular species. However, a number of tropical species rate high1)' as well.

• "Lauart", the· vernacular name for the many s~ies of the Meranti group of Dipterocarps.

e Jongkong , .Nyatoh • Taun/Matoa • Teak

Furniture Conswnption by Species

JVW A estimates of consumption of tropical woods by the. furniture industry are shown In

the following table.

Table VI-O FURNITURE INDUSTRY CONSUMPTION BY SPECIES CATEGORY

,~ _____ ----------------------.-I I I I I I I ' ______ ----------------------_. I

: L lST'be r : Tropical Hardwoods : Temperate Hardwoods : Soft woods I . I I . Subtotal

1980 I I 1989

_________ w _____ , ________ _

I

OOOm' : % : DOOm' --- ______ 1 _____ '---------

I I I I I I

1300: 68: . ; 00 400: 21 I I SOO 200: 11 700

I I

1900 : 100 2300 _____________ • ________________ --- ______ 1 ____ - ____ • ___ _

Common and Specialty Plywood Tropical Species Other

I I I

800 : 100 I I I I

900

. 48 22 30

100

100

Subtotal I 800 : 100 900 100 I

----------_._-_._---------------------------------------------:

Source: JV~A estimates

This table clearly iliustrates that, although furniture is a vital industry segment for tropical hardwood lumber, the species are losing ground, especially to softwoods. Tropical plywood, however, is holding its own.

PACKAGING

Packaging is a sizeable but gradually declining market for wood major uses are for wood boxes, crates and ,::rating, and pallets. market is shown in the following table.

products in Japan. The The overall size of the

Tabl e VI-P ;. ~OOO PACKAGING MARKET AND END USES

(SMi 11 ion)

~--------------------------------~-:------~---~----;--:--~--~ : : ~ood : Export : Other : :. . : Year : BoxeS :Packaging:Packaging: Pallets: Total 1_ .. _ .... ,; ____ 1 ... _ .. ____ ... _1 _________ 1 ____ ..... __ ... 1 ... ________ 1 .. _______ _ 1 I' 1 -I 1 1

: 1980: 1349: 1061 I 563 I 251: 3224 : 1985: 1083: 1119: 289.: 503: .2994 : 1989: 1083: m : 345: 882: 3083 1----"------------------------------------------------------*Includes wooden dunnage, drums, wirebound boxes Source: Japan Packaging Technology Association and Japan Pallet Manufacturers Association

'/'°0

" ,

VI-13

As table VI-P indicates, the only growth sector is Pallets which retlects their expanding use in transportation.

Detailed statistics on the amount of woodus.ed in packaging are unavailable. However, table VI-Q shows estimates based upon a study performed in 1?85 by the Packaging Industry Conference. .

Table VI-Q TIMBER PRODUCTS USAGE FOR PACKAGING

1985 (OOOml)

t __ ~ _____ ~~ _____________________ ~------·--~----------- ___________ _

: \.iood: : Other \.iood : . Year :Boxes & Crates: Pallets :Packaging Material: Total

--- ______ 1 ______ --- ______ 1 _________ 1 ______ ------------1 ________ _ 1 1 I. 1

1980 : 3454: 194 :. 200: 3848 ---------f---------------;----·-----;--·-··----~------ ---:--.-------

1985 : 3156 : 389 : 103: 3648 ___ ~ ___ ~_I _____ ~ _________ I _________ l __________________ 1 ________ _

I 1 1 1 1

: 1989: 2660 : 682 : 123: 3465 J _________________ ~ _______ ~ ___________________________ __________ _

I

Source: Packaging Industry Conferences

Although "packaging" in'the overall is a growth market, substitution by other materials, e.g., plastics and corrugated has caused minimal growth in wood packaging. As an example, the Packaging Industry Conference Indicates that in 198044% of all export packing was wooden boxes; by 1988 that share had'dropped to 36%. .

The types of wood products and species categories used for, and their relative mix in, these packaging applications as estimated by the "Japan Packaging Conference are as follows.

VI-14

Table VI-R LUMBER SPECIES I:lSED FOR PACKAGING

:--------------------------------,--- ---------------------: : Lurober. I Product 1980 (X) : 1988 eX) : :---------------:-------------------- ----------1--.-------_ 1

I South Seas : Tropical hardwoods 15.1.: 13.9 I North America I Mainly softwoods 20.2 : 25.2 : North Seas I Mainly softwoods 6.1 : ·5.8 : New Zealand : Mainly softwoods 15.9 : 18.3 : Domestic : Both softwoods and 36.7 : 33.8 : : hardwoods I

I : Other : Both softwoods and 6.0 : 3.0 : : hardwoods I I

I I I I I I ----------:----------: :: 100.0: . 100.0 :. :-----------,--------------------------------~------------of

Source: Japan Packaging Conference

As to the primary tropical species used for lumber in packaging Apitong and Kapurare the most popular. However, any low priced tropical. species which can resist cracking during nailing and which have similar strength and. decay resistance can be substituted.

The major competition for these tropical species in packaging applications is from low grade Japanese pine, beech, larch and sometimes oak.

Packaging Consumption by Species

Translated into a table similar to that for construction and furniture, the consumption of wood by species in packaging is shown below.

Table VI-S PACKAGING INDUSTRY CONSUMPTION BY SPECIES CATEGORY

'. , I ______ ---------------------------------------------~- __ ~ _____ ·_I I I

: : 1980 : 1989 : I 1 _______________ 1. ______________ 1 I I· I I

: : OOOm' : % : OOOm' : % : 1_----------------------- ______ 1 _______ -.1.- ___ 1 _____ - ___ 1 _____ 1 I . I I I I I

: LlIDJer ::: : : Tropical Hardwoods : 550: 16 500: 13 I : Temperate Hardwoods : 500 I 16 400: 11 : : .Softwoods : .. 2450: 70, 2900.: 76: I 1 I ., I I . I I I I

: Total': 3500: 100 3800 : 100 : . 1 ______ ------------------ ______ 1 ______ ---1----- ________ .1 _____ 1

I , ' I I I I

: Conmon and Special ty Plywood :: : I : Tropical Species ': 300 : 100 400 : 100 : : Other :: :: 1 I I I I I I I I I

: Total ' : 300 1..100 I 400 : 100 :, :-----.--------------.--------~----------------------- -----_._-:

Source: JVWA Estimates

VI-IS

As in its other two major markets, plywood is holding position and tropical hardwoods are losing ground in packaging. The loss in the hitter is most pronounced, we expect, because of the price sensitivity of this sector; paclal.ging is a market for low cost woods. And, as prices have moved upward for tropical hardwoods and availability has declined, the natural result has been a drop in usage. As we can see tropical species, again in this case, are being replaced mainly by softwoods.

*******

As we have seen from this review, tropical hardwood lumber is substantially losing position in Japan, whereas tropical hardwood plywood is holding its own. These trends in interspecies and inter-product competition are discussed further in Section IX.

vn. JAPANESE TRADE ."pOLICIES AND REGULATIONS AFFECflNG TROPICAL TI.AJBER

hJ';:Jn h8.5 long h2.d the intemational image of a country with a relatively closed domestic market 1:0 many imported products. It has retained tariffs against many manufactured items while at the same time keeping its market open to their raw ma.terials. It has a reputation for nonta..riff barriers to trade sllch as stmdards or unreasonable inspection requirements. And finally, Japan has been accused of simply having an environment which discourages foreign competition.

To a degree, some of these barriers exist for tropical wood products. For example, Japan still has taJ-iffs on a number of wood products, including those of tropical timber, while at the same time, it allows Jogs duty free ent!'j. And the Japan Agricultural Standard does cause problems to South Seas manufacturers of plywood. .

However, by and large, JW/A fOllnd Japan to be a relatively open market for tropical woods, with few barriers, other than relatively high tariffs, that might inhibit growth in trade.

JVWA did find, however, in its review of the policies of the major exporting countries,· that Japanese "quality requirements" were considered to be a major trade barrier by several countries. Although this is not truly a trade barrier, it does affect trade.

This section first reviews the most obvious trade barriers -- duties -- then those nontariff barriers 'Nhich are less cle.1r, such as quality standards and building codes ..

TARIFFS

Japan's tariffs on wood products are somewhat higher than those of the USA or the European Community, especially as they rei ate to tropical timber.. Table VII-A on the next page summarizes the GATT or Most Favored Nation (MFN) tariff rates of the three. From this table wc note several points.

Japan has a high cuty -- 10% -~ on lumber of Dipterocarp species, whether rough or planed. All other tropical lumber enters freely. The country reportedly. maintains this duty, to protect its own wood processing industry, thus providing it with a degree of protection ~68.ir.s~ P.1a:1uhct:JTers in the South Seas countries.· In the USA, all lumber enters freely. Europe, however, maintains a 4.0 - 4.9% tariff.

Japan still maintains. a 5 % tariff on all tropical wood veneer except teak, which has zero duty, and sandalwood, :which has 8%. These duties ostensibly are to protect the country's

.. plywood industry. However, in JVWA's opinion, these tariffs are counterproductive since they hinder, rather than assist, that sector's competitiveness by raising the domestic price of raw materials, particularly 'considering recent Indonesian competition on plywood. The USA has no taJiff on veneer and Europe maintains duties of 4.0to 4.9%.

*

* * * *

*

*

*

* *

* *

* *

VII-2

Table VII·A . DUTY RATES OF MAJOR TIMBER PROOlkTS OF JAPAN, USA, AND EC

1990 ;~--------------------------------.--------------.---- --------------------------------------------------------_.: I I· I Japan : USA I EC : I Description I Code 1-··················:··················-1-····-····-----.---:

: 1 A** : 8** : A** B** I A** : B** : _________________________________ ft ____________________ ______ ~ __________ •• ___________________________________ ----I , Logs :

• _____ • ____ ~------------.~-------_-------------------- ________________________________________________________ I

I K i ri 1'4403.99 ' 5 ' 0 ' 0 ' 0 ' 0 ' 0 : , ' , , I , , ,

IOthers 14403: 0 I 0 : 0 : 0 : 0 I 0 I ____________ • __________________ •• ______ : ______________________________ ._. _____________________________________ ._ I ,

,lunber : t __________________ ._. __________ ._. _______________________ ._ --------- •. ------------------------------ _________ I ,

Ispruce, Pine, IPlaned :4407.10-110 8 0 f 0 : 0 I 0 : IFir tether Coniferous' : 121 4.8 0 : 0 : 0 I 0-4.9: 0 : I IOther Spruce/fir I 129 . 6· 0: 0 I 0 I I 0 : 1--·---·-------·:---···-----------:-··--···------- -.------- --··--~--:-··----·-:-··------I·---·-··-I------:--: Ilarch IPlaned 14407.10-210 8 0 : 0 I 0 1 0-4.9 I 0 : I' IOther I . -290 10 0 : 0 I 0 : I 0 ' 1---·---_·------1--------_·_------1----····_---_·- --- ••• --. ----·-~·-:·-·-·----:·-----·--:-·---···-I---------IDiptero IPlaned :4407.21- 99 10 5 :. 0·1 0 I 0-4.9 I 0 : carpaceae IOther :4407.21- 99 10 5 : 0 : 0 : : 0 :-------------------------.--------:--------------- ---------1---------1----------:--------- :---------:---------

, IOthers I 0 I 0 : 0 I 0 1 0-4.9 I 0 1--------------------------------·-----·--·-------··-·--.-.--~-----.---- .. -----.------.------.-----.-------------'Veneer Sheets '

------------------~----------------------------------- ----------------.. -------------------------------------- , ITeal< 14408.90- 20 0 0 : 0 I 0 I I 0 : IKarin, Sandalwood, res awn 14408.90 8 0 :. 0 1 ·0: 0-4.9 le: IVenepr for ply\olood 14408.10-410 5 2.5 :.. 0.1 01 : 0 : : Others 14408 5 0 : 0 I '0 I : 0 :

_________________________ M ________________________________________ • __________________ • _________________________ I

I

Processed \.Iood

." ------------------_ .. _---------------------------------------------_._ .. _---------------.-----------------IDrawn \.Iood :4409.10- 20 7.5 I 0 0-7.61 0 4 I 0 IBeading and Mouldings :4409.10- 20 ,. 4.8 I 0 0-4.5 I 0 3 I 0 :---------------------------------:---------------:---------:--------- ---------:--------- ---------:----------: :coniferous 14409.10-310 I 8 I 0 0-7.6 : 0 3-4 : 0 I Other. IDiptero carpaceaeI4409.20-330 I 10 I 0 0-7.6 I 0 3-4 ' 0 I IOther :4409 I 0 I 0 I 0: 0 4 0

1-----------------1-----------------:---------------1---------:--------- ---------:--------- --------- ---------I Particleboard IBoard 14410.01- 02: 8 I 0 4 I 0 10 0 I

: . IOther 14410.01- 02 I 10 : 0 0 : 0 10 0 : ,--~--------------:-----------------:---------------:- --------;--------- ------~--t--------- --------- ---------:. : Fiberboard : Hardboard 14411.11- 19 I 5.2 I 0 3 I 0 I 10 0 I I IOther 14411 I 3.5 I 0 0-6 10 I 10 , 0 1 ______ ----------------------------------------------- ------------------------------------------------.--~-- -----, IPlywood/Laminated Lumber I ______________________________________________________ ----- --------.-.------------------. -------------------, , , , , , , , , , , ,

ISurface Covered 14412.11- 12 15 15 : 3-8 I 0 10 : 0 ISurface/both side cove,-ed :4412.11- 12 . 10 10 : 3-8 I 0 10 ~ 0 : ____________________ .. ____________ :M _______________________ -________ : _________ : _________ ---------:---------:Both Sides :Less than 6crrn 14412.11- 12 15 15: 5-20: 0 10 : 0 : Coniferous IMore than 6Im, 14412.11- 12 10 10: 5-20: 0 10 : 0 :---------------:~-----------.----:--------------- --------- ---------1---------:--------- ---------1---------. O~he,- ILes!'. than 6irrtJ \4412.11- 12 15 15: 3-8 I 0 10 I 0 , :More than 6r;rn 14412.11- 12 10 10 I 3-8 : 0 10 I 0 :---------------------------------:- .. ------------ ··-·-·-·-I-------·-:--~---·-·I--------- :--_·-----1---------ILaminated LlJl'ber 14412.21- 99 15 0: 3-20 I 0 I 10 I 0 , IOther 14412 I 20 0 : 4 I 0 : 10 I 0 :

--·-··----·----·-----------·-------:----------·;-··1--------. -··----·-:--··-----1---·---·-:---------:--··----·: ,Densified wood 14413 I 7 0 : 5.8 I 0 : 3 : 0 : IBui lders' Joinery and Carpentry 14189.90.221 I ' 0 0 I 0-7.5: 0 : 4.1-6_0 I 0 : :\Jooden Furniture 19403.30- 60 I 0 0 : 2.4-6_6 I 0 : 5.6 I 0 : IIJooden Furni ture Parts : : 0 0 : 5.3 I 0 I 5.6 I 0 I 1 _______ ._---------------_·_·_--------_·"·_-_·· __ ··_--------.-- ••• -.----.----.------------ •• ------ ••• -----------, , . , *Duties primarily affecting tropical timber **A. Effective Rates are those which currently apply to all countries ree Most Favored )/ation treatment. "Sound" rates, those agreed to under the~ATT, may be higher. B. Preferential Rat those rates which apply to approved less developed countries under the international Ger,eralized System of Prefe agreed upon by most developed n~tions (see discussion on GSP in this section). Source: Tariff Rate Schedules of Japan, USA, and EC Coornission

VII-3

It is of plywood that Japan is most protective. Here its tariffs range from 10% on tropical plywood over 6mm thick to 15 % on that which is under 6mm to 20% on "Other" plywood type pIOduc:ts (e.g., surface treated or specialty products). In the USA plywood of tropical species enters at 3 to 8 % .. (The USA maintains a high 20 % tariff on coniferous plywood but this is mainly because of a bilateral debate with Canada on standards.) In Europe the duty is also 10% on tropical hardwood plywood; however, the EC has a duty free· quota which permits substantial amounts of product to enter duty free before the quota is applied.

In pa..-rtially processed wood products, Japan's rates are higher than those of the EC or America. In the "Drawn ·Wood" category -- e.g., a wood product planed to a profile -importers must pay 7.5% versus 0 - 7.6% in the States and 4% in Europe. Moulding products have a more comparable 4 % rate versus 0 - 4.5 % in America and 3 % in Europe. Other partially processed wood products, again of the Diptero carpacae species, must pay 10% compared to 0 - 7.6% in the United States and 3 - 4% in the EC. "Other" processed wood of other tropical species enter with no duty.

However, for finished wood products Japan's markets are the most open. Builders joinery and carpentry prodblcts, wooden furniture parts, and finally wood furniture itself -- all have

. no duty currently applied (actually Japan does have 0 - 2.4 % bound duty rates for furniture and parts under the GATT.) In the USA these products must pay duty ranging from 2.4 to 6.6% and the European Community charges 5.6%.

Actions 10 Reduce Duties·

Japan has been under pressure in the world trading arena to reduce its tariffs. In the mideighties, after extensive bilateral negotiation with the Unite.d States, Japan sharply reduced a number of product items to their present levels.

• Veneer came down from 15 to 5 %. • Tropical hardwood plywood (except that in the "Other" category) was dropped

from 17 - 20% to 10 - 15%. • And beadingsand mOUldings came down from 7.2 to 4.8%.

In 1989, the Japanese government made additional adjustments under the GATT on several products involving tropical wo,ods. )

• Rattan chairs and other furniture, upholstered seats, and wood shelving were cut from 3.2 -4.6% to zero.

• The bound rates of other wood furniture items were reduced from 3.8 to 2.4%.

In spite of these actions, Japan's tariffs on basic tropical wood products -- especially those of primary importance to its South Seas supplying partners -- .remain I relatively high compared to those of the other major developed countries. For this reason, Japan is again under pressure in the present GATT round to· bring its duties on wood products down, especially those affecting tropical products.

VII-4

Preferential Tariffs

Jap<ltl, lik~ the other major industrialized countries, has certain preferential rates -- usually zero -- for developing countries to enter the market with less competition. Those rates were shown in Column B in Table VII-A and have been established under what is called the Generalized System of Preferences (GSP).

GSP was lilitiated through the United Nations Conference on Trade and Development (UNCT AD) as a means of contributing to the growth of developing countries. GSP was introduced in Japan in 1971.

GSP duties are applied to specific countries established ~y the host nation as Designated Beneficiary Countries. At present virtually all tropical wood producing countries have received this designation in Japan.

As can be seen in Table VII-A, the GSP rates for most products are zero. However, Japan takes exception to GSP, as is permissible under the UNCTAD agreement, for several products of great importance to tropical countries ..

