€¦ · web viewa market assessment conducted under emp agreement #2014-22, and approved by fas,...

Emerging Markets ProgramFinal Report

Date: August 16, 2019

Title: Philippines Technical Assistance Program for U.S. Softwoods

Target market: Philippines

Target commodity: Softwood lumber

Lead authors: Rose BradenDr. Chris KnowlesJerry HingleNick Clark

Emerging market agreement: #2016-08 Central FundsActivity E16MX-SW4PH

Introduction

A market assessment conducted under EMP agreement #2014-22, and approved by FAS, reports that the Philippines went from being the world’s biggest exporter of tropical hardwoods in the 1970s to being a net importer of forest products by the 1990s. Deforestation continues at a rate of several thousand hectares each year and landowners have little incentive to replant. With insufficient domestic stocks of eucalyptus and acacia and the rising cost of inter-island transportation, the industry is increasingly having to rely on imported material.

The assessment highlights several end-uses that present opportunities for U.S. softwoods: Furniture producers report deep dissatisfaction with rising prices of the domestic wood supply, making U.S. softwoods increasingly competitively priced. Residential housing construction has grown significantly since 2008 and is expected to continue to rise in line with overall economic growth. Importers hold that the “potential is tremendous” for U.S. softwoods to displace Malaysian hardwoods for construction as well as interior flooring and joinery.

It concludes that the market clearly holds potential for the U.S. industry, but without providing technical assistance the market will remain largely untapped. The assessment recommends technical assistance needed to grow this market, centered on training lumber specifiers on the

Philippines Technical Assistance Program for U.S. Softwoods – Final report

characteristics, advantages, and structural values of U.S. softwood lumber which would mutually benefit the U.S. and Philippine industries.

This project provided the technical assistance and training recommended in the market assessment. SEC is grateful for Emerging Markets Program funds to carry out this project as well as the support and assistance of FAS/Manila.

Executive Summary

SEC conducted a series of technical seminars and on-site training in Manila and Cebu, two hubs for furniture manufacturing in the Philippines – a key end-use of imported woods. The events were highly successful reaching nearly sixty key wood traders and end-users while on-site training assisted several manufacturers in choosing U.S. softwoods. Evaluation surveys show that the events succeeded in increasing technical understanding of U.S. material and intent to begin or increase purchases. Encouragingly, exports to the market have increased steadily since 2016. Difficulties Encountered

No difficulties have been encountered in this project.

Accomplishments

First seminar series, December 2017

SEC and Oregon State University held a technical seminar in Manila in coordination with the Philippine Wood Producers Association and the grateful assistance of FAS Post in Manila. Expert speakers were:

Dr. Chris Knowles, Oregon State University: Wood basics, introduction to Western U.S. softwood species

Jerry Hingle, international program consultant for the Softwood Export Council and the Southern Forest Products Association: Introduction to Southern Pine lumber and preservatively-treated lumber

The event gathered 25 attendees consisting mostly of wood traders. The speakers fielded many questions, mostly centering the durability of wood used outdoors, naturally durable species such as Cedar, prices of softwoods imported from the U.S., the characteristics of hardwoods vs softwoods, and the use of preservatively-treated lumber in areas with widespread termites.


While some in the audience were familiar with Douglas fir and Southern Pine, other species addressed by the speakers were new to the attendees.

Survey of Attendees

Twenty-two evaluation surveys were collected showing low awareness of U.S. softwoods but improvement in interest and awareness of specifying U.S. product as a result of the training event. Complete results of the survey are available in the appendix. In summary:

1. Thirty percent of the respondents source softwood lumber from New Zealand followed by Canada at 25%. Fifteen percent of the respondents source from the United States and a fair amount import from Russia and Germany.

2. As to what poses obstacles or difficulties towards importing U.S. softwoods, 33% cited “lack of knowledge of different species/products and their uses” and “lack of knowledge of different grades”. Fifteen percent cited U.S. softwoods being “more expensive than other countries” while 13% cited “quality concerns with U.S. softwoods”. This indicates the need for further guidance on the cost competitiveness of U.S. softwoods and its advantages over imports from Canada and New Zealand.

3. Knowledge of the characteristics and grades of U.S. softwoods was mostly ranked “fair”, “poor” or “none” indicating the need for increased educational efforts in the market.

4. As to the respondents’ opinion of U.S. softwoods, U.S. product was favorably rated in nearly every category.

5. As to opinions of U.S. forest management practices, the respondents mostly ranked the U.S. as “much better” or “somewhat better” than other countries. That the U.S. is held in high regard in this area is important as buyers seek supply from legal and sustainable sources.

