The Impact of Global The Impact of Global Log MarketsLog Markets

By By Mike Seidl Mike Seidl

Indiana State Department of Indiana State Department of Agriculture/DNR Agriculture/DNR

It’s a Global Economy!It’s a Global Economy!

The Global EconomyThe Global Economy

Consumer and legislatively driven Consumer and legislatively driven demand shifts in one market demand shifts in one market

impact producers & consumers impact producers & consumers on other continents who may not on other continents who may not even serve or purchase in that even serve or purchase in that

market.market.

Examples Examples

U.S. sub-prime market U.S. sub-prime market

Reduced U.S. Hardwood demand Reduced U.S. Hardwood demand

Chinese furniture into Asian market Chinese furniture into Asian market

Growing Worldwide DemandGrowing Worldwide Demandfor North American Wood for North American Wood

Products- why? Products- why?

Exchange Rates – Weak Dollar Exchange Rates – Weak Dollar

Middle Class Growth Middle Class Growth

Increased Tropical Forest Increased Tropical Forest Preservation and Illegal Preservation and Illegal

Logging LawsLogging Laws

Exchange RatesExchange Rates

Who’s buying and what??Who’s buying and what??

CanadaCanada

The Middle EastThe Middle East

Resort regions - Caribbean Resort regions - Caribbean

ChinaChina

Luxury Furnishings for HomeLuxury Furnishings for Home

Hardwood Flooring Hardwood Flooring

U.S. Furniture U.S. Furniture

Custom CabinetsCustom Cabinets

The Middle ClassThe Middle Class

China China

20% of total population – 250 million20% of total population – 250 million

(assets of $18,000 -$36,000)(assets of $18,000 -$36,000)

Chinese Academy of Social Sciences Chinese Academy of Social Sciences predicts this to increase 40% by predicts this to increase 40% by

2020!2020!

From Made in China to Sold in From Made in China to Sold in ChinaChina

Urban consumer spending to reach Urban consumer spending to reach $2.3 trillion annually over next 20 $2.3 trillion annually over next 20 years. years.

Currently China’s consumer economy Currently China’s consumer economy is about the size of Italy’s. However, is about the size of Italy’s. However, in two years time it will add an Italy in two years time it will add an Italy every year. * every year. *

Removal of trade barriers - WTO Removal of trade barriers - WTO

*Andrew Grant -McKinsey & Company*Andrew Grant -McKinsey & Company

Forest Preservation & Illegal Forest Preservation & Illegal Logging LawsLogging Laws

Tropical forests in South America, Tropical forests in South America, Africa, and Southeast Asia are Africa, and Southeast Asia are

increasingly being set aside from increasingly being set aside from timber harvests due to pressure from timber harvests due to pressure from

environmental groups or because environmental groups or because poor stewardship in the past has left poor stewardship in the past has left forests decimated or unproductive. forests decimated or unproductive.

South America - BrazilSouth America - Brazil The Brazilian state of Para created the The Brazilian state of Para created the world’s largest forest preserve in 2006 – world’s largest forest preserve in 2006 – 58,000 square miles. One third of this 58,000 square miles. One third of this

preserve is strictly off limits to preserve is strictly off limits to development and logging. The remaining development and logging. The remaining two-thirds will be strictly regulated by the two-thirds will be strictly regulated by the

Para government. Para government.

Brazilian Imports of U.S hardwoods Brazilian Imports of U.S hardwoods have more than tripled in 2007.have more than tripled in 2007.

IndonesiaIndonesia

The Indonesian government plans to The Indonesian government plans to reduce log harvests by almost 70% in reduce log harvests by almost 70% in an effort to rehabilitate and conserve an effort to rehabilitate and conserve its forests which have been some of its forests which have been some of the most overexploited in the world the most overexploited in the world in recent years. Already the Aceh in recent years. Already the Aceh

province prohibits logging. province prohibits logging.