• All plywood items are excluded from GSP; thus developing countries pay the full duty rate.

• Rough sawn Dipterocarp lumber and veneer for plywood are considered "Selected Products" under GSP; thus their effective rate is only cut in half.

Several tropical countries have complained to the Japanese government about these exceptions; however, Japan has not respondrAl. Moreover, JVWA's survey revealed that these exceptions were considered to be significant barriers to trade in these products.

GSP Adminisrrarion: Possibly a greater problem to tropical wood shippers is the Japanese administration of the;; preferential tariff system.

Under the UNCTAD agreement Japan, as other countries,is allowed to set quotas for products covered by GSP. On this basis products from the beneficiary countries are allowed entry at the preferential rate up to an amount -- the Ceiling ]mport Value -- established by the Japanese Government on a formula basis (most recently adjusted in 1982). After that lhey must pay the effective rate.

Furthermore, governments have the right to suspend preferential rates -- either in total or for a specific nation -- if imports exceed these ceilings. At present, most preferential rights under GSP in Japan that are of interest to tropical producers, are usually suspended about mid-y~ as imports begin. to reach the Ceiling Import Value. For example:

• The Lauan lumber GSP has been suspended for aU countries every year for the . last five, typically in August.

a Rates for veneer have been suspended every year, usually in July.

VII-5

The table below srows present ceiling quotas and Japanese imports of the products involved.

Table .YII-B JAPANESE GSP CEILING QUOTAS FOR

TROPICAL TIMBER PRODUCTS (million $US)

:-------------~---------------------------- .... -- ..... _. __ ._--_. __ ... _--_ ..... _._----: : : 1985 i 1989 i Typical : : :.--.-------------.-:--- •• ------------.-: Month : : I Ceiling I Actual I Ceiling I Actual I For I I I Quota : I~rts: Quota i I~rts I Suspensi on I :-- .. -.--------------------------.:- .. --- .. -:-.--- .. -.1-·---·_··:-·_------:----------: IDipterocarp lumber I 32 : 75 : 38 : 72 I August I I (rough sawn) :::: I I : Veneer- : 7 : 13 : 7 : 13 I Ju l y : ILaminated ll.lllber I 4 : 6 : 4 I 12 I August: i---------·--····------·-·-····-----------··-·---·---------··----·-·--··-··-·-·----·--1 Source: Ministry ef Finance

It should be pointed out that, while the European Community has a ceiling quota, the USA does not. ~owever, it is applied somewhat differently in the EC than in Japan.

Summing up the tariff situation, Japan:

• Maintains generally higher tariff rates than the USA and EC on important tropical wood products.

• Has lower rates on finished wood products, e.g., furniture and parts. • Limits the benefits of GSP to tropical countries by exception (e.g., on plywood)

and by ceiling quotas.

It is clear that a liberaiization ofJapan's tariff rates and GSP regulations could be of benefit to tropical countries attempting to market their products.

STANDARDS AND CODES

Japan's agricultural and industrial standards, as well as its building codes, have some impact on the use of tropical timber in that country. JVWA has concluded from its review of many of these stJlldards and codes that none of them discriminate against tropical timber and thus :;hould not be considered barriers to trade. The following presents our review and analysis.

First, the Japan Agricultural Standard (JAS) defines specifications, design, application and performance for most timber products.' The Japan Industrial Standards (lIS) stipulate some of the same requirements for certain wood products; although sometimes there is overlap between the two s!.andards. Generally speaking the JAS deals with basic wood products and the lIS deals with products manufactured from wood, e.g., furniture.

VII-6

F0r comtruction, government regulations require that wood materials meet two regulations. The Building Standards Law, which enforc@s the building codes, regulates the use of timber in conslruciion. This law, administered by the Ministry of Construction essentially defines the requirements for:

• Structural materials used in wood-based houses and wood frame construction. • Exterior materials.

The Housing Finance Fund (a government corporation which helps finance lower cost housing) also· has specifications which govern the use of materials for subflooring and sheathing material for wood based housing as well as materials used in 2 x 4 or wood frame construction. Usually, both the Building Standards Law and the specifications of the Housing Finance Fund require that timber products used for construction conform with the JAS. The former are requirements for strength and safety whereas the latter are mainly guarantees of a certain level of quality in housing financed by that organization.

Construction is generally the only market where these standards or requirements may affect the use of tropical timber. Although there are JAS and JIS standards for material used in fUITl;tur~: fixtures, packaging and pallets, these st.andards have minimal direct effect on species used, are not compulsory and materials defined by them are incorporated depending upon the preference of the manufacturer.

Let us consider each of these standards areas.

Japan Agricultural Standards

According to MAFF, the purposes of the JAS system are to:

• Improve the quality of agricultural and forest commodities. • Aid in their uniform production, distribution, and consumption. • Assist consumers in product selection.

At present, there are approximately 25 primary standards which cover wood products as .. follows:

. 1. Logs a. Coniferous Logs b. Broadleaved Logs

.2. Sawn Timber a. Coniferous Sawn Lumber b. Broadleaved Sawn Lumber

3. Glue Laminated Timber a. Glue Laminated Timber for Fixtures b. Decorative Glue Laminated Timber for Fixtures c. Structural Glue Laminated Timber d. Decorative Structural Glue Laminated Timber

4. Large Dimension -Glue Laminated Timber for Structural Uses

5. Structural Lumber for Wood Frame Construction a. A Class Framing Lumber b. B Class Framing Lumber

6. Laminated Veneer Lumber 7. Structural Panels 3. Veneer

a. Veneer (general) b. Veneer for Fixtures and Furniture (face veneer) c. Veneer for Chip Board

9. Joinery Lumber 10. Paulonia Timber

a. Logs b. Board c. Lumber for Wooden Clogs

11. Rough/Squared TimbeL 12. Timber with Wane

a. Timber with Wane of Coniferous Wood b. Timber with Wane of Broadleaved Wood

13. Telegraph Poles 14. Railway Sleepers 15. Plywood for General Use

a. Plywood for General Use Whose Face is Made of Domestic Wooden Veneer

b. Plywood for General Use Whose Face is Made of Foreign Wooden Veneer

16. Plywood for Fire Retardant Doors 17. Fire Resistant Plywood 18. Concrete Form Plywood 19. Special ty Plywood

a. Fancy Veneer Overlaid Plywood b. Specialty Processed Plywood .

20. Structural Plywood 21. Scaffolding Plywood 22. Flame Resistant Plywood 23. Plywood for Pallets 24. Veneer (for Plywood) 25. Flooring

a. Flooring Board b. Flooring Block and Mosaic Parquet c. Compound Flooring

VII-7

VII-8

In general, for each product the JAS covers its application, standards of quality aild testing methods (e.g., for wood surface quality; physical or mechanical properties, etc). Some also include requirements for performance. For example, the JAS for Plywood for General Use includes quality criteria for:

• Adhesive strength ., Face and back quality • Core or crossband quality " The finishing of the sides and ends • Insect control treatment (when applied) • Moisture content • Dimensions

Simply expressed, the: product is inspected to the critdia described under the appropriate standard and then inscribed with a so-called J AS mark, examples of which are shown below.

Structural Lumber for Wood Frame Construction (A Class Framing Lumber)

Glued Laminated Timber

Structural Plywood -

Note: The Japarlese I a"g:;;;ge indi cated by the nunbers trans I ates as folle.ws:

1) Grade ?) Ncme of Grading Organization 3) K;nd of Pr~s~rvqt:ve Treatment 4) Type of Preservative Us~d 5) Name of I~em 6) Structural Plywood 7) Type Special or Type 1 8) Thickness

Flooring Block

The JAS system is not compulsory and it is the manufacturer's option as to whether its products are inspecte..rf and certified with a JAS "mark". Table VII-C illustrates how much of each product manufactured in Japan is so certified.

Table VII-C AMOUHT OF JAPA~ESE PR~UCTION CERTIFIED UNDER THE JAS

(million m')

:~ ________ • ____ w _________________ r_~ __________________ ___________________________________ _ : : 1980 : 1988

:-------------------------------:-------------------------------: : JAS: : : JAS : : Total : Graded : X JAS : Total : Graded : X JAS

I :Production : Volune :CertifiedlProduction I Voll.rne : Ordered ,------------------------_._---- ______ 1 _________ 1 ____ - ____ 1 ___________ 1 _________ 1. _______ _ I I' I I I 1:0 ,y"cod - - Genera l Use I 999 i 559 : 56 : 790 383 I 49 IPlywood -- Concrete Form I 241! 134 I 56 I 249 138 55 IJ.>lylolood -- Structural: 6 I 6 : 100 I 12 12 100 IPlywood -- Specialty : 353 I 80 : 23 : 293 71 24 IFlooring -- Single layer: 9 : 5 : 61 : 6 4 68 :Flooring -- Multi layer: 38 : 23 : 61 : 58 32 56 : Llsrber* :::: :--------------------------------------------------------------------- -------~- ---------

VII-9

*A~curate statistics are not available en lumber; however, an estimated 6 - 8% is JAS certified each year.

Source: Food Distribution Bureau, MAFF

As can be seen not all products manufactured are JAS certitied. Further the percentages of products that have been so marked has varied minimally QV er the last several years.

JAS certification may be accomplished in Japan only by Registered Grading Organizations or within Permitted Plants. The former are agencies which have· gone through a rigid examination and registration procedure as stipulated by MAFF. The latter are those plants which have large scale production, and inspection and certification is built into the pr:oduction cycle. In this case the plal!t itself must be approved. and regularly inspected by representatives of MAFF.

Producers without such in-plant certification capability must have their products inspected and JAS certified by Registered Grading Organizations. These firms grade both domestic and imported product.

For foreign producers two options exist: a) obtaining the necessary JAS certification on the arrival of their products in Japan, or· b) becoming a Permitted Plant in their own country .

.. The first method can be accomplished rather easily as long as the product meets the ,requirements of the appropriate JAS.

However, becoming a Permitted Plant in another country is not a simple or inexpensive process. At present, it takes 6 - 12 months and involves: (a) several inspection and training trips to the plant by MAFF representatives, (b) the training of company personnel, and (c) in some cases,the installation of specific testing equipment. Nonetheless it can be accomplished. At present, 22 such Permitted Plants have been approved and are operat,ing in North America as shown in Table VII-D.

Table VII-D JAS PERMITTED P~ANTS IN NORTH AMERICA

I_._~ __ ------.-----~----------- __________________ _ I I I

:--------------.------~--------ILlAl1ber 12 x " lUiber ITreated Luroer :?lywcod for Structural Use Ilaminates/Panels for I Structural Use I I

USA I Canada ---------:---------

1 I 1 I 1 I

. 0 I 4 I

I I

o 2 o

11 2

---------1---------I Total 7 I 15 1--------------------------------------------------Source: MAFF

VII-IQ

Another alternative is to use a Designated Foreign Testing Body (DFTB). within that country to gain the approval from MAFF_

At present, only two organizations -- the Council of Forest Industries (COFI) of British Columbia in Canada and the American Plywood Association (APA) in the United States -- have been approved as DFTB's for wood products. According to MAFF, these orgaI'.iLations must· have:

• A :ecord of past activities as a. certifying agency under internationally acknowledged standards and certification systems.

• Sufficient technical competence, financial strength, and neutrality to correctly execute the required JAS review and approval services as required by MAFF.

Obtaining this designation is a complicated process; however, it can be accomplished if the organization can meet the inspection standards' and above criteria.

Both COFI and APA have requested that Japan go further with the DFTB process and essentially a!1o\v them to il1'ipect their member companies' plants and certify directly to JAS standards, rather than require that each of these companies be designated as Permitted Plants .. Although this issue has been pressed at high government levels, Japan has not yet agreed. ..

Pro.?l;:",.:; /0:' TiopicalTimher

The JAS standard impacts primarily the producers and exporters of tropical hardwood plywood since most· tropical lumber related products are not used in construction as structural products.

As we have noted,· two thirds of all plywood· flows into construction;. and imports flOW

account for 31 % of this consumption. Although it is not known how much plywood receives JAS certification on arrival, none is certified in the producing country because Permitted Plants have not bee.n established.

VII-ll

Large builders, who are becoming increasingly quality conscious, are reluctant to use imports unless they at least have JAS approval. For many of the large builders JAS is a minimum -- they have their own standards which are even more stringent. Moreover, all housing built under the specifications of the Housing Financing Fund must use plywood that has a JAS mark. Thus, any product which is not certified under JAS essentially -is precluded from competing in a significant share of the market.

Indonesia l as the major supplier of plywood to Japan, has complained to MAFF regarding this problem. The country could have its product certified in Japan. However, to date only a minimum amount of imported Indonesian plywood is so certified.

Longer term, any of the produd'ng: countries have the option of having their manufacturing operations approved as Permitted Plants. It is doubtful however whether' any of the tropical countries have testing agencies which could meet the Designated Foreign Testing Body criteria.

Japan Industrial Standards

The Japan Industrial Standards (JIS) were :initiated under tfi'e Industrial' Standardization Law and have similar objectives for further manufactured products as do the JAS.

Li'ke J AS, the JIS is also voluntary. However, if products are to be used in construction, as indicated, the Building Standards Law and Housing Finance Fund will require them to meet JIS if covered by such a standard.' In addition, all products purchased by the government itself must meet those JIS standards which apply.

At present, the JIS standards cover the following wood based products:

Building and Consrrucrion

1. \Vooden structure fire tests. 2; Wood flush doors. 3. \Vood sliding glass doors. ' 4. \\'ood construction of school buildings.

Furniture

5. Strength tests for earthquake fittings used in wood furniture. 6. Wooden office furniture -- general. 7. Standard materials for wooden office furniture. 8. Standard production methods for wooden office furniture.

VII-12

Others

9. Testing methods for wood. 10. Flat pallets. 11. Wood boxe$ for export packing. 12. Wood framed boxes for export packing. 13. Wood skid assemblies for export packing. 14. Cleated plywood boxes.

The JIS' inspection system' -- domestic inspection agencies and approved plants, foreign testing agencies and approved overseas plants _ .. is similar to that of the. JAS. However, its standards have minimal, if any, effect on the use of tropical timber in Japan.

Building Codes and Standards

JVW A could find nothing which could potentially be restrictive to tropical producers in Japanese building codes and standards other than the requirements of the Building Standard Law -- which sets forth standards relating to a) structural strength, and b) fire prevention .. - that certain materials must meet the JAS or JIS.

Few tropical wood prod~cts,' other than plywood, are affected by the structural standards. The fire preventioil~t.andards do affect tropical woods -- however, they affect tropical just as they affect all woods.. Many fire prevention experts in North America, and in Japan for that matter, believe that Japan's Building Standard Law discriminates against wood generally in such areas as:

• Flame testing methods for fire retardant wood doors. o Restrictions on the use of wood siding because of fire concerns. • The use of wood in new office buildings.

However, none of these questions relate to tropical timber specifically. Neither are they trade barriers as such. These standards simply reflect the best ideas of Japanese building and fire technologists when they were created. Thus, JVWA believes tropical timber producers should not worry abollt them -- except to cooperate with tethnical groups, e.g., not only f:-om North America but witllin Japan -- seeking to get them changed.

VIII. "" PRODUCER.~' POLICIES AND POSmONS AFFECTING EXPORTS TO JAPAN

This section analyzes the position of the supplying countries vis a vis Japan: their exports to that market and relative imPortance; their perceptions of the Japanese market; and their domestic policies -- both trade restrictions and inceniives -- which impact trade with Japan. We first review these points in their totality then look at Japan's three primary suppliers separately ~ ""

JAPAN'S SUPPLIERS

The South Seas region is Japan's tropical wood basket with 99 % -of its needs being supplied by the countries within that region. Africa and Uitin America have shipped a few logs and a little lumber; but, t? date the amount is a small portion of Japan' sre;quirements.

Japan is supplied tropical wood products by a wide range of countries -- ranging "from some of the most poor -- Vietnam -~ to the most wealthy of the newly industrialized countries -Singapore and Hong Kong. A few of the characteristics of the countries supplying Japan are shown below.

Table VIII-A CHARACTERISTICS OF SELECTED COUNTRIES SUPPLYING JAPAN*

1 ___ --------------- -------------------------'----- ______ 1 1 1 I 1 1 1 1 1 1 1 I 1

1 1 I 1

1 1 IBasic \iood; ,

1 GNP : Forest Total : \iood

Population: (mi II ions) 1

Per Capi ta ($)

1988

: Resources I (mi II ha)

Exports IProducts % of ($ bill) ITotal Exports

I 1 1988: 1988

1 _________________ _ ----- .. _- ______ 1 ........ __ ----- ----------,--------------1 1

1 I

1 'Asia

Hong Kong India Indonesia Malaysia

6 822 181 18 4

61

10989 340 440

1860 790 630

1 1 1 1 1 1 1 1 1 1 1 1

1 73.1'

Papua New Guinea Phi I ippines Singapore S. Korea

I Taiwan I Thai land

3 43 20 56

10521 3240 7509 1000

38.3 73.6 -15.6 14.0 6.7 1

3.9

14.8 19.5 21.1 1.4 7.1

45.8 60.7 65.9 15.9

,-"-_ ... -----------_ .. ---------- ----- .... ------- ----------- ----------1 ILatin America _I I Bol ivia 7 I : 570 29.9 : aroz"j l 144 I 2160 300.6

.6 33.8

, ______ ... ___________ ---- __ - ... -_1 ... -- .. -_-------- __ ... ___ .. _____ .. _______ _ I r 1

IAfric! I : : Gabon 1 I 400 19.9 : 1.2 : Ghuna 14 I 2970 1.3 : 1.0 I Ivory Coast 12 I 740 3.3 I 2.4

2 4 '

16 16 ND 13 NO NO NO 11

NO ND

NO ND NO

Products**1 Exports to!

Japan ($ mi ll)

*** ***

1244 1331

93 75 30 NO 10 10

2 8

40 1

*** I ................................................................................................ "_ .................... -":, .......... .. --~---------------- ______ I 1 1

·Statistics shown in this section, unless otherwise indicated, are based upon the statistics of the producing country. Thus there will be differences from Japanese statistics -- e.g., country exports versus Japanese imports .- shown in earlier sections of this report because of timing of shipments, FOB versus CIF values, accuracy and other factors. Generally, JVliA bel ieves Japanese statistics to be the most reliable. **[ogs, lumber, plywood only ***Minimal NO . not determined

Source: Various

VIII-2

Japan· -is a key market for all exports -- numb_er one in many cases -- to the tropical timber supplying cou!1tries of the South Seas. Its importance as a wood market is critical -- in some case:>;. dominant -- to the export success of these countries.