6. Most (61%) of the respondents agreed that the training event increased their understanding of U.S. softwoods.

7. Encouragingly, most (65%) of the respondents held that they are “very likely” to begin specifying U.S. softwoods as a result of the event.

Second seminar series and on-site training, July 2019

On-site training

On-site training was provided to several furniture manufacturers in the region, thanks to the grateful assistance of the Cebu Furniture Industries Foundation, Inc.


Mehitabel

The company has been in the business of manufacturing high-end furniture since 1948. It primarily exports to the U.S., as do most manufacturers in Cebu (contrasting with manufacturers in Manila who primarily produce for domestic consumption). Its clients include high-end retailers such as Serena & Lily, Ralph Lauren, and Frontgate. Mehitabel primarily uses domestic hardwoods, some U.S. hardwoods, and some pine imported from New Zealand. Prices paid for Beech averages $900/mbf. Its plywood is sourced from Indonesia, which they considered to be of low quality.

They report that labor costs in Cebu are very low, with a minimum wage of $1.00 per hour, but land, electricity, and transportation costs are high. As such, despite labor costs being significantly lower than in China and Vietnam, manufacturers in Cebu are unable to compete with producers in those countries. However, the U.S./China trade war has created opportunities for Philippine producers as some production is shifting from China to the Philippines due to higher tariffs.

The company expressed interest in U.S. softwoods if delivered competitively and at a low moisture content.

Axentwood

Axentwood is also a high-end furniture producer exporting almost entirely to Japan. It uses a mix of hardwoods (oak) and some softwoods. The company is familiar with Douglas fir (or as they called “Oregon pine”) due to its widespread use in Japan, where most of its furniture is shipped, but has not carried significant volumes due to perceptions of high prices. The company’s furniture designs often call for use of Rattan; they report that Rattan is of dwindling supply but at one time it was the core component of the Philippines’ furniture industry.

Corroborating earlier interviews, given low labor costs, the cost of inputs (e.g., wood) is a relatively high share of overall production. Thus, recovery/waste reduction is very important. The company strives to make use of all downfall (pictured).The team discussed – and later presented at a seminar – how shop grades from the western U.S. could help manufacturers improve recovery and forgo the need to stockpile cutoffs for future use.


Beechwood used in furniture production

The company experimented with pressure-treated Radiata pine from New Zealand with limited success. It is considering thermally-treated rubberwood for outdoor applications, something that the U.S. team advised against due to its poor performance in tropical environments. The team recommended considering pressure-treated softwoods from the U.S. and discussed U.S. grades that can maximize wood recovery.

Katipunan Limber

Reportedly a high-end and high-volume furniture producer using domestic hardwoods such as Lauan, Yakal, and Narra, but the company had little information to share.

Central Lumber

Central Lumber is the largest wood importer/retailer on the island and a fan of U.S. softwoods – importing both Douglas fir and Southern Pine. The company imports about 20 containers monthly, with imports peaking at 60 containers a month. Imports are Prime grades in standard U.S. dimensions in 10’ and 20’ lengths. Company owner Jeffrey Sy Sinco reports no problems importing from the U.S. He acknowledged, though, that there is a lack of awareness of U.S. softwood in Cebu and in the Philippines in general. Thus, the company has put lots of effort in education consumers on U.S. softwoods, which are becoming accepted in the market, but confusion remains over “softwoods vs hardwoods” and how species differ from product traditionally carried in the market. Other than Douglas fir, Western softwoods are little known in the market but clear opportunities exist for tight grain material that resembles domestic Acacia.


Extensive stockpile of small cut-offs for re-use

Seminar

Speakers included Dr. Chris Knowles (wood basics, introduction to Western U.S. softwood species), Jerry Hingle (introduction to Southern Pine lumber, forestry practices, and preservatively-treated lumber) and master carpenter Nick Clark (furniture design considerations using American softwoods).

Attendance was strong at 29 wood buyers, furniture manufactures representing the Cebu Furniture Industries Foundation, architects, and manufacturers of saunas and spas. Academic groups also attended – including the University of San Carlos, University of Southern Philippines Foundation, the Cebu Institute of Technology-University, and the Bosco Technical College which offers woodworking and cabinetry in its vocational curriculum.

Attendees expressed considerable interest in the discussions, with numerous questions centering on silviculture, pressure-treated lumber, slope of grain in softwoods, sourcing material locally, density, and kiln drying. Some academic groups invited the speakers to provide lectures on the same topics.