Illegal Logging Illegal Logging

World Bank estimates that annual World Bank estimates that annual revenue losses amount to $10 billion revenue losses amount to $10 billion

for business and $5 billion for for business and $5 billion for governments. U.S. exporters lose governments. U.S. exporters lose

approximately $460 million per year approximately $460 million per year in business and lower prices. in business and lower prices.

Many governments are passing Many governments are passing tougher laws and have stepped up tougher laws and have stepped up enforcement to stop this practice. enforcement to stop this practice.

World Markets for U.S. World Markets for U.S. Log Exports Log Exports

Red Oak - Millions BFRed Oak - Millions BF

106,17249%

110,60751%

2006

2007

33,91240%

4,7525%7,329

8%

7,4669%

33,12638%

Canada

China

H-Kong

Mexico

Indonesia

Cherry- Millions BFCherry- Millions BF

41,17142%

56,23358%

2006

2007

6,96323%

5,27718%

4,98117%

2,3388% 10,594

34%

Canada

China

Germany

H-Kong

Italy

W.Oak – Millions BFW.Oak – Millions BF

133,04565%

72,54035%

2006

2007

13,25815%

8,2409%

7,6159%

6,0777%

5,1006%

4,5825%

19,31622%

24,12127%

Spain

China

U.K.

Portugal

Japan

Germany

Canada

Italy

Walnut – Millions BFWalnut – Millions BF

79,89959%

54,65341%

2006

2007

36,65355%

12,98320%

5,8749%

6,44210%

3,9446%

China

Italy

Germany

H-Kong

Canada

Hard Maple – Millions BFHard Maple – Millions BF

79,89959%

54,65341%

2006

2007

100,54180%

4,1953%

4,6874%

7,2056%

9,2357%

Canada

China

Korea

Germany

Japan

Ash – Millions BFAsh – Millions BF

29,07460%

19,16640%

2006

2007

5,23630%

2,41614%

2,67615%

7,05041%

China

Italy

Canada

U.K

Average Prices / M’Average Prices / M’

Ash - $1157/m’ Ash - $1157/m’

Cherry – $2119/m’Cherry – $2119/m’

Hard Maple - $2555/m’Hard Maple - $2555/m’

Red Oak - $984/m’Red Oak - $984/m’

White Oak – $1538/m’White Oak – $1538/m’

Walnut – $1770/m’Walnut – $1770/m’

Indiana Log Exports – World Indiana Log Exports – World $USD $USD

200730,048

36%

200624,310

30%

200527,682

34%

Red & White Oak – Totals Red & White Oak – Totals $USD $USD

200611,64130%

200713,98736%

200513,01234%

Remaining Species – Totals Remaining Species – Totals $USD$USD

200612,699

29%

200716,054

37%

200514,670

34%

2006 Total $USD

H-Kong3,47819%

China4,66124%

Germany 4,80225%

Japan1,3047%Italy

1,4218%

Spain3,11917%

2007 Total $USD

Italy1,8777%

U.K.2,2779%

Germany2,59710%

Japan2,79011%

Canada3,03912%

China3,83815%

Spain3,91915%

H-Kong4,99821%

Logs and CompetitionLogs and Competition

Continued international demand will Continued international demand will keep sawlog and timber prices higher keep sawlog and timber prices higher

than domestic markets would than domestic markets would support absent of the international support absent of the international demand. High grade logs – 3SC or demand. High grade logs – 3SC or

better along with veneer will remain better along with veneer will remain the most wanted in the the most wanted in the

marketplace.* marketplace.*

*Hardwood Review *Hardwood Review

Conclusion Conclusion

U.S. log exports in 2008 will reach U.S. log exports in 2008 will reach approximately 575 million Bf approximately 575 million Bf about 10% more than 2007about 10% more than 2007

ReferencesReferences

Hardwood Review Hardwood Review

Foreign Agriculture Service Foreign Agriculture Service

Trade Stats Express Trade Stats Express

U.S. Census Bureau U.S. Census Bureau