Only the major :;ountries supplying Japan will be covered in detail in this section -- namely Malaysia, Indon~~ia, and the Phihppines. The smaller producing countries -- e.g., Papua New Guinea and the Solomon Islands -- will be dealt with only in the aggregate. Others are important --' e.g. ,Taiwan, South Korea; however, they are not primary timber producers for export.

In Asia each of the supplying countries, has taken a somewhat ·differentapproach. Malaysia, as Japan's dominant overall source, continues to supply logs from its states of Sabahand Sarawak. Indonesia has b~n the most aggressive imposing bans on Its logs, heavily taxing its exports of lumber, and pushing hard to gain position in Japan's plywood market. The Philip?ines, with its logs badly depleted, seems to be pulling back.in all sectors.

To understand )4pa11 's~uppliers it is important to understand these variations, as wellas the forest products development of these countries within the regjon as a whole. The past djr~I~'c·;· :If SEAL-PA, Mr. Antonio Bernas appropriately captured this in a chart which shows the life cycle stages of the major timber based industries in the region.

Abbreviation:

Table VIII-B LIFE CYCLE STAGE OF ASIAN TIMBER BASED INDUSTRY

1 _________________________________________________ , , , : : Period/Country : : Life Cycle Stage :-----------------------------1 : :50'5 :60'5 170'5 :SO's :90'5 : 1 ___________________ 1 _____ 1 _____ 1 _____ 1 ____ .1 _____ 1 I I . I I I I 1

'Early :PH IMP IMSS IPNG :SI I ITHAI liNO 1 : IB I

-.------.--.--.---- l----- 1----- :--~--:----- :-----: Growth I IPH IPH IMP IMSS :

I 'THAI:THAI: INO :PNG : : IMP .IIoISS: :

. I : IND: : . I -------------------:----- ----- 1----- t----- ;-----:

,Maturity I l lPH ·IPH I : ~ :THAI /THAI: l : I : IND I

, : I liMP l 1 •• ______________ • ____ .. _ •• _____ .. _____ .... ____ .. _ .. __ .... 1 , ,

PH-Phi l ippines INO-Indonesia SI-Solomon Islands

THAI-Thai land MSS-Malaysia Sabah/Sarawak B-Burma

MP-Peninsular Malay~ia PNG-Papua New Guinea

.Source: Paper by Antonio Bernas for the Regional Seminar for the Management of the Tropical Forest, Jakarta, Indonesia, January 90; 90's projection by JVWA.

VIII-3

JAPANESE TRADE BARRIERS PERCEIVED

Generally, the supplying countries perceive few Japanese tntde barriers -- other than tariffs and, to a lesser degree, standards -- as restricting thei~ market entry. There is concern in several countries that Japan maintains other impediments that restrict entry, especially of wood products. And there is a feeling in some quarters that Japan's acti9ns are not always transparent and that tropical hardwoods are being, kept 'out in ways that may not readily be visible. However, those expressing these concerns were unable to support them and JVWA's investigation did not reveal such hidden barriers to trade. '

However, as this study has shown in Section VII, Japan's existing trade barriers do cause problems:

• Tariffs are imposed on some basic tropical ,wood products, higher than those in the USA and European community.

'. The GSP system is limited and, for those products included, has been administered ina restrictive manner.

• The Japan Agricultural Standard, d~s ~ake competition fo~ certain products -- e.g. 'Tnd0nesia..1 plywood.:- somewhat more difficult. ,

• Building codes preclude certain uses of wood products; however, they are not truly trade barriers and do not discriminate against tropical woods. ' -

JVWA does believe that continued pressure on Japan, through the GAIT and via bilateral negotiations, will eventually eliminate or significantly reduce Japan's true barriers to trade.

Quality RequiremenJs

Some Japanese quality requirements, were deemed "barriers" by the supplying countries. For example, Japan's high interest in I~quarter" or "rift"sawn lumber was classified as a trade barrier by several countries. The normal sawing method is fiar sawing which generally develops a full grained, broad pattern in the face of the \I,'ood. Quarter' or rift sawing, a more difficult 'pr"bcess, produces a consistent vertical grain which is highly prized in Japanese wood products, e.g" for furniture and for many building products. ' ,

Similarly some producers of mOUldings and miIlwhrk items, furniture parts and other high value added products indicated it was difficult to compete in Japan -- "The quality requirements are just too tough", "The USA and, to a lesser' extent, Europe, are much less demanding" were common comments.

Though hardly "trade barriers" per se, such quality requirements of the Japanese market do put' pressure on' suppliers. To many with lower technology and inferi(':, I :~uality control capability, such requirements may still be "de facto" barriers to entry.

VIII-4

PRODUCF.RS' TRADE RESTRlCflONS

The, greatest impediments to trade between Japan and the producing tropical countries, however, lie with the latter, not the former. Restrictions abound within the tropical countries thatkf:ep many of their products from moving to Japan or the rest,of the world.

Such trcde restrictioris include: logging bans; log export restrictions; restrictions on certain . lumher, ver.rer, and other products; export taxes; and others. Table VIII-C on the next page shows the ~ajor impediments now existing within the primary countries supplying Japan and other tropical timber producers. . '

Log Restrictions

,Most tropical wood suppliers now either have log export bans, log restrictions in place, or hav~ restrictive quotas that llmit the amount of wood in raw form that, can be shipped.

Several countnes in Asia, notably' Thailand an'd India, have long had bans OT:· major restrictions on the export of logs. Peninsula Malaysia banned their export in the mid sc't:nties. The Philippines did likewise: however for at least 10 years the ban was ineffective and smuggling was rampant. In 1986 the new Philippine government was finally ahle to make the ban' stick and Philippine exports have diminished to'nothing, except for pulp logs permitted annually from plantation forests.

In 1978 Indonesia announced it was planning to ban the export oial1 logs by 1985. Accordingly log exports, which had been a'large earner of foreign exchange for that country, were completely phased out by the target date.

The latest country to restrict log exports is Papua New Guinea. PNG announced a series of logging restrictions in June of this year including the statement that after 1992 log export permi~s would neit be renewed. As its second' largest supplier this actiqn, unless it is modified, wiII hurt Japan.

As sto:ted, there is political and environmental pressure for Sabah and Sarawak to restrict or limit log exports. However at present the foreign exchange gained. is deemed' so important to the eco,nomies of those states that it appears doubtful whether any changes will occur in the immediate future.' Log exports being continued at present rates ,over the long term is, however, a tenuous proposition.' .

The restrictions on wood exports were not studied in detail outside the South Sea's area. However in both Africa and Latin America most countries have either bans on the exports of logs or quotas which limit their export.

Table VIJI-C EXPORT RESTRICTIONS OF SELECTED TROPICAL TIMBER EXPORTING COUNTRIES (1)

1----------·----------------------·------------------- ---~-----------------.-------: _ : Ll.Illber : : I------------------~---------~l I Logs : Rough I Plywood : ,: Sawn IRough'KO I Planed 1-, _______________________________________ I _________ I ____ w ____ I _________ I ________ _ I I I I I

:SOOTHEAST ASIA I I I IPhi l ippines B(2) BIB I B(3): ET l~aLaysia - Peninsula B ET I ET I ET _: F

Sabah f F:F: F ~ I ' F F F: "F : F :' F Sarawak

Indonesia Solomun Is lands Papua New Guinea Th2iland

B ET 1 ET 1 ET 1 F 1 t 1 F F I F(5): F(4): -F(4) F(6) F F: F(4) I F(4) B B BIB: NA B ET ET: ET': ET 1 India, '

I ______ ---------------~--------1 __________________ ---------:--- ______ 1 ______ ---

'ILATIN AMERICAN :Brazil B :Bol ivia B' :Ecuador B

F HA B

F NA B

F HA

1 ______ ------------------------ , _____________ M_MW. _________ • _______ _

1 1

IAFRICA I :Ivory Coast : O,ET ET ~T' ET

,I Ghana I 0 - F F .- F : Gao:;ri : HA ' !lA HA HA : Cameroon : Q 1 NA 1 NA NA ,----------------;------------------------------------ --~--------------1

F NA NA

NA .F NA NA

---------,

1-1 1 1 I

Veneer

ET F F F B F(4) F(4) ET ET

F NA NA

ET F ~A

NA

1 1 I 1

VIII-5

B - Banned ~ - Free of restrictions ET - Export Tax (see Note 5) Q - Export quota goverrvnent. banned.

regulated "Some spec i e,

Notes: (1) Table shows, all timber producing countries in Southeast Asia with significant exporJ:s to Japan and only

'selected countries in Africa and Latin America. (2) Excep! plantation logs mainly for pulpwood. (3) Planed lunber (4 sides) under 2 inches' (5111Tl1) thick is banned. (4) No production of these products. (5) Export taxes are shown below.

Philippines -- Plywood and Veneer Peninsula Malaysia Selected Species

4% FOB value

a) Rubberwood *, Ramir. *, Red Heranti*, Nyatoh*, Jelutong*, Sepitir* ,b) Mersawa, Yellow and ~hite meranti:, Red Batan, Kempas, Harbau,

Bintangor, Keruing c) All Veneer d) RubberwlJod, S4S dressed timber- (excep't finger joint)

Export Tax $/m' FOB Lumber and Veneer W*

44 30

22 44

* An export quota was initiated species listed.

for rubberwood in 1990 and quotas may also be instigated to the other

*" Currently apolied mainly for Indonesia

strips. After Januarv 3, 1991 will apply for all sizes.

Selected Species a) Ebony, Sonekeling b) ~hite meranti, Agathis, Ramin, Teak, RubbPrwood, Albazzia c) Red meranti,'Yelloll meranti, Pulai, Kapur, Hatoa ,

Export Tax Rough Lunber

2400 1000 500

Thailand -- Veneer 40% FOo value (with certain exceptions) India -- All processed products 10% ~oast - - '. Logs 24 - 44%

LU1eer 6 - 44% Veneer 1 - 2% Plywood _ 1::

(6) PNG log exports will be sharply restricted in two years

$/m' FOB Planed Lumber

, 1200 500 250

VIII-6

Restrictions on Other Products

In the mid eighties, Indonesia proceeded, to ban the export of several other products such as the very popular, .and increasingly sca:rce in Indonesia, Ramin lumber. Veneer exports were banned at the time as well in ,an attempt· to strengthen the country's then budding plywood industry.

Also in the eighties Peninsula Malaysia instigated a system of moderate taxes -- in t.he $22 to $44/m 3 range - on the export of certain processed wood products, notably lumber. This action had no major effect upon its lumber exports.

In 1988 the Philippines took· a major step by banning the export of both rough and finished lumber as well. Only "finished wood parts" are now allowed to be exp0!ied. The result has been that lumber exports to Japan have declined to virtually nothing. As yet .:- though it is too early to tell -- there has been no corresponding, rise in finished products exports.

In late 1989 the government of Indonesia decreed the most restrictive action on lumber to date. It initiated an export tax procedure ranging from $250 to $1 OOO/m 3 on the most popular species, e.g.',the 1'ieranti, Kapur, Rubberwood. Such was' a major jolt to the traders in the consuming countries since the effect was to double, in some cases, the price of the lumber. . It is too early to clearly determine the impact of this action but it wi1l certainly raise prices and reduce Indonesian exports -- actions which the Indonesian government states are the results intended.

There is also pressure building in Malaysia to follow Indonesia's lead with higher export taxes; however to date that has not been accomplished and JVW A surmises it will not happen to a significant degree. .

Forest Depletion

Most of the trade restnctlOns have developed in the last 10 - 15 years. They stemmed, at least initially, from the desire of the producing countries to .conserve their forest resources which, in many of these nations have been declining at a rapid rate. AHhough this analysis is not about forestry, that issue pervades every trade restrictive action by the tropical producers.

Timber availability has been significantly reduced for a variety of reasons in a number of the Southeast Asian countries -- Japan's primary suppliers -- as well as in Africa and, to a lesser degree, Latin America.' These problems have been well analyzed in an ITIO study, summarized in the book, No Timber WithoUT Trees: Sustainabiliry in the Tropical Forest. The tropical timber picture throughout the world has been, and is continuing to be; affected by the economic status of each country, shifting agriculture, commercial logging -- all either directly stimulated or at least exacerbated by, government policies or the lack of them within each country.

VlII-7

In some countries of Asia -- Thailand, India, the Philippines, Peninsula Malaysia -- the timber supply picture is particularly grave. These nations have sharply restricted logging and banned log exports as part of an overall program to conserve and better utilize their forest resources.

The same picture is present in Africa where the timber resources in virtually all major supplying countries have been depleted. Latin America, though having similar problems, is in somewhat better shape.

The timber supply picture in all tropical countries has, and will continue to have an influence on government policies which may restrict trade in tropical wood products.

Industrial Development .

In addition to fo!"est conserVation, greater industrial development, has also been a primary motivation for the restrictive trade policies in the tropical countries, Indonesia, is,· of course, the primary example.

Indonesia. combined its 1978 - 85 incrementally imposed ban on log exports with a major investment program in new plywood facilities and an aggressive sale effort and pricing policy. Indonesia now is trying to carry that policy further with additional restrictions and heavy export taxes on veneer, lumber and certain other "~ess processed products." The country's new avowed objective is to penetrate the world's wood furniture markets with its own in-country produced products using a combination of restrictions and incentives ..

Peninsula Malaysia -- though originally motivated by forest problems -- has taken a similar tack with industria! development. However, it's effort has been less aggressive and the emphasis has been more on building domestic lumber capacity rather than plywood. It too, has its eye on the world's furniture trade and, in fact, has made greater progress in some

. ar~s, e.g.,Japan, than has Indonesia. Peninsuia fv1alaysia, however; has tried to accomplish its goals with mainly log export restrictions rather than restrictions and high taxes on lumber.

The Philippines program has been stimulated by similar ambition. However, the intensity of its industrial development program appears limited both by its political. instability and its I I1cre<1 si np problems .of. timber avai lability.

More details on each of these countries" export policies follow in their respective country reviews.

VIII-8

MALAYSIA

Malaysia is Japan's largest tropical wood supplier and its. primary source for logs. It currently exports $1.3 billion in basic wood products to Japan*. Although the country has some export re'lrictions it is on balance the most open of the major tropical traders. .

The country is a federation of eleven states and a federal territory miling up. Peninsula Malaysia andtwo states on Borneo (the major island Malaysia shares with Indonesia); Sabah and Sarawak. '.

TImber Resources

Forests totz.1ing 20.2 million ha. cover about 62 % of Malaysia total land area. Th~ forest cover is heavy in Sarawak, less so in Sabah, and has been depleted in Peninsula Malaysia due primarily to the conversion of forest land to agricultural. crops ..

Table VIII-D MALAYSIA

DISTRIBUTION Of FORESTS . 1988

I ___________________________________ ~---------- _____ I

I I : : Total Total : : Region I Land Area : Forest Area : % of : :. : (million ha) : (million ha) :Land Area:' ;---------:---------------:---------------~---------:

. :Peninsula: 13.2 : 6.4 : 48 : , _________ 1 _______________ 1 _______________ 1 _________ 1 , I . I I I

: Sabah: 7.4 : 4.4 : 60 : :---------:---------------:---------------:---------: :Sarawak : 12.3 : 9.4 : 77 I 1 _________ 1 ______ --- ______ 1 ______ --- ______ 1 _________ 1

I I I I I

:Total: 32.9 : 20.2 I 62 : 1 ______ --------------:-----------"------------- ______ 1 I I

, Source: Halaysian Tinber Industry Board

Almost 87 % of the total forest land is covered with pipterocarp forest, t~at which produces the most desirable' timber for international trade and, of course, Japan.

It should be pointed out here that the forests of Malaysia are state controlled, i.e. Peninsular, Sabah and Sarawak each decide what they will do with their own timber. Further, the state forests are a major source of government revenue. In Sabah and Sarawak, this revenue accounts for a high percentage of those states' total funds; thus, their governments have been loath to consider any changes -- e.g.,Iog export restrictions -- which might affect their budgets.

*J apanese statistics

VIII-9

MaIaysian Log Exports

Mal~.y$ia is the world's largest supplier of tropical timber, producing about 30 million m;) and exporting two thirds of that amount. Virtually all logs produced in Peninsula Malaysia are processed locally while 65 % and 82 % of the logs produced in Sabah and Sarawak respectively. are exported. As was shown in Table VIII-A, 13% of Malaysia's exports of all products are timber industry related.

Malaysia is the world's Jargest exporter of both tropical hardwood logs and lumber and the largest single· exporter to Japan. Its production and exports of logs are shown in the following table:·

Table VIII-E MALAYSIAN PRODUCTION AND-EXPORTS OF LOGS

I ___ ~ _________________ • _ _____________ ---------------------- •. _--------- ______ 1 I 1

: : : Total Malaysia : I P. Malaysia Sabah*· ISarawak* :----------~-- •• ----: : DOOm' ~OOm': ~OOm'. I DOOm' iSrni II ion': 1 .. ____________________________________________ 1 _________ 1 _________ , _______ : ... 1

1 I I'- I I il>roduct ion : : : : : 1983 11200 9500: 18200 38900: - NA : : 1980 I 10453 9063 i 8339 27915: .NA : : .............................................. I .......................... J .... .... -.- ...... : ................... .. ................ I ...................... ;

: Exports i : : 1',189 14: 6135 14951 21000 1613 : : 1985 I 262: 8234 6695 15191 971 : 1 _______________________ , _____________ 1 ______________________________ # _____ ,

.1 ., I· I 1 ·:Exports ~ of Production: :. : I 1988 , I ** : 65 82 . 54 • - : : 1980 .: 3 : 91 80 54 - - : I ______ --------~~- ______ I ______ ------- • _____________ •. ____________ _____ ~ ___ I 1 I

: Exports to Japan , : : : 1989 : 4776 6941 I 11717:' 10'13 : 1985 : 24 64 75 2346: 8845: 653 1 ______ ----------- ______ 1 ______ ------- __________________ 1 _________ 1 ________ _ 1 I I I 1 1% Exports to Japan : ::. : :ofTotal: ::: : 1989 : 78 : 43 : 56 : 63 : 1985 : 9 79 I 3') : 58 : 67 I ______ ----.---------------------------~-------------- _______________________ • 1 '

j *1989 figures for Sabah and Sarawak are 9 months annualized w*lnsignificant ~ Sou'ce: Malaysian Tirrher Industry Board

As can be seen, P. Malaysian's logs are virtually all used at home. Howev,er, those of Sabah and Sarawak are largely exported and Japan is the' primary customer.

Malaysian Lwnber Expons

The lumber picture is different. P. Malaysia is the primary force here, producing nearly 80% of Malaysia's lumber, over half of which is exported. Lumber production and exports are shown in the next table.