Questions on prices of U.S. softwoods ensued -- often a topic at seminars -- whereby the speakers responded that they are unable to quote exact prices due to variances in species, grades, sizes, and transportation. However, they cited earlier research conducted by SEC showing that U.S. softwoods are competitively priced compared to what’s commonly carried in the market (acacia, rubberwood). An attendee added that he’s typically paying $1,000 per thousand board feet, a price that the U.S. could easily beat.

Mr. Clark’s presentation was particularly well received for its practical overview of how various U.S. softwoods are used in furniture production, taking into account where higher strength is needed and desired grain and color patterns. He underscored his preference of Douglas fir for its strength, color, and grain patterns. His review of grain selection (e.g., quarter sawn or flat grain) as it pertains to warping and splitting was also well received.

One-one-one discussions with attendees continued after the seminar, with several inquiring about sourcing softwoods from the U.S., naturally durable (cedar) for large scale production of outdoor planters, ideal species for pallets, and a long list of other questions.

Survey of Attendees


Strong seminar turnout in Cebu

Nineteen evaluation surveys were collected showing low awareness of U.S. softwoods but improvement in interest and awareness of specifying U.S. product as a result of the training event. Complete results of the survey are available in the appendix. In summary:

1. A sizeable share of softwood lumber imports derive from New Zealand and Canada while 30% of respondents report sourcing from the U.S.

2. As to what poses obstacles or difficulties towards importing U.S. softwoods, 18% cited “lack of knowledge of different species/products and their uses” and 13% cited “lack of knowledge of different grades”. Ten percent of respondents cited distribution channel difficulties as a barrier to sourcing U.S. softwoods. As in the previous event in Manila, this indicates the need for further guidance on the cost competitiveness of U.S. softwoods and its advantages over imports from Canada and New Zealand. While there is some awareness of Douglas fir and Southern Pine, other species are hardly known.

3. As to the respondents’ opinion of U.S. softwoods, the respondents ranked U.S. product favorably in nearly every category. However, corroborating with the above question on distribution channels, many don’t know how to source U.S. material.

4. Most (59%) of the respondents agreed that the training event significantly increased their understanding of U.S. softwoods.

5. Encouragingly, 47% of the respondents held that they are “very likely” to begin specifying U.S. softwoods as a result of the event while 53% are “somewhat likely” to begin purchasing U.S. softwoods.

OUTCOMES AND PERFORMANCE MEASURES

Surveys show that the events succeeded in increasing technical understanding of U.S. softwoods and the participants’ ability and interest in beginning to specify the correct material.

Baseline Goal Measurements Success stories

Wood traders and furniture and joinery manufacturers are unaware of the advantages of U.S. softwoods and the proper grades, sizes, and preservative treatments appropriate to the application.

Increase awareness and understanding of U.S. material grades, sizes, and preservative treatments as a result of technical seminars/workshops and one-on-one training.

Surveys of program participants showed an increase in awareness and understanding (see survey details above)

A success story was developed outlining growth in exports to emerging markets as a result of the U.S. industry’s EMP programs.


Cooperation

This project relied greatly on assistance of the officers and staff at the Foreign Agricultural Service post in Manila. SEC and Oregon State University are grateful for their support.

Follow-up

SEC is following-up with questions raised at the events and connecting buyers with U.S. sellers.

Observations

The training was clearly successful in explaining the merits of U.S. softwoods, “hardwoods vs softwoods”, and introducing the thirteen commercially available from the U.S. But much work is still needed to fully explain the complexities of the U.S. grading system and U.S. sizes and grades compared to what’s been traditionally been used there for decades.

Moreover, while Douglas fir and Southern Pine are somewhat recognized in the market, much work is needed to introduce other species. Opportunities particularly exist for Western softwoods that are traditionally used in interior joinery and furniture applications as the country struggles to compete against low-cost producers in China and Vietnam. The clear path that Philippine furniture exporters are choosing is high-end, unique products in which Western species are ideal. And importers report paying on average $1,000 mbf, which is easily within the range of higher-grade material sourced from the U.S. west.

Recommendations

1. Future seminars should target the city of Davao where much construction activity is underway.

2. With basic educational work mostly complete in the market, future efforts should center on connecting buyers with sellers by way of trade show exhibits and outbound missions from the U.S. to the Philippines.

3. Like elsewhere in Southeast Asia, the U.S. industry needs a more consistent presence in the Philippines to respond to buyer inquiries. Otherwise momentum gained through this project is lost.

Principals

Industry experts assigned to this project are:

Rose Braden is the President of the Softwood Export Council (SEC), a non-profit trade association made up of U.S. forest products associations, state trade agencies, and public research centers who work together to increase the use of U.S. softwood products globally. She has over 20 years of experience developing international marketing strategies for the U.S.


forest products and building materials industries and executing promotional programs. For ten years Braden directed international marketing and educational programs as the President of the Evergreen Building Products Association. Prior to her work with the EBPA, she was an analyst for the Center for International Trade in Forest Products at the University of Washington where her work included projects on Taiwan, China, Japan, Europe, and U.S. industry trends and manufacturing clusters.