VIII-lO

Table VIII-F MALAYSIAN FRoOUCT~N AND EXPORTS OF LUMBER

1--------------------------------------------------------- -------------------1 I : I I l Tota.t : I IP. Malaysial Sabah I Sarawalc Total l$Million: 1------------------------_ 1 _----------:---------1-------~- ,--------:--------~I INo. of Operating Mills : I I I I 1988 ' ,,583 : 110 : 78 n1 I -- : :------------------------- -----------:--------- --------- ---------1"--------1 IProduction (OOOm') I ,I I : 1989 ,5600 1550 460 7610 : -- I

': 1983 5339 542 357 1 6238 -- I l--------~---------------- ----------- --------- --------~l--------- ---------1 IExport (OOOm') I I I 1988 3454 ,1388 273 I - 5115, 1087 I I 1985 2722 238 173: 3133 -, , 449 : 1-------------------------1----------- ---------1---------:--------- ---------1 : Export % of Product i on: 1 : I I : 1988 : 62 : 90 : 59 : 67 - - : I 1985 I 51:,' 44 I 48 : 50 : - - I I·------------------------:-------·----I-----~---:---------I---------~---------~ IExports to Japan (OOOm') I I: : I I 1989 : 154 : 344 I 31 529 I 141 I I 1985 : 83 I 67 I 9 159 I 4 : l~------------------------:-----------:---------I--------- ---------:---------1 1% to Japan I I I I: I ·1989 I 4 : 25 I 11 .- 10 I 13 I : ' 1985 : 2 : 28 I 5 5 I 1: ~-----------------------------~----------------------- --.- -------------------1 Source: Malaysian Timber Industry Board

Malaysia's lumber industry has been concentrated in Peninsular Malaysia; however, only a relatively small amount -- about 4% -- of Peninsular Malaysia's exports flow to Japan, its third largest customer. Producers and the Malaysian Timber Industry Board explain this is 1) because the historic concentration of the industry has been on ;Europe and Singapore which take 26% and 25% of its lumber exports respectively and 2) because Japan's quality requirements are far more difficult to meet than' those of other markets. ' Sarawak, with far smaller production, ships to similar customers as Peninsula Malaysia.

S;ibah's production is also smaller than that of Peninsula Malaysia; however, a higher share -- 25 % -- of its lumber flows into the Japanese market. This is believed to be due to the historic major relationship that this state has maintained with Japan, on logs.

MaJaysian Plywood Exports

Although Malaysia in plywood has been less aggressive than its Indonesian neighbor" it has not been complacent -- doubling its production over the last '9 years. Tables VIII-G and -H show panel production and what is happening to it.

TableVIII-G MIlLAYSIA

PlY~, AND BLOCKBOARD PRODUCTION AND EXPORTS

l---------------------~--------------------~-------~--~~~---------------------------l I .' . I' l, I I ' I Total I I IP. Malays:a I sabah I Sarawak I Total l$Million t I--------~--------------~------l------------l---------I---------I~--------'---------I INo. of Plywood Hills (1987-88)1 42 I 7 I 6 I 55 -- I l-------~-----~----------------I------------I---------1---------1--------- ---------1 lProduction (OOOm') I 1 : I 1 1 1989 1 754 I 157 I 90 I 1001 - - I I 1980 I 441 1 49 I 23 I 513 -- I I------------------------------I------------I~-------- I---------IT~------- ---------1 IExport (DOOm') III I: I 1 I 1989 I 706 1 132 1 n I 915 I . 267 I 1 1980 I 388 I, 22 I 24 I 434 I 103 1 1------------------------------1------------1---------1---------1---------1---------1 IX to Export I I 1 1 I I 1 1989 1 94 I 84 i . 86 ,I 91 I - - I I 1980 I 88 I 45 1 104 ,. 85 I - - 1 1------------------------------1------------1---------1--------- ---------1---------1 lExports tO,Japan (OOOm') 1 I 1 1 1 I 1989 1 4 1 1 I 5 11 I 1 1980 12 I 9 I . , . 12 I. 3 I I-:-----------·---------------~I------------:---------1--------- ---------:---------: 1% of Exports to Japan . I I' I I 1 I 1989 1 1 I 1 I .~ 1 1 * 1 I 1980 . I 1 1 41 1 4 I 3 I 3 I l-~----------------------------"-----------:-----"----------------------------------1

*under 0.5 **Production and export statistics for plywood only Source: . Malaysian Tinber Industry Board

; ~;.

VIII-ll

Most of the new plywood mills are going into Sabah and Sarawak and 1hey are averaging capacity twice as large as those in P. Malaysia.

As for Japan, virtually nothing is going there. Although Malaysia has a brqad· customer base, Japan is no~ one of them. Malaysian government and company officials explained that the competition' -- both from Japanese and Indonesian competitors has be,en just too tough, Margins are . lower than other countries, and other customers are available.

Malaysian Veneer and Other Panel ExpOrts

Veneer exports are significant to Malaysia. Although there has been no growth in volume -- exports declined· by half during the period --total value of exports ($46 million) has increased b'y 66%. Malaysian veneer exports are summarized on ~he next page.

.. ;! .

Table VIII-H MALAYSIA EXPOir!S OF VENEER

i ___________ ~. __________________________________ •• _~ __ _ ~ _______________________ I

I' I

I' I . ! I I Total I 1 . . IP.Malaysia sabah !.Sarawalc: Total l$Million I I---~---~---·-~-:~-------- ------------ ---------1---------1---------1---------1 ITotal Exports' (OOOm') I· I I 1.1989 . 44 178 26 248 I 54 I I 1980 64 47 111 I 14 I .l----------~------~"------ ---.-------- --------- --------- ---------1--"------1

, IExports to Japan (DOOm') I I : I 1989 3 124 23 150 I 311 '

I 1980 4 24 28 I 3 I I _____ ~---------~--------- ___________________________________ ~ ___ :_~ _______ I I . I I I IX to Japan I _ I I I 1989 7 :. 70 88 60 I 57 I i 1980 I 6 I S 1 - - I 2S I 21 I I-----------------------------------------:~------------------------------~----I

Source:' Malaysian TinDer Industry Board

VIII-12

The situation is again differe~t in each area. Peninsula Malaysia is virtually. not exporting veneer; it isrestricted. Sabah's exports had declined in the mid-eighties because it had been heavily committed to supplying the plywood industries of Korea and Taiwan, shipments to

, which . d~1ined .. sharply as international competition from Indonesia came to the fore. However, recently exports have increased and are moving heavily to Japan. Sarawak, though small, is heavily committed to Japan ..

Malaysia is also a producer of particle board and wafer board, 9 plants which were producing 81,000 m 3 in 1988, approximately 75% of which was exported. ,The Malaysian government has also approved. three Medium Density Fiberboard (MD F) mills, two of which are under construction. Japan is expected to be the' major customer for these "new mills ..

Malaysian Expons of Other Wood Products'

Malaysia refers to any other value added lumber product as "mouldings". True mOUldings meet that category as well as dowels, door, and wooden components, joinery, dimension products, furniture parts, etc.

Th~.development of Malaysia's moulding industry can be seen by reviewing Table VIII-I. )

TabLe VIII-I h/iLAYSIA

MOULDING PRODUCTION AND EXPORTS . .

�----·----~-·-----------;-:---------:-------~-~~------~-----~---p~-------·----------I 1 : ~ I I : . Total I I IP. Malaysia I Sabah I·Sarawak I Total ISmillion I 1-------~---------------·~-----1-·---~~-·---:---------1---------1---------1---------1 IMoulding Plants .. 1 I I : : I

'. I 1988 .: 89 : 15 1 23 : 127 : - - I 1--------·--------------·----··:--------·---1---------\---------1---------1--·-----·: :Moulding Exports (DOOm'): I I I I: I I 1989 I 333 I HA 1 /lA I 407 I 235: I 1980 I 153 I . NA I NA I NA I 55 I I------------~----~--·--·-··--·l--·---·-·---I·----~-~-l------~--I-------~-l·--------I IExports to Japan (OOOm') I I I I I I I 1989 I 50 I .. I NAI NA I 24 I I 1980 : 21 : -. : HA 1 NA 1 9 : 1--------·---------------·-----1------------1-·-----,-1------·--1-------·-1-------··: . 1% Exports to Japan : I : I I I r':; I 1989 I 15 I : NA : 12 I 10 :. : . 1980 : 14 I I NA : NA : 16 I 1_. ___ -.---._._-----_. __ •• _-.-. __ •••••••• __ ••••• _ ••• _- __ ._ ••••• _____________________ 1 I I Source: Malaysian Tinber Industry Board

VIII-13

:'i.: .

The moulding industry is' developing rapidly.' .. It is concentrated in, Peninsula Malaysia; however; in Sarawak reportedly already 10% of the lumber whic~)s being processed is going into moulding products whereas in Sabah the industry is just beginning. Japan is important to P. Malaysia as a moulding customer and its involvement is growing.

Malaysian Expons of Furniture

There are some 2000 furniture factories in Malaysia, most of which would be 'more accurately defined as workshops. Approximately 150 of the largest plants are manufacturing for export, and 15 of these are accounting for over 70% of the volume of Malaysian furniture exports. Malaysia's growth in furniture in total is shown below; unfortunately, statistics are not available by state, however, most production and exports come from Peninsula Malaysia.

Table VII I-J MALAYSIA EXPORTS OF ~ooo FURNITURE

I ______ --~------------------------------------~------- • __ _ I : : Total Malaysia 1. _____ ------_.------_._----------- ___ .-_1 ______ -_._-- ___ _ I I ITotal Furniture Exported ($ mill) I I.· 1988 I 36 I 1984 I 6 1 ______ --------------------_ .• ------------ ' _______________ _ I I IYood Furniture Exported (S mill) I I 1989 I 47 I 1980 I 11 I. ________ A _______________________________ • _____________ _

I :~ood Furniture Exports.to Japan ($ mill) I

: 1989 6 I : 1980 3 I :---------------------------------------- ----------------: p: ef Furni ture Exports to Japan . I I 1989 I 13 I I 1980 I 27 : ~----------------------------------------------------- ----: "under 0.5 Source: Malaysian Timber Industry Board

VIII-14

As can be seen, furniture export growth,though still small, has been rapid.

Malaysia's primary furniture customer has been 'the USA (41 %), followed by Singapore (16%), with Japan inthird position (13%) and one of the most rapidly growing. In contrast to other wood products: where there has been a strong relationship with Europe, this is not true for furniture. All European .countries account for only 4% of its"t6ta! exports.

A-falaysian' frpiJrlS by 'Species .

Malaysia i~'primarily. an exporter of light hardwriods mainly of the Dipterocarp family. The country's' exports by species.are shown in the Table VIII-K. .

From reviewing the following table' showing Malaysian shipments to.aII countries, we can see that: . . '

• "Meranti" species dominate both log and lumber shipments. • Lig4t hardwoods are Malaysia's primary export, both in logs and lumber.. '.. . • "Other·hardwoods" have been the primary growth area for logs, indicating a greater

bi-eadthof"species is being sold.' ... . " '. . .. ; • The primary growth product in lumber. has been ~bberwOod. . .'

And, of interest, the mix in species shipped during this period changed minimally_

. I

Table VIII~K MALAYSIA EXPORTS BY SPECIES

(OOOml)

;'

1 _____________________________________________ • __ •• _____ • ___ •••• _____ • _______ •••• 1

i I 1,;1.-< I 1984 I, 1988* I I I··"·-··-·-·-··-····I-··~·----------·---I I I Logs I L~rLogs I Lunber I I----.-~----------·--~~---~_--:--·~~~------I--~--~_--: ._---.-.- ______ M __ I~_~ __ -___ : I LI GHT HARDIIOOOS ,'.' " I 'I I I IMerantr'-- includes light red, dark red I 82051 601 8778 I 991 I I Merant i ," - .' i ne l udes wh ite, merant i and I I 389 I 532 I white; yeUoJ~; and red seraya I I I : Rubbefwood I ** 96 ** I 258 IJelutong 1 ** 32 ** I 44 INyatoh 45 16 86 I 20 IRamin ** 125 ** I 169 ISepit,ir 107 19 133 I 56 IOther Light Hardwoods ,804 204 830 I" 379 I Total light Hardwoods 9161 1482 I 9827 I 2449 1----·------------------------------_·_-- ---------1---------1-·-------1---··----I MED IUM HARD\,'OOOS I I I ' IKeruing 1837 1 536 I 1983 I 467 I Kapur 1982 I 87 I 2172 I '98 I Kempas ** I 1,17 I ** I 128 I Redwood ** 192 I ** : 180 IOther Medi un Hardwoods 2 39 : 1: 107 I Total Medium Hardwoods 1 3821 971 I 4156 I 980 1 ________________________________________ 1 __________________ 1 _________ 1 ________ _ , 1 1 1

: HEAVY HARDIJOOOS I I I IBalan and Red Balan I 724 167: 1314: 260 I Marbau Chenga l I ** 76 I ** : 85 IOther Heavy Hardwoods : ** 17 I .* : 52 I Total Heavy Hardwoods.. I 724 260: 1314: 397 1

I-----------~-;--------------------------:-~·------I-·------~I--·-----·:----·----: IOTHER HARDIJOOOS*** ,I ' .2966 I - - - I 5273: - - - I , ________________________________________ , _________ 1_. _______ 1 _________ 1 _________ ,

I 1 I 1 I _ 1

I TOTAL I 16672 I 2713: 20570 13826 I ;----------------------------------------------------- ---------------~----.------; ~

*For lumber 1987 **May be included in the "other" categories listed below. Source: 'Malaysian Timber Industry Board

VIII-IS

"'-, .. i .:; '~''; ,-

VIII-16

INDONESIA

. Indonesia, the world's largest archipelago of over 13000 islands (3000 inhabited) which stretches 5120 kilometers from west to east, is also a vast-tropical storehouse of wood. And Indonesia, more than its Southeast Asian neighbor~, has used that resource to leverage its position from primarily. a raw materi~ ,supplier' to a producer and major ~xporter of plywoOd, especially, and other finished wood products.

Indonesia' stopped expoI1ing . logs in 1985 and currently maintains an. ~x.:tensive range of policies which progressively restrict the export of alJ'wO{)d products to the- degree' they are unprocessed. It accounts for 8.0% of the world's plywood exports and,' as we have seen, more than 97% of Japan's plywood imports. It has been Japan's second largest" supplier of tropical lumber' and it is working hard to build its exports. of wood building materials, furniture and parts, and other finished products to that country. Indonesia in 1989 exported $1.2 billion in basic wood products to Japan* .

Summarizec;l, Indonesia's wood industry strategy appears to be to take actions which will:

. 0

'.~. : Build employment within the countf']. • Force;increasingly the export of value added wood products . • . Maximize revenue from products with lesser value added .

. . .

. .-And, to date, one must. ~gue that this strategy is working f<tirly well.

Timber Resources

Indonesia possesses abundant forest resources on Over 90% of its islands. Although Java, its primary center of population, has long since' seen its jungles become rice paddies, most of the other islands are well timbered. Forests totalling 144 million ha account for 75 % of Indonesia's land area. The largest concentration -of forests are on the island of Kalimanta..n (Borneo) -- which Indonesia shares with Malaysia -- Sumatra, and Irian Jaya, the Indonesian h,Jf f)'f the former island of New Guinea, now shared with Papua New Guinea. Indonesia's forest distribution is shown below.

TabLe VIII-L INDONESIA

DISTRIBUTION OF FORESTS

1-------------------------------------------------------------------1 I ITotaL land Area'Production Forest'Production Forest I I I emit L ha) emit L ha) X of TotaL : 1---------------1--------------- ----------------- -----------------1 I Ka Limantan I 54.8 25.6 47 I ISunatra I 47 14.4 31 l IIrian Jaya I 41.1 11.9 29 I IsuLawesi I 19.7 6.1 31 : IHaLuku I 8.6 3.1 36 I lJava I 13.1 1.9 15 I IOther I 8.8 1.4 . 16 I r·--------------:--------------- --- ... ------------ -----------------: l Tot~L I 193.1 64.4 33 I 1-------------------------------------------------------------------: Source: Department of Forest Products

*Japallese statistics

.' .. ' ...

VIII-17

Indonesia's Production Forest~ -- those which are directly allocated for continuous logging and timber production -- account for 64.4 million hectares ··or 45% of its total land area.

The country has, allocated its forest land into four categories.

Table VIIi-M INDONESIAN FOREST CATEGORIES

� _____________ ~----------------------- ______ I I ' ,

: I Forest Land: X of : : : mill ha I Total I 1--------------------:------------:---------: IProduction Forest I 64.4 : 45 : IProtected forest I 30.1 I 21 I :Nature Reserves I 18.7 I 13 I :Conversion forest: 30.5 I 21 I ,-------------- ______ 1 ____________ 1 _________ 1

, '" I Total I 143.7 I 100 I 1 ______ ------------------------------- ______ 1 I I

Source: Department of Forest Products

Prot~ted . Forests and :Nature Reserves are designated, as permanent forests, never. ~o be c~t Conversion forests are those which will eventually be converted from natural ,. forests to forest plantations, a major goal of the Indonesian government.·-

Indonesian Wood Trade

Indonesia now is the world's second largest exporter of tropical timber;however, in contrast to Malaysia which' is heavy to log exports, its shipments are virtually all processed products -- plywood, lumber, and increasingly finished products such as mOUldings ,and furniture. Wood product exports are vital to Indonesia, accounting for 36% of its 'non-oil based foreign' exchange earnings.

The bulk of its exports are plywood -- 8.8 million m 3 valued at $2.7 million in 1989,29% of which is going to Japan. Lumber is similarly growing and here again, Japan is Indonesia's most important customer. Let us review Indonesia's production and exports by sector.

Indonesian Log Exports

Vie have alrezdy discllssed Indonesia's changed policy on logs. As we can see in the Table VIII-N on page VIII-18, log production has grown but exports ha~e been reduced to nil.

VIII-I 8

, ",Table VIII-~' INDONESIAN PROOUCTION ANO fXPORT OF lOGS -,

I ••••••••••••••••••••••••••• 1 I I I OOOm' I 1 •• _ •••• _----._--_ •••••• __ ._1 I' IProduction I 1989 31500 I 1980' 21702 IExports I 1989 0 I 1980 14853 IExports to Japan I 1989 0 I 1980 • 10523 IX Exports to Japanl : 1989 I 0 : 1980 I 71 :-_. __ ._ ......•.. _ .. _ ... _----

Source: APKINDO

Indonesia's log export ban was clearly effective. In 1975 Indonesia was a major log exporter to the world and to Japan. In 1978 the 'ban was initiat~: By i985, it was !.~lly'enforced.

, :, ,~y, .198'8" ~xpo~s had ,diminished to nil.

Indonesian Lumber Exports

Indonesia's plan has been to replace that loss of exports with processed products; however, the country's officials say that lumber is not part of that equation. Even so,Indone'sia: has developed a size.able lurriber industry,' its production in 1989 totalling over 8.0 million m 3

compared to 3.6)'nillion m3 in 1980. Indonesia lumber' producti6nand exporisare shown in the next table.' ,

Table VIII-n INDONESIAN PRODUCTION AND EXPORT OF LUMBER

:···-·····---·-··----···-----------·-·-···--·-~-l I ' : OOOm' (except" I I

, I I where i ndi cated> 1$101 illi on : °,-------------- ____ -.1.- ____ ---------- 1 _________ I I I I I INo. of Saw Mills I I I I 1989 I 2344 I I : 1980 I 1827 I I :Production I : I

, /1,989 ' I 8250 I I I 1980 I 3579 I : ' IExports : : I ' I 1989 : 2709 I 776 I I 1980 I 1218 I 254 I IExports to Japan I I I I 1989 I 873 I 250 : I 1980 I 91 I 22 I IExports • X to Japan: I I I 1989 I 32 I I : 1980 I 7 I I 1 ______ ----------------------------------- ______ 1 I I

Source: APKINDO

VIII-19

As can be seen, Japan is a very important customer for Indonesia's lumber production:-m fact by far its largest -- taking 32 % of its exports; a share that substantially exceeds L~at

share which Malaysia is exporting to Japan (9:%).- "_

Indonesia's exports oflumber declined frorrl 3.0·miilion m' in 1988 to the 2.7million sho\\'n for 1989. Furthermore, the Indonesian" government is frank to admit they will decline further in 1990 due to its imposition of high export taxes.

Indonesian. Plywood Expons " . ' :...

The plywood industry-has been the shining star in Indonesia's wOOd products indl!stry. We have already discussed, the country has become' the world's largest plywood exporting machine, providing nearly one third of Japan's consumption of plywood. This growth is detailed below.

Table VI !I.p INDONESIAN PRODUCTION AND EXPORT OF PLY~ .

: ..............•...........• ~ ...•..•.. -...•..... I I I OOOm' (except : : lwhere indicated)ISHillio~ 1······_·············1················:·_······· INo. of Hills I I 1 1989 I 112 1 I 1980 1 29 I IProduction I 1 I 1989 : 8838 I I 1980 _ : 1011 I IExports . : I I 1989 I 8038 : I . 1980 I 282 IExports to Japan : : 1989 : : 1980 I IExports . X to Japan I

3216 15

I 1989 I 40

2704 60

1036 3

: 1980 : 5 I

1········--······························-···-··:

Source: APKINDO

As can be seen, Japan is very important to Indonesia's plywood industry. Again, it is this, industry's largest customer, taking 40% of its 1989 plywood exports, over three times that which is shipped to .the United States, the second, largest. .

. :' \

.: · .. ·f:i;-

VIII-20

Indon:esian Veneer Exports .... '.: ~

Veneer,isriot-anirn~rtaflt export product for Indonesia. Veneer' exports; theoretically banned but allowed under certain exceptions, totalled only $8 million in 1989 (included in foregoing plywood statfstics), over half of which went to Japan.'

Indonesian' Exports of Other Wood ProduCts'

Although plywood receives the pUblicity, Indonesia has done remarkably well outside its borders targeting and shipping finished lumber products such as mouldings, millwork, and building products, as is shown below. " ,

': :

Table VIll·Q INDONESIAN EXPORTS OF OTHER ~OOO PRODUCTS (Excluding Furniture)

I _______________________________ • _________ ~ _____ I

, ' .. j

I I DOOm' (exc<!pt '\' I I Iwhereinciicritecl) l$Io{ill ion I , .••...•..•.........• , ................ , ......... , , , " IProduction ' I I'- I I 1989 ' 1039 I I -I 1980 293 I I IExports I I I 1989 779 I 223 I I 1980 220 I 11 I IExports to Japan I I I 1989 192 I 55 I I 1980 NA I 6 I IExports . % to Japan, I: I 1989 I 25 I : 1980 I NA t ,i I ______ -------------------------------~--- ______ I , ,

Source: APKINDO

IrukJnesian Furniture Expons

Indonesia's newest target is the world's wood furniture industry. The country has long been a major exporter of rattan furniture. Now it has turned its energy to building a world class furniture industry. . ,

At present the Indonesian furniture industry is coordinated by a semi-private organiZation called ASMINDO (Indonesian Furniture and Handicraft Association), a subsidiary organization of APKlNDO. This organization now has 600 members of the 2500 furniture manufacturers within Indonesia. Approximately 50 - 60% of all furniture now produced is exported and the industry consumes an estimated 1.8million mJ of wood products annually.

In 1989 alone, 39 million pieces were exported, totally over $434 billion. At this time, precise statistics on wood furniture production and exports are not available.

VIII-21

lndonesian Exports by Species

Indonesia is reportedly cutting over 200 species, 53 of which are going into products to be exported. Plywood is made with a variety of fast growing (often LKS) spr"-cies used in the core with the f:ice veneer-_:normally a dipterocafp specIes; - .

Shipments ·of lumber by species from Indonesia have shifted dramatically over the la~t few years, in part influenced by both availability and demand, bu{ largely influenced -·by Indonesian· eXpbrt restrictions and· tax~s (the impact of those initia~ed in 1989 is not shown).

Table VII I-R INDONESIAN EXPORTS OF AIR-DRIED LUMBER BY SPECIES

�----------------------------------------------------:-~~-I I I 1988 I .. ,1980 I 1---------------1--------------------1--------------------I : : eOOm' :X of Total: DOOm' 1% of Total :---------------:---------:----------:---------:----------:Meranti : 893 : 31 I 260 : 23 :Keruing : 446 : 15 I 39 I 4 IRamin I 191: 7 I 648 : 57 I Kapur : 86- : 3 I 2 : * IPulai Group : 78 I 3 : 5 I * :Agathis I 70 : 2 : 8 I 1. : :Teak : 55 I 2 : 17 : 2 I IOthers : 1097: 37 : 152 I 13 : 1--- ......................... -: ............. __ .. : ........... _ ...... _- :--------- J_ .. _ ... _---_ .. : I Total : 2916 I 100: 1131: 100 I , _________________________________________________________ I I I

*Under 0.5% Source: Indonesian Sawmillers & ~ood Processors Association

The changes in species exported are clearly dramatic.

• Ramin, the number one .item In 1980 accounting at that time for 57% of shipments, has dropped to 7% In 1988, largely because of export restrictions initiated in 1986 . ..

• Meranti has grown in volume and become the top species being shipped. ~ Keruing has expanded nearly 12-fold to become the second most important

species shipped. • Kapur, the Pulai Group and Agathis, shipped minimally in -1980, now account for

a total of 8 % of exports. • And the "Others" category, which includes a huge number of different species, has

become significantly more important in the mix, in9reasing from 13 % to 37 % during the period.

VIII-22

Several major conclusions may be drawn from these sharp changes, particularly,: whe.,nthey are compatedto the lumber shipments of Malaysia, whose species mix has remained -fairly

, constant' over a, similar period. ,':

• Indonesia's resL-ictive export policies -- both on logs and lumber -- have caused ,major shifts in shipments. ,

• ,Japan, -- which i~ Indonesia's largest customer,at present' -- has been most affected . by these major shifts in species shipments. ~; .

• 'And Indonesia's export customers have-- at least 'up until the late 1989 lumber tax impOsition-~' been able to adjust to this shift in mix while at the same time increasing their imports nearly three-fold.

. The impact of Indonesia's 1989 export taxes are yet to be observed but certainly will force further changes in its exports by species.

,"

'\ .

.' " ., .. " ... ::" .' .. .'.' ...... _- " ~ .

VIII-23

PHILIPPINES

The Philippines, with its resources deeply depleted, is trying to retrench its wood products industry, putting heavy. emphasis on production. and trade in higher valued products.

Relative to the other Southeast Asian countries, the Philippines is less dependent on Japan. Still Japan. was the Philippines second largest customer after the USA for all wood products --$47 million in 1988, with 32% of its basic products going to Japan, up from 24% in 1981.

Timber Resources

The Philippines, for many reasons too complex to elaborate upon here, has a badly deteriorated forest resources base. The Philippines forestry position is summarized below.

Table VIII-S . PHILIPPINES

1---------------------------------------------------------------------------1· : I I I Forest, Area I Production I : ITotal Land ArealTotal Forest Areal lJithTirrber 1 Forest Area 1 I I (mill ha) I (mill ha) I· (milt ha) "1 (mill ha) 1 I~ ___ ·_~ ___ I _______________ I _________________ I ________ - ______ 1 ______ --- ______ 1

I .' I I I I I I 1989 I 30.1 I 6.7 : 4.6 I 3.0 I 1---------------------------------------------------------------------------: Source: Bureau of Forest Development

Of the current 4.6 million ha. of timbered forest area, only 3.0 million ha, or 65 %, are considered 'to be productive.

The loss of forests has stimulated drastic measures on the part of the government to reduce the domestic cut and to force the production of higher valued products, especially furniture.

• Log exports were restricted during the seventies; however, illegal cutting and shipping has rendered these measures ineffective.

lit Selective logging bans in certain areas and for certain species have been imposed in recent years; however, impressioris are that these as well have not been adequately administered.

• Log exports were. banned totally in 1986 and reportedly this ban is being enforced.

• Rough lumber exports were banned in 1988 and full surfaced, kiln dried (S4S KD) lumber exports were banned in 1989.

$ The govern!TIent is considering the banning or restricting of the exports of veneer.

The effectiveness of these measures is still to be determined.

.'i-: ;;

, .

VIII-24

Philippines Wood Trade

, Wood products trade by the Philippines has been affected both by the growing shortage of logs, as annual cut has declined regularly, and by the restrictions ;iliat have been put on exports. ' ....

Over the last 8 years, log production has declined'sharply and 'log exports h~ve become minimal. ,Lumber exports' have actually increased only slightly and veneer ,and 'plywood have remained, about the same.,' Shipments of higher valued products have increaSed except for mOUldings, which have declined. The Philippines exported $75 million in basic wood

. \-2.'

products to Japan in 1989*. ,~, -'r >

Philippine Log &ports' . .~ .

. . :,,; :., J :: ...

The Philippine log trade has all but dried up. Whereas, in the sixties and seventies the Philippines was a major shipper of dipterocarp logs,that trade virtually no longer exists. The decline in log production and exports is shown jn the table below.

" Table VIII-T PHI LI PP INE PRODUCTION ,AND EXPORT OF LOGS"

1-----------------------------------------1 "

: 1 DOOm' l$Million**1 \--------------------\---------\----------\ IProduction 1 , \' '. : \ 1989 1 3200 \ i \ 1980 I 6368 \ \

, I Exports \ \ ; :.. 1989 : 110 1 " 6

1 1980 : 758 I 92 IExports to Japan I I 1 1989 \ '61 \ 4

,I 1980. _: 471 1 64 "IX Exports to Japan 1 " 1

\ 1989 . \.; , SS \ 67 . 1 1980 1 62 I 70 1 ______ -----------------------------------I

**Conversion 1989 sus equals 21.7 pesos and 1980 $US equals 7.5 pesos Source: Phi l ippirieIJood p'roducts Association .

The few logs exported . by the Philippines now are primarily pulpwood, produced from plantation forests specifically geared for that purpose. Taiwan is the primary customer' with Japan ina second position. I

It . should be pointed out that Philippine log export "statistics, have long been, suspect. The log export ban, originally initiated in the seventies, was never fully effective. ' Reportedly, vast quantities ,of logs were smuggled out, of the. country which never showed up in the Philippines export statistics. Even now, with logs totallY banned, and supposedly enforced, the Philippines showed log exports in 1989 to Japan of zero, whereas Japanese ,statistics indicate that 52000 m 3 were imported.

*Japanese statistics

VIII-25

Philippine Lumber Exports

The Ph.i1ippines has in the past had a strong internationally· minded lumber industry. However, as logging in the country has declined both production and exports have decreased as wel1. Its pwduction, exports and trade with Japan is shown below.

Table VIII-U PHILIPPINE PRODUCTION AND EXPORT OF LUMBER

:----.----------~------.--------------------.--------: : OOOm'(except : Value I 'where indicated) I $000 1------------------------- ----------------:---------INo. of Sawmi lIs : : 19139 173 : : 1980 209 : :Production :, : 1989 951 : : : 1980 1529 : : : Exports : : : 1989 438 : 136 : : 1980 742 : 181: :Exports - % of Production, :: : 1989 : 46 : : : 1980 : 49 : : :Exports to Japan . : :: : 1939 : 119 : 30 : : 1980 : 199 : 46 : : % Exports to Japan . : :: : 1989 : 27 : 22 ' : 1980 : 27 : 25 i :-----------------.--~-----.--------------------------I

Source: Philippine ~ood Products Association

As can be seen, both the Philippines production and export of lumber have declined sharply. Nonetheless, Japan has continued to remain the Philippines' most important lumber customer with the United Kingdom a close second.

Philippine Plywood Reports

At one time, the Philippines vied with Korea and Ta,iwan for the leading spot as the world's foremost exporter of plywood. No longer. Although the Philippines has had a resource base -- which the. other countries lacked -- it still has been unable to maintain its position in il1ltrnational ma.rkets due both to its own declining resource position and to the heavy competition from Indonesia. .

Table VIII-V PHILIPPINE PROOUCTLON AND EXPORT OF PlY\.IOOO**

:-·--------------------------------------------------1 : { OOOm' (except { { : {where indicated>,:SHill ion { 1 ______ ------------- ______ 1 ______ ---- ______ 1 _________ 1 1 _I

l# of Plywood/Veneer Millsl : 1989 i 1980 i Product i on : 1989 .l 1980 IExports : 1989 I 1980 IExports - %.of Production l I 1989 I I 1980 I {Exports to Japan I { 1989 { { 1980 I :X Exports to Japan :

41/12 29/23

342 553

116 742

34 58

* *

38 104.

* *

: 1989 : 0 0 : 1980 : 0 0 : 1----------------------------------------------------: *Not significant **Inctudes blockboard and other laminated produc:t_~ Source: Philippine \.Iood Products Association

VIII-26

Philippine plywood production and exports have declined, though not nearly as much as those figures for lumber. Of interest, the Philippines currently make virtually no attempt to export plywood to the Japanese market which is described as "much too compet:tive" by Philippine producers. All of the Philippines' exports shown for Japan are of other laminated products. The country's primary customers are the UK, HOEg Kong, and the USA in that order.

Philippine Veneer Exports

At one time, the Philippines was aJso an important producer and exporter of tropical hardwood veneer, both face and core_ That position has changed drastically as production fer o,ther than domestically produced products has virtually stopped.

Table VIII-\.I PHILIPPINE VENEER PRODUCTION AND EXPORTS

I __ ~ ___ --------------------------------- ______ I 1 1

: : DOOm' :$Million: 1 ______ ------------- ______ 1 _________ 1 ______ •. _- I 1 1 1 1

:Production I:: : 1989 I 65 I I : 1980 I 660 I : I Exports I:: : 1989 : 64 I ~ 7 I 1980 I 164 j 36 IExports - X 'of Production: : : 1989 I 98 I I 1980 : 25 : {Exports to Japan : : : 1989 : 25 : 4 I 1980 : * : * :Exports - % to Japan: I : 1989 : 39 : ;~4 : 1980 : * : * 1 •• ____ ---------------------------------------1 *Not significant Source: Philippine \.Iood Products Association

VIlI-27

Japan is the Philippines second largest veneer customer behind the United States. Virtually all of the Japanese purchases are face, rather than core, veneer.

Philippine Expo,!s of Othe,. Wood· Products

The Philippines exports a number of other- wood products -- currently the largest items of which currently are doors (37%), household and decorative items (30%) and other building products (20%). The growth in these shipments is shown below ..

Table VIII-X PHILIPPINE EXPORTS OF OTHER ~OOD·PRODucrs

,_. _____________________ ._~ ____ I

I I : :$Hi II ion: 1 ______ -------------_._--------I I

:Exports : : 1989 : 64 : 1980 : 100 :Exports to Japan : . : 1989 : 9 : 1980 : HA :% Exports to Japan : : 1989 : 14 : 1980 : HA I 1 ______ ------------------ ______ 1 I I

Source: Philippine ~ood Products Association

At present the Philippines has 40 furniture factories. However, exports of wood furniture, including rattan, \'/ere $24 million of which $2 million or 8 % were shipped to Japan.

Philippine Exports by Species

Although the Philippines cuts a large number of species, those exported are quite small -red and white lauan being the primary. Japan's major interest in lumber is in white lauan, of which species it purchased 75 % of that exported in 1988. Log production and lumber exports by species are shown in table V1II-Y.

Table VIII-Y PHILIPPINE LOG PRODUCTION AND LUMBER EXPORTS Br SPECIES

1988

1---------------------------------------------------------------·_---------------------1 I I Log Production I I I - -: : 1- ---- _. - ----. ---------I 11I·mber Exports I X of Spec i es I I I X of ILumber Exports to Jap<,n I Exported I I I DOOm' : Product i on I (OOOm') (OOOm' ) I to Japan (%) I

:---------------:---------:------~----:--------------- ---------------:---------------1 IRed Lauan I 645 I 16.9 I 474 92 I 19 I IMoluccan Sau: 544 I 14.3 I ** I I ll-lhite Lauan ! 473 I 12.4 : 113 85 I 75 : ITangi le : 441: 11.6 : * : I IMayapis I 402 I 10.5 I * I I IAlmon : 321 I 8.4 I 2 I I IApitong : 222 : 5.8 I 6 5 I 83 I IBagtiken : 222 : 5.8 I ** I I lather I 546 I 14.3 : 36 I 11 I 30 I 1~ ____________ ~_I _________ I ___________ f __________ R ____ 1 _______________ 1 _______________ 1

I I I I I I I

I Total : 3816: 100 I 631 I 193 : 31 I • ________________________ " ____________________________ -------------------------- ______ 1 I I

*Not significant **Includcd in "Other" Source: Burea'.J of F ores t Deve l opment

VIII-28

IX. COMPl!.TITION AND OU1LOOK FOR TROPICAL WOODS IN JAPAN

Competition 'from other species -- espec.ially from temperate hard woods from North America, softwoods from North America, New Zealand and Chile -- and other products -will primarily influence how much tropical timber is used' in Japan in the future. This section summarizes how tropical timber is doing in Japan today, reviews the competition and attempts to project a scenario for those future developments.