Dr. Chris Knowles holds a PhD in wood science from Oregon State University and a M.S. and B.S in Forestry for Stephen F. Austin State University. He is an Assistant Professor in Forest Products Marketing and the Assistant Director of the Oregon Wood Innovation Center (OWIC) at Oregon State University, where he teaches “Global Trade in Renewable Materials”. Chris regularly conducts research on international markets for wood products, including recent projects in China, India, Vietnam, and Australia. Chris’ research interests include international markets, the role of wood products in sustainable design, and developing local markets for wood productsNick Clark is a Master Joiner and furniture manufacturer who began his career more than thirty years ago as a formal apprentice with the leading joinery contractor in Sheffield, England. He worked as a Master Joiner until moving to Berkeley, California, in 1991 to begin his own furniture making business. From Nick developed invaluable expertise completing a prestigious two-year fine woodworking program at The College of the Redwoods in Fort Bragg, California.

Nick Clark began his career more than thirty years ago as a formal apprentice with the leading joinery contractor in Sheffield, England. He worked as a Master Joiner until moving to Berkeley, California in 1991 to begin his own furniture making business. From 1994 to 1996, Nick developed invaluable expertise completing a prestigious two-year fine woodworking program at The College of the Redwoods in Fort Bragg, California.

Jerry Hingle has twenty years of experience developing international markets for value-added U.S. wood products. For 10 years he directed the international marketing and trade policy program of the Southern Forest Products Association in more than 20 countries. Prior to that he oversaw the American Forest & Paper Association’s international marketing and research programs for wood products in Asia, Mexico, and the European Union. For the past five years he has assisted the wood trade groups Softwood Export Council and Southern Forest Products Association in developing new emerging markets for U.S. softwoods.

* * * * * * * *


Survey of American Softwoods seminar attendees, Manila, December, 2017Attendees: 25, Number of completed surveys: 22

1 What obstacles or difficulties, if any, do you/does your company encounter when using/specifying U.S. softwoods lumber and panel products in general?

Responses Percent of total

Lack of knowledge of different species/products and their uses 12 18%Quality concerns with U.S. softwoods 9 13%Lack of knowledge of different grades 12 18%Green building standards 2 3%Local building regulations – structural building codes 1 1%More expensive than other countries 10 15%Can't obtain sizes/lengths required 5 7%Moisture content 3 4%Grade/knots 5 7%Cracks/checks/splits 3 4%Distribution channel difficulties 3 4%Difficulties between real and nominal dimensions 3 4%

68 1

2 How would you describe your overall knowledge of the grading of U.S. softwoods/softwood lumber and panel products?

3 How would you describe your overall knowledge of the characteristics of U.S. softwoods/softwood lumber and panel products?

2 – Grading

3 - Characteristics

Excellent 1 3Very good 1Good 5 6Fair 4 6Poor 4 1No knowledge 4 4

4 Following is a list of statements that people have used to describe U.S. softwood products. For each one I would like you to tell me whether you personally agree or disagree with it.

Agree DisagreeDon't know

Are easy to import 10 3 3Are versatile/have many uses 15 1 2


Are readily available 11 2 3Are good value for money 12 2Are available in many species/varieties 13 1 2Are environmentally friendly 14 2Are good for structural uses 13 2Add value to products/projects 13 2Meet our codes/standards 14 3Are better quality 14 4Are good for interior design uses 15 2Add value to furniture design/manufacturing 13 3

5 What type of information/materials could American Softwoods provide to you that would encourage you to use/specify U.S. softwood lumber and panel products more often? Contact information for US companies 14 19%Information on the varieties of softwood products and their uses 15 21%Codes/standards information 9 13%Sustainability/environmental information 10 5%Technical support 9 4%Generic U.S. market information 8 4%U.S. forest industry statistics 7 3%

72

6 How would you rate U.S. forest management practices compared to those in other countries? Do you think forest management practices in the U.S. are…?Much better than other countries 7 44%Somewhat better than other countries 7 17%About the same as other countries 2 5%Somewhat worse than other countries 0 0%Much worse than other countries 0 0%

16

7 Using a 5 point scale, where a 5 means it would have a “significant impact” and a 1 means it would have “no impact at all”, what impact would information on the “sustainability” of U.S. softwood resources have on your likelihood to use/specify U.S. softwood?Significant 5 5 11%4 6 14%3 4 9%2 1 2%No impact 1 1 2%

17


8 Using a 5 point scale, where a 5 is “significant” and 1 is “not at all”, thinking about all of the contact you’ve had with American Softwoods how has your knowledge and understanding of U.S. softwood lumber and panel products increased?

Significant 5 5 28%4 6 33%3 4 22%2 1 6%No impact 1 2 11%

18

9 How likely are you to specify new varieties of U.S. softwood products as a result of your participation/attendance at these seminars, events and/or tradeshows?

Very likely 11 65%Somehwat likely 5 29%neither more nor less likely 1 6%not very like;y 0 0%not at all likely 0 0%

17

10

From which one country/area do you/does your company use/specify softwood the most?

United States 3 15%France 0 0%Australia 1 5%Canada 5 25%Germany 2 10%New Zealand 6 30%Chile 0 0%Russia 2 10%Africa 0 0%Brazil 1 5%Don't know 0 0%

20


Survey of American Softwoods seminar attendees, Cebu, July 2019Attendees: 29, Number of completed surveys: 19

1 What obstacles or difficulties, if any, do you/does your company encounter when using/specifying U.S. softwoods lumber and panel products in general?

Responses Percent of total

Lack of knowledge of different species/products and their uses 11 18%Quality concerns with U.S. softwoods 6 10%Lack of knowledge of different grades 8 13%Green building standards 7 11%Local building regulations – structural building codes 4 6%More expensive than other countries 5 8%Can't obtain sizes/lengths required 4 6%Moisture content 2 3%Grade/knots 4 6%Cracks/checks/splits 3 5%Distribution channel difficulties 6 10%Difficulties between real and nominal dimensions 2 3%

62 1

2 How would you describe your overall knowledge of the grading of U.S. softwoods/softwood lumber and panel products?

3 How would you describe your overall knowledge of the characteristics of U.S. softwoods/softwood lumber and panel products?

2 – Grading

3 - Characteristics

Excellent 3 2Very good 5 5Good 4 6Fair 3 4Poor 6 4No knowledge 1 0

4 Following is a list of statements that people have used to describe U.S. softwood products. For each one I would like you to tell me whether you personally agree or disagree with it.

Agree DisagreeDon't know

Are easy to import 5 4 10Are versatile/have many uses 18 0 0


Are readily available 11 2 6Are good value for money 10 1 6Are available in many species/varieties 14 2 2Are environmentally friendly 15 1 2Are good for structural uses 16 1 2Add value to products/projects 17 1 2Meet our codes/standards 13 0 3Are better quality 16 0 2Are good for interior design uses 17 1 0Add value to furniture design/manufacturing 18 1 0

5 What type of information/materials could American Softwoods provide to you that would encourage you to use/specify U.S. softwood lumber and panel products more often? Contact information for US companies 10 14%Information on the varieties of softwood products and their uses 14 20%Codes/standards information 10 14%Sustainability/environmental information 6 3%Technical support 15 7%Generic U.S. market information 8 4%U.S. forest industry statistics 6 3%

69

6 How would you rate U.S. forest management practices compared to those in other countries? Do you think forest management practices in the U.S. are…?Much better than other countries 9 56%Somewhat better than other countries 5 12%About the same as other countries 2 5%Somewhat worse than other countries 0%Much worse than other countries 0%

16

7 Using a 5 point scale, where a 5 means it would have a “significant impact” and a 1 means it would have “no impact at all”, what impact would information on the “sustainability” of U.S. softwood resources have on your likelihood to use/specify U.S. softwood?Significant 5 6 14%4 9 20%3 1 2%2 0 0%No impact 1 0 0%

16


8 Using a 5 point scale, where a 5 is “significant” and 1 is “not at all”, thinking about all of the contact you’ve had with American Softwoods how has your knowledge and understanding of U.S. softwood lumber and panel products increased?

Significant 5 10 59%4 5 29%3 2 12%2 0 0%No impact 1 0 0%

17

9 How likely are you to specify new varieties of U.S. softwood products as a result of your participation/attendance at these seminars, events and/or tradeshows?

Very likely 9 47%Somehwat likely 10 53%neither more nor less likely 0 0%not very like;y 0 0%not at all likely 0 0%

19

10

From which one country/area do you/does your company use/specify softwood the most?

United States 7 30%France 0 0%Australia 2 9%Canada 4 17%Germany 0 0%New Zealand 4 17%Chile 0 0%Russia 1 4%Africa 0 0%Brazil 0 0%Don't know 5 22%

23


€¦ · web viewa market assessment conducted under emp agreement #2014-22, and approved by fas,...

Documents