TROPICAL 11MBER·S. PRESENT POSmON

Viewed in the overall, it would appea;' that tropical timber is doing reasonably well In

Japan.

• Log imports have declined in the last 9 - 10 years. • However, lumber is up substantially. • And plywood has shown dramatic growth.

The net impact of the changes in these three products is summarized in the table below.

Year

, , 1 .. - ____ ---, , 1989 , ,---------, , 1980 , ,---------,

Table IX-A TROP I CAL PRODUCERS REVENUE GA I NS' I N I MPORTS BY JAPAN

1980 - 89

IfllXlrts

logs - Ll.Illber . Plywood'

, , , , DOOm' , $mi ll** OOOm' I $mill ** aDOrn' $mi ll** , ,

(logs) I , "

, --- ______ 1 ______ --- --------- ,--------- --------- ---------, ,

12735 , 1251 1796 , 700 2948 947 , , --- ______ 1 ______ --- --------- ' _________ --------- -- .... -----, , ,

19168 I 1781 I 603 , 235 50 16 , , , , ------------------------------------------------- ---_ .... _--

*Assume 65% recovery

: Total - - - - - - - - - : N et Change

: 1980-Total : 1989, $mi II ----------

$mi II

2898 866 : --------- ----------, ,

2032 - - : --------------_- .. - __ 1 ,

**Priced at 1989 prices of $98/m' CIF Japan for logs, $390/m' for ll.lllber, and $320/m' for plywood for comparison purposes

. Source: Japan Tariff Association

As is shown, the tropical producers are nearly $900 million better off by having changed their mix of shipmerns from primarily logs to a mix of logs, lumber, and plywood.

Also on the positive side we have seen that the producers are shipping a higher percentage of finished lumber and ma.lGng some headway with wood building products, furniture and furniture parts.

The key questions is what will tomorrow bring for tropical timber in Japan. That will be decided not only by market growth, or lack of it, in Japan, but also by inter-species competition within Japan.

IX-2

INTER-SPECIES AND OTHER COMPEI1TION

Inter-species competition is, a function of wood appearance and characteristic~, price, and most important fin', Japan, availability. End users are continually seeking the optimum combination of these factors as they try to determine ,which wood to use for a given application. ' .

The tables' in Section VI for each end use category. showed. clearly that, whereas tropical timber has been holding position with plywood, it has been sharply losing market share in

'Japan as lumber. This is summarized in the table below.

Table IX-B JAPANESE MARKET TRENDS BY SPECIES AND PRODUCT CATEGORY

, ____________________________________________ --~---~---------·--------- ______ I I

Total Consumption i -------------------------------r

1980 i 1989 i ---------------~---------------;

OOOm' 1 % 1 OOOm' : % 1 .L _______________________ •. ___________________________ 1 _____ 1. ________ 1 _____ '

I I I I

I Lunh:r .- :: : 1 Imported T'ropical Hardwood lU'llber . 1 600 : 1.5: 1800: 4.6 / Domestic Produced Tropical Hardwood lumber: 5400 113.7 / 2000 1 5.1 :

. I I I I I

Total Tropical Hardwoods

Imported Temperate Hardwood lumber Domestic Produced Temperate Hardwood

- Imported Softwood lll!1ber Domestic Produced Softwoods frOm Domestic

Timber Domestic Produced Softwood from Imported

Timber

I I III

1 6000 :15.2: 3800: 9.7 : I I I I I I i I I I

i 20: *: 400 : 1.0 : : 2090: 5.4: 1380 1 3.5 : : 5030 :12.7: 7880 120.2 : : 11570 :29.2: 10920 128.0 : I I I I I I I I I I

1 14810 137.5 / 14650 /37.6 : I I I I I I I I I I I I I I I I I I I I

I Total . 1 39520 1100.01' 39030 :100.01 1 ____________________________________________ I _____ ... _~ ... 1 _____ 1 _________ 1 _____ 1 I ' I I I, I I

: COfTiTIon/speci a l ty Plywood :::: : 1 Imported Tropical Plywood : 80: 0.8: 2950 :30.2 : : Domestic Produced Tropical Plywood : 9210: 99.0; 6780 :69.3 : : Softwood Plywood : 20 1 0.2: 50 : 0.5 1 I I I I I I I I I I 1 I

: Total / 9310 :100.0/ 9780 :100.0: I ____ ......... _ .................. _ ..... _ .. _ ...... _ ............... _ ..... _'. __ ............................. _ .......................................... I I I

*Not sign if i cant Source: JV~A estimates

Let US consider tropical timber's competitive position within' each of these major product sectors.

Lwnber

I It is clear that tropical hardwood lumber has lost significant market share in lumber applications 'over' the last 10 years. Its overall ,position has declined from 15.2% of the market in 1980 to 9.7% in 1989.

IX-3

Why has the overall usage of tropical lumber declined and will it continue to do so? Let us review the factors which affect that usage.

Acceptabiliry: First consider the products' acceptability -- we believe this has nothing to do with decline in usage. Japanese end users like the tropical woods they have been using -lauan, meranti, ramin, nyatoh _ .. most are used enthusiastically for the ch~acteristics which

they embody.

Availabiliry: Thus we must consider availability. This is certainly the primary cause for the tropical hardwood's drop in market share.

Logs simply have not been available. It is clear that as logs have been increasingly restricted, those that were available went first to the plywood industry rather than for lumber. Japan's plywood sector cl~rly took preference on their usage. Note Table IX-C.

Table IX'.C JAPANESE TROPICAL LOG IMPORTS USAGE

:---------------------------------------------: : : 1980 I 1988 : t _________ ~ _______________ I _________ ,---------,

I. I I I

ITotal Logs'Imported I I I I OOOm' I '19168 I 12735 I : , %:' 100 : 100 : ;-----:--~---------------~::--------:---------: : For LlSTlber : : : : ' 'OOOm' ,: 8300: 3000: : % : 43 : 24 I :-------------------------:---------:---------1 : For Plywood I : : I ~OOm': 10868: 9735: I ~ : 57 : 76 : I ____ ~_--------.---.-------------------- ______ I 1 ,I.

Source: MAFF, Japan Tariff Association

In eight years imported tropical logs used for lumber not only dropped sharply in total but declined froni 43 % to 24 % of total imports. The tighter the restrictions -- the greater the share of logs used for plywo~d and the less available for lumber.

Then there have been the producing countries rts~rictions and taxes on rough and finished lumber. The impact' of these' policies has already been shown in the Philippines, where lumber imports to Japan dropped sharply between i 988 and 1989: Since the action In

Indonesia is so recent (October 1989), it is too early to fully measure the impact.

Nonetheless, a look at current statistics is revealing. Note the table on page IX-4.

IX-4

Table IX-D JAPANESE LUMBER IMPORTS FROMiHE PHILIPPINES AND INDONESIA

:~------------"-----------~---------------------------------: :.: : 1990 :COIJl)arison With: .: : 1988 I 1989 : 4 Months : 1989 4 Months (X): :·_---------1---------:---------:---------:----------- ----eel :Phil ippines: : :: : I OOOm': 180.: 103 : 1 I (97) : : Srni II : 64 : 44 : 1 : : :-----------:---------:---------:---------:-----------------: pndonesia : : : : .: : OOOm': 196 : 192 : 28 : (57) : : Srni II : 61 : 69 : 13 : ' : ! ___________________________________________________________ 1

I I

,Source: Japan Tariff Association

Although the time is too short to measu're a'trend, the impact of these restrictions is clear. Imports from the Philippines have dropped· to virtually nothing and those from Indonesia have decreased by 57%. If this is any indication of a trend, the future effect will be dramatic.

Price: Then, there is the question of price. Price is primarily a function of availability -- the less tWIJlcal w()od availabJe, the more one must pay for it. Note the table below comparing the changes in the price index from 1980 for lumber of tropical hardwood (lauan) compared to domestic temperate hardwoods (Japanese oak:), domestic softwoods (Japanese cedar) and imported softwoods (Douglas fir).

Table IX-E COMPARATIVE PRICE CHANGES IN SELECTED SPECIES OF LUMBER*

1980 - 1989 1 _____________________________________________________ ____ ~ ________________________________ 1

I I I : Lauan I Oak/Nara :Japanese Cedar/Sugi: Douglas fir : : \,<Tropi ca l Hardwood): (Domest i c Hardwood): (Domest i c Softwood): (llTl'Orted Softwood): : Year :------------------~:-------------------I-----------~--~----::------------------: : : S/m' : Index·· : S/m' : Index.: S/m' : Index : $/m' : Index : :----·-----I---------:---------:-~-------t----~---- :---~-----:---------:---------l---------l :1990(June)1 1021: 114: NA : NA : 373 : 117 : 351: 105 : 1989: 1015: 113: 1262: 107 : 343 : 108 :. 327: 98 : . 1988: 923 : 103: 1263: 107 I 339 : 106 : 300 : 90 : 1987: 915 : 102: 1200: 102: 331: 104: 309: 93 : 1986 I 868 : 97 1122 : 95 :. 309: 97 : 307 : 92 : 1985: '. 895 I 100 I 1176: 100 : 318 I 100 : 333 : 100 1 ______ ----------------------------------------------- __________________ ~ _________________ _ I

Source: Various

It is clear that the prices of tropical woods -- at least as reflected by lauan -- have been relatively stable then increased rather sharply in 1989 - 90. This is in contrast to other species which have not ri~en.

IX-5

'Yther Products:" Finally, we must consider "other products. The most formidable is Medium )ensity Fibreboard crMDF, produced primarily in developed countries from the residues )f hard\.liood and softwood lumber. MDF can be used as a direct substitute for both tropical "umber and ply~ood. The product can be machined and worked much like lumber. And It is a perfect substrate for veneer.

" "

MDF production worldwide has increased dramatically, from 2 million m 3 in 1980 to nearly 7 milliori m 3 in 1990. Because of classification difficulties, statistics on Japan's imports and prod.uction of MDF are unreliable.' Nonetheless, it is clear that they have grown considerably and have certainly precipitated' part of the erosion in tropical lumber's market share. It would appear that the impact in Japan is just beginning to be felt. Future inroads from MDF could be much more significant.

In summary, what does the future hold for tropical hardwood lumber? We can only expect more of the same -- a -decline in usage as prices continue to rise {because of limited availability and .export taxes) and availability continues to decline -- because of restrictions on lumber "and potential additional restrictions on logs. "

PI/wood

We expect that over the next 10 years plywood consumption in Japan will continue to grow modestly but the mix will shift considerably. As stated, we believe tropical timber's position is vulnerable "as a raw material for domestically produced plywood. "

We think tropical hardwood plywood from Indonesia -- its stated objectives notwithstanding -- will continue to make gains, perhaps to 35 - 40% of consumption. Second, we suspect other countries may enter the market as well. Malaysia, for example, would be a logical candidate, particularly if it were to restrict log exports from Sab?-h or Sarawak.

Longer term, we believe the major threat to -the dominance of tropical timber in domestically : produced plywood is softwood -- possibly Douglas fir from the Pacific Northwest of North America or iadiata "pine from Chile or New Zealand.

Competition for tropical hardwood plywood could also come from softwood plywood or veneer produced in N.orth America.

Soft'Nood plywood, because of its nature,_ must be produced in thiCker plies: Moreover, it has more knots and flaws and does not have the smooth attractive appearance "that plywood manufactured from tropical hardwoods possesses. "But the species generally used are stronger. As a result, softwood plywood could well target the thicker and faster growing panel applications such as concrete forming. .

IX-6

Softwood veneer is another option and .perhaps one with more immediate possibilities. At present, there is only one US plant in Washington state manufacturing veneer from Douglas fir. \Vhen that plant was completed --. in 1987 --, veneerqua1ity . was unacceptable by Japanese standards and there were other technical problems to be dealt with. However, as can be seen in Table V-I, US veneer shipments, much of which was softwood, had expanded dramatically bet~een 1985 and 1989. This trend could well continue.

As for other' products, MDF will not only affect'tropical lumber but is especially competitive with tropical plywood' in Japan's furniture industry. Consumption in that market could decline as MDF used as abase for tropical veneer begins to, be used;

Oriented Strand Board (OSB) is another product which Potentially can affect both the Japanese domestic and imported plywood industries, especially for thick panels in structural applications. Developed in the late 1970's,OSB and related products such as waferboard have grown continuously; over 40 million m J was produced in 1988; In North America, the product has already replaced softwood plywood in significant volumes for applications such as wall and roof sheathing.

Were its tropical log supply to be cut off or curtailed, it is unclear as to which direction the Japanese plywood industry will move. It does appear likely, however, that whatever portion of. the industry might remain after such a shock, would shift to another species' for the bulk of its production -- and tropical timber as a product would suffer accordingl,Y.

External DevelopmenJs

Of course, many developments outside of the tropi'cal timber industry· have,'and . will continue to impact the use of the species in Japan, for l.umber and plywood and for their multitude of end uses. A few of these are worthy of reiteration,

• The North' American temperate hardwood industry will incH2siriglY . target niche markets held by tropical" species. .... .. .

• US logs, in spite of recent restrictive actions, will still be avaiiable for the Japanese market.

• A major US producer of softwood veneer has specifically targeted the Japanese plywood market. ,

• North American 'producers of OSB and Waferboard project a 50% increase in the I

production 'of those products over the next five years, • Worldwide capacity for manufacturing MDF is expected to expand by over 50%

during the next five years as well. • New Zealand. and Chile are actively promoting Radiata pine -- an additional 55

million m:l of which will be available by the year 2000 -- for a variety of applications now using tropical timber.

• The USSR, with its vast Siberian hardwood and softwood reserves, is much more actively exploring joint ventures with Japanese companies for the development of the resource.

IX-7

In sum, there are plenty of competitors in tbe world eager to seize shares of the Japanese

market now held by tropical timber.

SUMMARY FORECAST FOR YEAR 200J

With all of this activity, it is difficult to forecast what will happen to tropical timber in the Japanese market. Nonetheless, we have attempted to do so with the fol1owing assumptions:

• Japanese wood products demand will be 110 million m 3 (similar to 1989) and will be 68 % supplied by imports (down from the current 73 %).

• South Seas producers will further restrict log supplies by 50% from present levels. c Present producer high taxes or bans on lumber exports will be abandoned, or at least

sharply modified. • producing countries will step up their marketing efforts for value added products.

Table IX-F FORECAST 2000

A Forecast of Tropical Hardwood Imports* by Japan

l----------------------------------------------------~ ____ MM: I Imports I 1980 I 1989 I 2000 I ~- __ --_.-----------------------~---------:---------t-- ____ M_M: IBASIC PRODUCTS (OOOm') I : I I ITropical Hardwood Logs : 19200 I 12700 I 6000 I I Increases (Reductions) I I (6500) I (6700): I Replaced primari ly by: I !: I (log equivalent) I I I Softwood Logs I 1100 1400 I I Softwood Lumber I 1100 1000 : : Temperate Hardwood Lumber: 400 500 : : Tropical Hardwood Veneer: 500 : : Softwood Veneer I 1000 : : Tropical Hardwood Lumber: 1000 1000 I : Tropical Hardwood Plywood: 2800 1000 : I Softwood PlYwood I 100 300 : ITropical Hardwood Lumber I 600 1800 3000 : :Tropical Hardwood Plywood : 30 3000 I 4000: 1 ___ -------------------------_ 1 _-------- ---------1--- ______ 1 I I I I

IVALUE ADDED PROOUCTS* (excl. : : I ! lumber/plywood) ($million) I : I ISelected Bui lding Products I 10 : 100 I : (Mouldings and Joinery) I :: I Furni ture Parts : 40 100 I 300 I IFurniture : 50 250 I 500 I I I I I i I I I

I Total I 90 I 360 I 900: 1-----------------------------------------------------------1

*All figures rounded for simplicity purposes Source: JVYA estimates

x~ MAJOR COi"{('LUSIONS AND RECOMMENDATIONS

Most of the conclusions have already been drawn in the text of this report. This section emphasizes and summarizes the most important and those which are the basis for the recommendations which follow.

CONCLUSIONS

Overall Demand

• Japan's overall demand for timber is irregular and highly correlated with housing starts.

• Japan is currently -- (1988 ·,90) -- experiencing the second highest period of timber demand in its history, in the range of 110 - 115 millioI1 m 3 (log equivalent).

61 J V\VA forecasts overall demand to be in the 105 - 113 million m 3 range, on average, over the next 15 years.

Overall Imports

• Imports, as a share of consumption, have been steadily increasing -- from 64 % in 1975 to 73 % in 1989. Over the next 15 years, they are c,q<'.cted to remain relatively constant on average, but decline to a 66 - 68 % share of consumption as the market expands. '

• Japan is the world's largest importer of major wood products (1988), taking over recently from the USA in second position which is followed by China, the United Kingdom, and Italy. Japan is the world's largest importer of logs, second largest importer of lumber, and largest importer of panel products.

• However, Japan's imports of logs; as a share of total timber products, have declined consistently -- from 89 % of 1960 to 69 % in 1975 to 42 % in 1989.

Jc.p:::.n's Forest ResDuTcesff.og Production

• Japan;s forest resources are extensive and have increased by over 50% in the last 20 years from ].9 to 3.0 billion m 3 , 63 % of which is softv,;ood and 37% hardwood.

• However, Japan's log production has declined, from 52 million m 3 In 1967 to 31 million m 3 in 1988~ .

X-2

Japan's DOTr.estic Plywood and Lumber Industries

• Japan's domestic production of lumber has declined gradually over the last 15 years. • Moreover, its mix of log supply has shifted from approximately a ratio of 21 %

hardwood, 79% softwood in 1970 to 8% hardwood, 92% softwood in 1988. Domestic hardwood logs sources (mainly temperate woods) have dropped from 9 % to 5 % of supply and imported hardwood logs, mainly tropical, have declined .from 12 to 3%.

• Japan's domestic plywood industry production has grown moderately in the last 5 years; however imports, primarily from Indonesia, have increased geometrically to 31 % of the country's plywood consumption.

• Japan's domestic plywood industry is 96% dependent upon imported logs, virtually all of which are tropical timber 85 % supplied by the eastern Malaysian states of Sabah and Sarawak.

• Japan's plywood usage is increasingly of "thick" plywood (over 12mm thick), currently 32 % of total usage calculated on an area -- and 66 % on a volume -- basis.

• Japan's distribution oflumber and plywood varies by product; however, its channels are not. complex as is often perceived.

Imports of Tropical Timber

• Japan is also the largest importer· of tropical timber in total and the largest importer of each of the major products -- logs, lumber, plywood.

• Japan's major suppliers of basic tropical wood products in 1989 were the following:

Malaysia Indonesia Papua New Guinea Phi I ippines All Others

Total

Total ($Mi 11·L2ill.

1331 1244

93 75

156

2898

• Japan's imports of tropical logs account for only 19% of its· total log supply, yet they represent 93% of the log supply for its plywood industry. .

• Imports from Africa and Latin America have been minimal; however,· in recent years, Africa, especially Gabon, has become Japan's fourth largest log supplier; nonetheless, these supplies were small -- providing only 1.2 % of Japan's requirements in 1.989. .

X-3

• Imports of selected value added wood products are growing rapidly. Between 1980 and 1989.

Planed/sanded lumber of tropical species increased from: Plywood expanded from: Wood furniture from Asian sources grew from: Furniture parts from Asia expanded from:

$7 to' $138 million $46 million to nearly $1. 0 billion

$58 million to $255 million

$40 to $97 million

• However, 81 % of the gains in furniture and 100% of the gains in furniture parts imports were made by Asian countries not considered to be producers of tropical timber -- e.g. Taiwai1 (POe), Korea, Thailand, Singapore.

Species Impons

. • Primfu], species imported by Japan in logs and lumber include (listed in order).

*Red meranti group Kapur

*Keruing *White seraya SegoTl Laut

*Yellow meranti group long Kong

*Tengkawang *Whitc meranti group Taun

*Indicates Dipterocarp

Lumber

*Meranti Perupok

*Keruing *Seraya *Melapi Kapur '

*White lauan *Lauan Nyatoh Ramin

.. The Dipterocarpaceae species, \vhich make up a large portion of the Southeast Asian forest are, as can be' seen, the most popular.

X-4

• Lesser Known Species (LKS) are increasingly being used. Dipterocrups have declined from 65% of lumber shipments in 1980 to 37% in 1989. A number of species scarcely recognized 10 years ago are now among the most popular -- e.g.,long Kong, Nyatoh, Perupok, Taun. Indonesia is using many LKS in the core veneer of its plywood. In addition, Japan has a significant program to assist the acceptance of LKS.

• Species from Africa and Latin Amelica have minimal recognition.

Erul Use Markets

• Tropical hardwoods' major end markets are:

1989 LunberUsage PLyWOod Usage

OOOm' _%_ OOOm' _%_

1. Housing/Construction 1390 37 6400 66 2. furni ture 1100 29 900 9 3. Pacicaging 500 13 400 4 4. Other 810 21 1980 21

Total 3800 100 9680 100

• Tropical hardwood lumber in total (imported plus domestically produced) has lost market share in all end use markets, declining from 15% of all lumber used in 1980 to 10% in 1989.

• Tropical hardwood plywood, in contrast, has maintained market position. • Tropical hardwoods' share losses in the past have been picked up by 1) imported

softwoods, 2) domestic softwoods 3) imported temperate hard woods , in that order.

Japanese Policies and Regula:ions

• Japan is a relatively open market to tropical woods. s ],.pan maintains higher tariffs on basic tropical wood products than does the USA

or the European Community, but has generally lower tariffs on higher value added products (e.g., furniture and parts) than either.

• Japan's approvals and administration, of the Generalized System of Preferences (GSP) are more restrictive to tropical woods than the USA or EC.

• Japa.n's building codes and product standards do not, in any significant manner, inhibit imports of tropical timber.

x-s

• Other than tariffs, the only major policy potentially restricting trade in tropical plywood is the Jf!.pan Agricultural Standard (JAS); and this is not a trade barrier but rather a technical standard which to date tropical countries_ have either been unable, or unwilling, to meet.

$ i-.-1any tropical countries believe that Japan's private sector quality requirements for wood products -- probably the toughest in the world -- are a "trade barrier", making it difficult to compete in that market.

Producers' Policies a."Ul Positions Influencing Trade

• The producing countries' strategies all appear to be to limit the drain on their forest - resources, reduce their exports of roundwood, and increase their exports of higher value products. _ .

• Tropical countnes in the South Seas -are increasingly adding restrictions -- for environmental and developmental reasons -- to their exports which limit wood trade with- Japan (and the world).

• These restrictions have reduced trade with and tropical timbers' market share in Japan: .

Export bans on logs clearly have caused the drop in log imports. Export bans on logs and lumber have also caused the net drop in market share for tropical lumber in Japan. -The recently imposed bans and taxes in the Philippines and in Indonesia will certainly cause a further decline in tropical lumber imports.

• In contrast, these S:lme export bans and taxes have influenced the shipment of more value added products; however, plywood appears to be the only product which has resulted in 2. net gain to producers.

• Few of the producing countries have aggressive market development programs to assist their companies sell in Japan.

X-6

RECOMMENDATIONS

Based upon the foregoing conclusions, 311d those others' expressed in the text of this report, JVWA recommends the following actions to the ITTO, to the . Japanese government/industry, and to the producing countries.

JVW A believes these organizations should consider the following actions:

Recomrl1endations to the I1TO

• Coordinate a project to clarify and establish consistent tropical wood species nomenclature throughout the world. '

. Undertake a major project to bring order into this chaos~ Combine possibly with the contemplated ITT.O study on the possible "Harmonization of Specifications on Tropical Timber Products", pre-project work on which has been accomplished by ATIBT. Establish common name species groupings, using existing work already accomplished, based upon appearance, physical properties, workability, decay resistance, other factors. Develop reasonable associations between lesser known tropical and better known tropical and temperate hardwood and softwood species. Develop estimates of availability by country. Publish an authoritative book with those names and encourage the use of these groupings both intra andinter-regionally. Develop literature in Japanese to promote the 5;pecies publication.

• Assist the producers, as part of the foregoing program, in building species awareness.

Coordinate a joint cost sharing Tropical Species Center in Tokyo (and possibly in other major consumption centers in; the world). Play a coordinating role in the promotion of the Center, allowing the producers to share the cost along with the host consumer country. Identify and cooperate with in country projects, e.g., the LKS program of MAFF and JPMA. Organize to become more of an information center, both disseminating information and answering questions on tropical species worldwide. Expand the concept into Japan of the "Internati~nal Promotion Center for Lesser Known Species in Europe" (PD 49/89)

X-7

• Aid the tropic~l producers in stfengthening their position in the building products market in Japan.

Initiate a study of the Japa."1ese building market in greater detail to determine more specific opportunities in applications and end uses. Arrange a building product seminar in Japan to develop product knowledge and identify oppOrtunities. Assist the tropical producers with technical issues, e.g. ,in developing certifying capability for plywood under the JAS.'

'. Aid the tropical producers' in expanding position in the furniture parts business. Initiate a detailed study of the Japanese' furniture' industry to identify opportuni ties. . Encourage joint ventures and investments b.etween companies from consumer

_ and producer countries (see investment seminar recommendation). • Sp\.1l1sor a tJ.Opical wood products investment semimLf in l.apan, .

Promote added value wood product investment an-a joint venture opportunities in the tropical countries -- e.g., simple KD facilities, wood finishing, plywood, building products, furniture parts, furniture, MDF, even pulp and paper complexes. ~

Gain Japanese co-sponsorship of this seminar. Encourage participation by all producing countries, not only South Seas, but Africa and Latin America as well. Promote the concept aggressively in Japan ~J trading companies, the association, importers, plywood manufacturers, others. Expand the concept if the seminar is a success to similar programs 111 the United States and Europe.

• Monitor the impact of export bans and taxes on tropical wood trade. Establish an information center on such actions which can provide worldwide information. Track trade patterns in both· basic and value added wood products. Provide regular reporting fel~dback to both producing and consuming countries showing export increases and declines by product resulting from these changes. Obtain consumer country help to support this activity.

Recomme,uWtio~ for Japan

• Assist the ITIO in undertaking recommended actions in Japan, e.g., Species clarification. Buiiding products promotion and seminar. Investment seminar. . Tropical Woods Center.

X-8

• Recognize that a major change in Japan's plywood industry, caused by tropical producer competition and the eventual demise of its tropical resource base, is inevitable and act accordingly.

Continue. to assis't the Japanese industry with research on alternative woods. Actively support Japanese investments in value added projects in the tropical countries. Aggressively trade off financing and teChnical assistance in forestry and product manufacturing for continue.d log supply, especiall}' in Sabah and Sarawak.

~ Eliminate tariffs on tropical wood products. The 10 % tariff on dipterocarp lumber. The 10 - 15% tariffs on plywood. The 5 % duty on veneer.

• Open up GSP to include major tropical products now excluded. Plywood. Veneer (now only 50% tariff reduction). Dipterocarp lumber (only 50% tariff reduction).

• Provide aid to tropical producers to assist in meeting Japanese quality requirements. Arrange seminars bringing users and producing country manufacturers together to provide technology assistance and to explain product quality needs, manufacturers' . re.quirements and capabilities and how to bring them together, e.g., on rift sawn lumber, for plywood production. Provide investment assistance to help producers obtain improved equipment. Assist in improved methods of finished product shipping, i.e., using containers rather than break-bulk shipments. \Vork \I,'ith the tropical plywood producers to assist them in meeting the requirements of JAS.

X-9

Recommendations for Producing Countries

• Recognize that export restrictions on "basic wood products distort markets and may diminish the long term potential for higher value added products in the same species.

Consider carefully log "export bans before implementing them. Be aware that major restrictions on logs" and lumber can sharply diminish species usage in the consuming country." Recognize that it is exceedingly difficult to replace banne:d finished lumber (planed/sanded) exports with equivalent business in finished wood parts or products because of differences in: marketing, quality, number" of products, inventory requirements, changes in style, etc.

• Target KD planed a..'1d/or sanded lumber as a "mid"-value added product opportunity.

The imports of planed/sanded products are growirtg rapidly. "Tropical woods have been losing market share in rough lumber. Selling this basic product prepares both the producer and opens the market for additional further value added products. Export restriction, or excessive taxation of these products, in contrast, will result in net export losses.

• Consider the Japanese plywood market as an opportunity. Indonesia appears to be backing away from further penetration in Japan. The Japanese plywood industry is still very vulnerable. Specialty plywood may provide some unique high value opportunities, Production core veneer could well prove to be a major product whose time has come.

• Target the Japanese building products market for value added products. The market is huge, more dynamic than furniture, and has potentially more standardization. Tropical wood penetration is relatively small to date. The merits of few tropical species are known or understood. Target prefab housing and major builders, those looking for good values and which are interested in more standardized products.

X-IO

• Develop plywood certifying capability. The trend to certification is worldwide, not only in Japan. Tropical countries and companies must have this capability to compete. The major competition in the future will be in the structural plywood segment which requires JAS certification in Japan. Explore the US performance related grading system. The trend internationally is to performance based, rather than composition based standards. This suits tropical plywood since it allows the use of a much broader range of species as long as the product meets certain performance criteria.

• Learn to meet the quality demands of the Japanese market. . Determine the needs of the Japanese customer. Invest as necessary in the appropriate equipment, seeking a Japanese patron if necessary.

- . Remember that if you can compete in Japan on the basis of quality, you can compete anywhere.

• Explore joint ventures or longterm supply .agreemen-ts with Japanese furniture manufacturers.

Promote a mix of rough and finished lumber combined with selected furniture parts. Consider importing temperate hard wood s to supplement tropical woods availability to provide a full range of the furniture manufacturers' requirements.

• Work more closely in concert to .promote tropical woods. Support IITO actions on species, a Tropical Woods Center, end use. market studies (see IITO recommendations) and Japan's actions on quality. Coordinate promotional activities in certain areas, both by region and for the entire industry.

• Push Japan harder to reduce its tariffs and improve its GSP. Aggressively ·lobby Japan for this action both unilaterally and in concert. Press aggressively in the GAIT negotiations for Japanese reductions on wood tariffs. Support the USA in its bilateral negotiations with Japan on wood products.

APPET\'DIX XI-A nTO REOUEST FOR PROPOSAL

tNruutATIONAl TROP1CAl nMi£R ORG1HIZATIOH orro)

23 Octob~r 1989 L. 1659

Dear Sirs,

CONSULTANCY SERVICES FOR MARKET RESEARCH ON THE TRADE AND MARKET FOR TROPICAL HARDWOODS IN JAPAN

The International Tropical Timber Organization (ITTO) wishes to invite your consultancy to submit proposals to undertake the above WEn: 5.or.ed E't.udy ..... Hr. the attached background inform1'ltion and 'ferms 0: Ref erence (Annex 1). If yo\;.r organization is interested in undertaking this assignment under contract with the ITTO your proposals should be submitted to ITTO HeadquartE!rs Secretariat not later than 20 November

1989.

1. Form of Propo.sal

Your proposal should be submitted in duplicate and shoulc include:

(i) a curricul~~ vitae for the Project leader and other key personnel to be employed;

( i i) a detailed schecule of work in accordance wit.h the start and completion dates of the assignment, indicated in the Terms of Reference;

(iii) a firm price to cover all costs associated with the services as specified in Annex I .

Mr. John V. Ward President John V. Ward Associates, Inc. International Trade consultants suite 300 1738 N Street, Northwest Washington, D.e. 20036

•

SF. SANGYO SOEKI CENTER SL CX::;. 2. YAM.I>.SHIT A-CHO. NAKA·KU. YOKOHAMA. 231. JAPAN

Te' 045.671·7C>4:"E TeIP' 3822 d 80ITIOJ Tele1a, 04:'·671·7007

APPENDIX A-2

- 2 .-

The total cost should be analyzed to show :

a) professional fee-number of man-days and daily rates;

b) travel and subsistence (daily rate); c) report preparation; d) any other costs (to be specified).

The requesteD terms of payment should "also be included.

2. Support of facilities in the field

The Contractor shall provide all facilities and services required by the personnel employed for this work, and expenses of every kind incurred in connection with such perJionnel shall be solely for the account.

3. Acceptance of Proposal

Upon receipt, your proposal will be examined and you will be advised as promptly as possible as to its acceptability. ~ny

contract subsequently arranged could be subject to the relevant provisions of the Financial Rules and Rules Relating to the Projects of the 1TTO (copy attached as Annex 2 for information).

We look forward to receiving your proposals before the closing date.

Yours faithfully,

/" ~~.X'-~re.z.

E.xecutiv

APPENDIX A-3

Am.'EX I

BACKGROUND INFOFY.ATION AND TF.Rl~S OF REFERENCE FOR THE STUDY PROJECT

1. Objectives'

The main ojjective of the project is to generate relevant information 'on the .j'apanese market in the area of supply and demand for tropical hardwood with ,a view to contributing to stable trade relations between producing and consuming countries of tropical hardwood.

2. Background and Justification

Japan is one of the majo= international markets for tropical hardwood products together with North America and EEC. In 1986, t~e Japanese market absorbed 49% of saw and veneer logs exported by developing countries (FAO Yearbook of Forest Products, 1986). The imports of other products such as sawnwood,-veneer sheets and plywood to Japan, have been steadily. -increasing. In addition, this market has a large potential for high-value-added products made ef tropical hardwood such RS high quality furniture, due to a very prosperous economic situation of the country.- .

It is reported that it is not easy in general for foreign traders to access the Japanese market. This would be due, among others, to the lack of understanding of customs clearance procedures, and the regulations reI2lting to compliance with standards. Added to this would be the problem of language. Although there are many sources of information written in-Japanese in respect of the trade in forestry products, very little of this is available in English. In Japan, foreign trade s .... atistics of trJpical hardwood products are well colle·cted and compiled by thf.: CUstoms Bureau of the Ministry of Finance. The products are classified in, groups and sumrr~ized into a monthly bulletin, "Japan Expc.rts and rmpC;rts". Official agricultural statistics of the Government, "the Statistical Yearbook of Agriculture, Forestry and :isheries" are publishec: in both Japanese and English on the basis of thIs bulletin.

It is hO;lever, difficult to undertake an in-depth study of the statistical anhlysis of forest products trade because of a lack of Eng1ish la~~~age materials in a related field of trade regulations and .policy, qua:ity standa=ds, market structure and traditional trading cu~toms and market behavior etc!

For instance, the Forestry Agency issues an "Annual White Paper on Forestry" in which the latest Japanese forestry policy, analysis of new trends and directions, etc. are documented in Japanese. However, this valuable documentation cannot be used by foreigners who cannot read anc w;',derstand Japanese. Similarly, other useful reports and articles

APPENDIX A-4

2

which have been published in Japanese in forestry magazines, journals and"newspapers have not proved useful:

It is also recogniz£::d that instability in the Japanese hardwood market is caused partly by the lack of inforrr.ation related to policy and market situations in producing countries.

For these and other reasons, it is extremely useful to conduct studies on some essential aspects in both Japan and relevant producing countries which.will throw light on the Japanese market and contribute to promoting a stable trade of tropical hardwood~the Japanese market. The results would be publishe ~ s the original language. The outcome of the project w a benefit to both producers and consumers of tropical hardwoods. It will furL~er,

a) make a contribution towards the setting up of a regular system of collection and dissemination of tropical hardwood statistics;

b) make a contribution towards the setting up of a reg~la, system of monitoring the tropical hardwood markets;

c) assist ITTO, through the experience gained in undertaking the ~ study, to carry out its priority activities ·in the area of Market intelligence.

These studies could well be the precurs"l ·.)f various future activities, among which are the following :

1) Up-dating of the study at regular int~rvals (3 years or longer) ;

2) organizing an international ,seminar in Japan on the "Marketing of Tropical Hardwood Products in the Japallese Market" .

3) Initiating intensive studies in producing countries relevant to Japanese market based on the ove~iew of trade policy and market situations in relevant producing countries.

3. outputs

The main output of the study would have the following four componer.ts :

1) Statistical Analysis of the trade of tropical hardwood in the Japanese Markets;

APPENDIX A-5

3

2) An overview of the Japanese Trade Policy on Tropical Hardwood;

3) A Guide for the Japan Agricultural Standards with special reference to the Tropical Hardwood Products;

4) An overview of trade policy and market situations in relevant producing countries.

It is intended that these stUdies and surveys should be comprehensive both in depth and breadth with detailed tables and illustrations. The study should commence at the latest by January 1990 and the drafts of the reports should be ready for processing and translation, six months thereafter by June 199; The e submitted for review to ITTO Secretariat in will be finally revised and prepared for publication

4. Activities

1) Collection and analysis of available information on imports and utilization of tropical hardwood in Japan, as well as other relevant information e.g. developments in main utilization sectors;

2) Translation into English of important inforrr~tion and of other technical materials written in Japanese;

3) Contacts with producing countries through correspondence anc/or visits in order to L~rove the information base an~ to uncertake further examination of the available data.

5. Inputs

1) ITTO will seek the assistance of FAO and other relevant institutions to pr~vide necessary statistical data on ~ropical hardwood, production and trade;

2) The member governments of ITTO will be. requested to provide information needed for the project activities;

3) General support from ITTO Secretariat as may be needed from time to time to ensure co-ordination and smooth project implementation.

APPENDIX A-6

4

s. Prep~ration of work plan

The duration of the Project has been fixed at 12 months. The detailed work plan would be elaborated by appointed C9nsultancy Agency in consultation with ITTO as soon as possible.

The project will be carried out by a Project Coordinator (PC) who will be recruited by the Executing Agency in consultation with the ITTO and under an·agreement with ITTO~ In view of the need for extensive contacts and availability of several reports and Bulletins in Japanese, the Coordinator-should also be _very-competent in Japa,ese. He will be res?Onsible for the day-ta-day operation of the project. The PC should be in close contact and collaborate with ITTO.

~his project will be evaluated- by ITTO in accordance with its p.stablished procedures. _

South Sea Sp.ecies ,':

Common, Name Species Scientific Name Other Vt~ 7nacu la r Name Agathis Arausariaceae Agathis Almaciga(rh.), Dama(ln.),

Kauri(N.G.)

Antiaris Moraceae Antiaris Terap(Ssb.). Upas(ln.)

Binuang Datiscaceae Octomeles , Erima(N.G.)

Bintangor Guttiferae Calophyllum t Caliphyllum(N.G.), Penaga(Sab.)

Canarium Burseraceae Canarium Kedondong(Mly., Sab.), Kenari(ln.}

Dillenia . Dilieniaceae ' Dillenia Simpoh (Sab., Swk.)

Durian Bombacaceae Durio J

Jelutong Apocynaceatl Dyera Djelutung(ln.)

"

Jonqkonq Melastomaceaa Dactylocladus

Kapur Dipterocarpaceae : Dryobalanops Borneo camphor wood ;

Keruing fJipterocarpaceae Dipterocarpus Apitong(Ph.), Chhoeuteal(Cam.), Yang(Th.), Kanyin(Bma.)

Iv1engkulang' Sterculiaceae Tarrielia Teraling(ln.), P alapi( Sulawesi)., , Lumbayau(Ph.) . . '

Mersawa Dipterocarpaceae Anisoptera Palosapis(Ph.), Phdiek(Cam.). Pengiran(Sab.), Ven-ven(Viel.). Anisor?!era(N .G.)

Merbatu Rosaceae P arinari, Maranthes Busu fJlum (N. G.)

----- . _._----

Uses' , :

Fittings, drawl3r:-picturo frames.door~, posts,sleps, door-sills and others. Furniture, woodworking, plvwood and packaQe: Plywood, drawers and canoes.

Furniture, beds, sofas and plywood ..

, Furniture, plywood,doors. 'packaQe and drawers. Dunnage, flooring, package . and pallets.

I Package, plywood and furniture. :, : .' Laminated wood, drawers, plywood,shoe hoels and

: .. 1

ceilinl:J.·~· .,.i

Furniture and drawers. General construction, flooring; plywood, door-sills, railroad coaches, pallets ~l/,d dunnal:Je.

Package, dunnage, plaliols, construction base, panels

I and plywood. ,

Boxes,'furniture; plywood, build incl' and doors.

Door-sills, flooring, plywood, interior fittings and furniture.

Package for heavy stuff, dunnage and plywood .

,

> ~ '";:l M ~ o ~

~

~ ~ , I;d

I~

!~ C ~

;;j o ~ Q ~

~ ~ @ 18 V:I

~ Q ~

Common Name Species Scientific Name Nyatoh Sapotaceae Palaquium

Perupok Cetastraceae Lophopetatum

Pulai Apocynaceae Alstonia

Red Lauan Diplerocarpaceae Shorea

Red Meranti Diplerocarpaceae Shorea

Segon Laut Leguminosae Albizzia

Senoawan Diplerocarpaceae Shorea

Serangan Batu Diplerocarpaceae Shorea

Terenlang Anacardiaceae - Camphosperma

Tengkawang Diplerocarpaceae Shorea

-

"

Other Vernacular, Name " Nato(Oh.), Pencil ceder(P .N.G.)

"

. , -

Alstonia, Milky Pine(N.G.) !

Red Philippine mahogany

Red lauan, While lauan, Red seraya (Sab.), Philippine mahoQany(Ph.),Tangile (Ph,)

Balai(Mal.), While albizia (P.N.G.)

• Alan, Alan bunga(Swk.)

8angkirai( In. ),Balau(Mly. ,In.), Yakal(Ph.)

Campnosperma (N. G.)

-"

Kawang janlong(Br.)

Uses Musical instruments, show-cases; higH class furniture; door-sills: picture frames, interior fittings, and cabinets.

Furniture, picture frames, drawers, ceiling, package and substitute for Ramin.

Ceiling, shoe heels, drawers, plywood and laminated wood. Construction, furniture, plywood, cabinets and others. ~ j ~ , -

Plywood, general constru'clion, furniture, filtinQs and others. Plywood(core), packages, models, furniiure fittings, musical instruments and fittinQs. Mainlv',plvwood.

Door-sills, basement, helves, pallets, packagoand fittinQs. . ' Drawers, Alcone posts, laminated'wood, plywood and packaQe. Similar to red meranti qroup.

,

> "t1 "t1

~ ~

tJj I

N

Common Name Species Scientific Name

Water Gum Myrtaceae Syzygium

White Lauan (lip:· "IIr;~r:,aceae Pentacme -

White Meranti DiptElrocarpaceae Shorea

White Seraya Dipterocarpaceae Parashorea

.. Yellow Terminalia Combretaceae Tl3rminalia

Yellow' Meranti Dipterocarpaceae Shorea ,

-- -- --

Other Vernacular Name Kelat (Sab., In.)

Light red philippine mahogany "

Melapi(Sab.). Meranti putih(ln.), Kalunti, Yellow lauan(Ph.) Bagtikan(Ph.), Urat mata(Sab.)'

Yellow seraya, Selangan kuning, Selangan kacha(Sab.), Yellow

·lauan(Ph.), Merantikuning(ln.)

Uses

Construction, rafters, dunnage, plank piles and furniture.

Furniture, cabinets, plywood, interior fittings and ships. Plywood, general con st· ruction furniture fillinqs. Plywood, general const· ruction 'and furniture . Furniture, 'plywood and laminated wood. Plywood, general consturction and furniture.

~.-.---

» "0 '1::J tT1

S ~

;X

to I

W

African Species

Common Name Spei:les Scientific Name

Bubinga Leguminosae Guibourtia

Iroko Moraceae Chlorophora

-

Makore Sapotaceae Tieghemella

..

Moabi Sapotaceae Baillonella

Obeche Sterculiaceae Triplochitol1

-Okoume Burseraceae Aucoumea

Other V~rnacular Name Uses Kevazingo{Gabon), Furniture, shelves, wall, Essingang(Cameroon) flooring, cabinets, alcove

posts, musical in~truments,

tables, sliced veneer etc. Odum(Ghana, Ivory Coast), Sliced veneer - furniture Mvule{East Africa). and doors. Kambal(Zaire), Bang(Cameroon), Sawn lumber - fancy posts Moreira(Angola), Tule, and flooring .. Inrule(MozambiQue) Agamokwe(Nigeria). Baku, Sliced veneer - musical Abaku(Ghana).Okola, .. instruments and furniture Douka{Gabon), Cherry mahogany Sawn lumber - flooring

boards, door-sills and door frames.

Ojave(Nigeria), Njabi(Cameroon), Sliced veneer - flooring and Dimpampi(Congo) , wall.

Sawn lumber - furniture, door-sills and floorinQ.

Wawa(Ghana, Ivory Coast), Sliced veneer - furniture Arere(Nigeria), Samba(lvory and plywood Coast), Ayo,us Sawn lumber - furniture

and shoe-heels. j::;aoon _ jl1Y_v./()od, cabinets.

--r

:> "0 "0 tr1

@ ...... >< to , .s::.

South American Species

Common Name Sp':H~les Sclenllflc Name

Balsa Borr.bacaceae Ochroma

Mahogany Meliaceae Swietenia

Purploheart Leguminosae peltogyne

Tatabu Leguminosae diplotropis t

I

Wallaba Leguminosae Eperua

-Other VnrnacUlar Name

Gois violot(Fr.G.), Zapatero (Ven.), Koroborelli(Guy., Sur.), Pau roxo(Braz.). Purperhart( Sur.). Ameranth, Violet S ucupira( Braz.}, Zwartekables(Sur.), Tatabu(Guy.)

Wallaba(Guy.)

Uses

Models and insulators. Furnituro, moulds, models, cabinets, interior decoration, instruments, veneer, plywood and wood carvinq.

Handles, flooring, athletic instruments, panels, plywood, furniture, cabinets, inlay and turnery.

Flooring, handles, furniture, cabinets, turnery, fittings, agriculural instruments and ships. Utility posts, house building, props, roofing and decorative use.

;J:> 'ij 'ij tT1 Z t1 ....... ~

to I

VI

ApnE:l'-IDIX XI-C CONSULTANT'S LIST OF CONTACFS

BRAZIL '

STCP

GHANA

Timber Export Development Board

INDONESIA

Department of Forest Products

.'.'

Dep':L.rtr;lent of Trade Directorate General for Foreign Trade

Djajanti Group

Indonesian Forestry Community

Indonesian Furniture Industry & Handicraft Association

IndoneSIan \Vood Panel' AS30ciation

, . Investment Coordinating Board

National Association, of Export' Promotion

Pt. Abadi Indo Rona

. , j

Pt. Astra, International, . Inc. General Services Division

Pt. Kalimanis Plywood'Industries

•

Ivan Tomaselli Director

Kwasi Appiah-,' Ag. Managing Director

A. A. Malik Director

SoemaIjono GoenaIjo Director'

Sadikin Djajapertjunda President

M. Hasah Chairman of MPI

Dr. Ioes C. Tuarissa Executive Vice President

"

. -. ",'

::-. .. .1;::

Asmaning Tjipto Wignjoprajitno

Mr. Subijanto, Advisor to Chairman

Mr. Arifin

Eddy Budiono Director

PUSpo Adijuwono GeneraJ. Manager

Gerald W. White Managing Director

. (IndOliesia, cont'd)

Pt. Rinda Tama Agung

Republic of Indonesia Investment Coordinating Board

US Embassy

JAPAN*

Government/Semi-Government Agencies

Affair of Forest Agency. Statistics Publishing

The' Building" Center of Japan International Department Manager of International Div . . "

Economic Planning Agency Office of Trade and Investment

Embassy of Papua New Guidea

Embassy of the Republic of Indonesia

Ir.ternational Tropical Timber Organization

APPENDIX C-2

Sadikin Djajapertjunda

Ir. Soebijanto Special Staff to the Chairman

Ken Murry, Agricultural Counselor

Takezo Ishida Manager

Shigeru Rara Architect

Hideo Konuma Ombudsman

Larry Hulo Counsellor

Saefoeddin Achrriad Agricultural Attache.

J.E.K. Aggrey-Orleans Assistant Director Economic Information & Market Intelligence

Manoel Sobral Filho Assistant Director for Forest Industries

Arto Jalkanen Programmer/Systems Analyst

. Markku Simula Dr. B.C. Y. Freezailah

Chairman

*In addition, over 125 companies were surveyed for this project in Japan.

Japan· (cont'd) .

Japan Housing Wood Technology Center

Ministry of Agriculture, Forestry and Fisheries Food and Distribution Bureau Consumer Division

Ministry of Finance

Mitsu!:>ishi Corporation Environmental Affairs Dept.

Wood.,..Products Stockpile .Corp., Japan (Wes, JAPAN)

Trade Associations

International Development Association of the Furniture

. Japan Pallet Association

Japan Plywood Inspection Association,

Japan Plywood Manufacturer's Assodation

Japan South Sea Lumber Conference/ Japan American Lumber Conference

Japan SpeciaIty Plywood Manufacturers· Association

APPENDIX C-3

Takashi Soya, Manager

Ryoen Mimura' Assistant Manager

Sakae Hamada Customs Counselor Customs and Tariff Bureau

Taketoshi Murakami Customs Counselor Import Division

Kyosuke" Mori General Manager

Akihiko Araya Research Division

Maki Mitsuda Industry of Japan

Tetsuji Hamamoto Managing Director

Yoshihiro Imada ' Manager

Yoshitaka Akiyama General Manager

Hisashi Takahashi ' Executive Director

Itsuro Nagahama Manager

Yosabro Sato Secretary

·'-.f;

(Japan, cont'd)

Importers/Wholesalers 'i ".:'1:-

Abe Lumber Manufact~ring Co., Ltd . ., Wholesale Log D~pru.:tment. '0'

Africa Ringyo Ltd.

:.: .

Iwai Kogyo (House builder)

Mitsui Homes (House Builder),

Mitsukoshi Seisakusho (Furniture Fixture builder) Manufacturing Dept.

Sasao Mokko (Plywood Mfr.) Manufact~ring Dept.

Shikiyama Co., Ltd. Import Division

Tokyu Homes (House builder)' Material Procurement Div. Construction Dept. ..

Total Forest Engineering Co., Ltd.

Others

Japan Lumber Reports

'r'

APPENDIX C-4

Kinya Mizorogi Manager

lunichi Ha'1asato : Grader

1. Yoshio Miyagi President

H. Yamaguchi

;. -

. Business Administration Department

Mr. InoGe Materials Division'

Susumu Hyodai Assistant Director

t

Isao Kobayashi Plant Manager .

Nittsu Shoji Packing Dept.

Hiroki Yokota Manager

Akira Nakada Manager

Akira Kushima President

Kazuo Kuchimura .. . ,

President & Publisher Satoshi .aka

Reporter

MAI..A}~4.

ASEAN Timber Technology Centre

Innoprise Corporation SDN. BHD.

Joo Hong Trading Corporation SDN. BHD.

Kawasho Corporation ; Kuala Lumpur Branch

Malaysian Industrial Development Authority Resources Based Industries Divjsion

Malaysian Plywood Manufacturer's Association

The Malaysian Timber Industry Board

Pie Hardwoods

RASA

APPENDIX C-5

Dr. Ir. Lew Wing-Hing KMN Director

Cyril Pinso General Manager Forestry Division

Raymund Tan Get Seng Executive Assistant to . Executive Chairman

Ong Chin Kun' S.M.T. Managing Director

O. Kota..t.,i Manager

Ooi Seng Hock Deputy Director

Chai Fbok L001]g Chairman .

Dato'Baharuddin Haji Ghazali Director General

Tong Kok Hung Marketing Director

Roszehan bte Mohd:' Idrus Director,' Planning and Development

Kamaruzaman Othman Marketing Officer

Chew Lye Teng Director·

Richard Wong President

Ting How Ting Director

.- . ;.' ;'P:

;::

(Mahiysia, cont'd).

Sarawak Timber Association

US Embassy

PHILIPPINES

International Trade Centre. Rattan Furnitur~ Development

Philippine Wood Products Association/ Dacon Corporation

" ":'

SINGAPORE

Singapore Timber Manufacturer's Association ,

Embassy of the United states; of America U.S. Agricultural Trade Office

UNITED STATES

US Department of Commerce International Trade Administrat!on

The World Bank

APPENDIX C-6

Barney Chan :

Jeffrey A, Hesse Agricultural! Attache' Manager

Florendo L. Lara ,Consultant

Antonio G. Bernas PresidentJExec. VP

Ho Mun

Steven D. Shnitzler '. ~ . .

Asst Agricultural Trade Officer ·President

Diana M. Tasnadi Primary Commodities Division

R.D.H. Rowe Forestry Advisor

APPE1'lllIX XI-D OUALIFlCAnONS OF CONSULTANIS

John V. Ward Associates. Inc (JVWA)

1738 N Street, .'f\V, Suite 300 Washington, DC 20036 Telephone: (202) 331-7742 Fax: (202) 331-4963

JVW A is an American international trade consulting firm which specializes in forest products and agribusiness. The firm has handled, for international clients a variety of marketing .related projects in Japan, the USA, .and 23 other countrieS.~·:;"; Projects' have included: .' 'r::"

• A market study of the "forest products industry. of Scandinavia for the American state of Minnesota. , '.'

• . An analysis for a major Japanese trading company or-the supply/demand . trading patterns in the pulpwood industry of the Southeastern' USA.

• Studies of several Japanese agribusiness sectors for firms interested in exporting to that country. ',;', . '

• Analyzing the Japanese market potential and developing marketing strategy for a number of VS hardwood product~,companies exporting to that COl!J1try.

~ ' •• T i . < ; ~:. ",: ~ ., ... ~

John Ward, the principal of rVVvA, :prior to forming the firm in 1981', had: . ':, r",

• Been vice president, international' trade, for the National Forest Products Association (NFPA), America's national trade. assOCiation representing its forest products industry. In that function, he had

Founded and managed the American Hardwood Export trade Council. Led the US industf'j in a successful effort to gain major reductions in Japan's wo,)d products tariffs as well as modifications in standards and building codes to permit greater use of wood products .

• Prior to his invol~ement with NFPA, Mr. Ward had been the head of market research and plaJJP.ing for two major US forest products companies, Boise Cascade and Southwest Forest Industries, as well as management consultant with the large international consulting firm of McKinsey and Company. He has a BS degree in Civil Engineering from Purdue University and an MBA in Marketing from the V niverslty of Wisconsin.

Other key staff members of JVW A include Scott Goidel (prior experience with the Strategic Planning Institute in London and Vienna, BA from Harvard, MA from Johns Hopkins, School of Advanced International Studies) and Alison Rael (prior working experience in Morocco and BA in French and International Studies from the University of Pittsburgh).

. , :.

International Research and 1\iarketine. Inc (IRM)

4-2 Higashi-Azabu, l-chome Minato-ku, Tokyo 106 JAPAN Telephone: 3-582-5341

,Fax: 3-582-2576

",: .

.:: .

.' .r'

~ .. ,:.. .

APPENDIX D-2

I~,'brought into the project by JVW A,is one of the foremost market, research companies based in JapCiIl. It has undertaken numerous mark~t studies in Japan as well as the in United States and, ,Europe. The firm has worked closely with many multi-national companies, associations, and other organizations assisting them ' to enter ;the Japanese ' market. Its clients have included:

,.

• . The American Plywood Association ':-. . Weyerhaeuser Co.

• Scott Paper Co. • Japan Automobile ManufaCturers Association

Mr. Yaichi Negishi was IRM's primary representative on this project, handling the details of the Japa11ese market analysis. Mr. Negishi has led IRM's Forest Products Division and has been the company's Director of Research for several years ... Prior to joining IRM, Mr. Negishi had worked for the American Japan Trading Company, an affiliate of the US Plywood Corporation and had headed Public Relations for the Japan Plywood Exporters Association.

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