Asian importers meet with western Montana wood products companiesPosted: March 19, 2013
With tariffs placed on wood exports from Russia and logging limitations in China, members of the trade mission spent the day in western Montana, looking to make new contacts and diversify their offering of wood products in overseas markets.
“The forest materials in Montana are a good fit for our Chinese market,” said Wu Zhi Xi, general manager of the Shanghai Daonuo Industry Co. “China has a high demand for forest resources. For Montana, this is really good.”
Xi, from Shanghai, represented one of the largest buyers traveling with the trade delegation. Like his peers, he has worked with suppliers from Washington and Oregon, but had little knowledge about the products offered in Montana.
China’s own demand for wood is large and growing, Xi said, and importers are looking to enter new markets. Showcasing Montana wood products to Chinese customers could help meet demand back home, satisfying producers and buyers on both ends.
“Given China’s projected growth rate over the next five to 10 years, the demand for wood products will increase 20 percent,” Xi said. “Through this mission, I definitely want to further my business relationship with Montana companies.”
Monday’s visit to the Sustainable Lumber Co. showroom in Missoula marked the third day of the delegation’s Montana tour, which saw stops at Pyramid Mountain Lumber in Seeley Lake and Tricon Timber in St. Regis.
Company leaders also joined the University of Montana’s College of Forestry and Conservation, along with the Montana Department of Natural Resources, at Lubrecht Experimental Forest over the weekend.
Xu Fang, director of Shanghai-based American Softwoods, said the feedback from delegates has been both positive and eye opening. With new contacts made, he believes many representatives will look to buy Montana products to satisfy customers back home.
“They didn’t understand the lumber quality on this side of the Rocky Mountains,” Fang said. “Before, there were questions about transportation costs and markup. But they feel that can be offset by the high quality of Montana products.”
Craig Rawlings, president and CEO of the Forest Business Network, said the delegates represent 16 companies responsible for roughly 15 percent of all wood products imported to China and Korea, amounting to nearly $300 million annually.
The Asian demand will continue to grow, he said, marking a new opportunity for wood-oriented businesses in Montana.
“China, in particular, has never used wood in construction, but in the last few years, they keep using more,” Rawlings said. “It’s not like we’re competing for a market that already exists, or trying to place wood against concrete – it’s a brand-new market for us.”
The recovering U.S. economy and the resurgence of the housing market prompted delegates to question the output capacity of Montana’s wood producers and their ability to meet local – and international – demand.
Ryan Palma of Sustainable Lumber told visitors Monday that his company already was sold out six weeks in advance. Sustainable Lumber currently produces 60,000 board feet of flooring each month, though Palma said they plan to increase their capacity to 100,000 board feet in the months ahead.
Despite questions over capacity, Rawlings said adding customers in new Asian markets was something local suppliers won’t likely overlook. He cited several Idaho companies that have sold to China for several years. They set record profits because of it, despite the economic woes of the U.S.
“With the local lumber market going up now, a lot of Montana mills aren’t going to want to sell a whole lot to these new (Asian) markets,” Rawlings said. “But I think they’re all smart enough to get 5 to 10 percent of their portfolio going into new markets to stabilize their sales program.”
Arnie Sherman, executive director of the Montana World Trade Center at the University of Montana, met the delegation in Idaho at the Small Log Conference, hosted by the Forest Business Network.
The buyers are looking to diversify their product offerings, and Sherman believes they’ve found promise in Montana. Before their arrival, he said, the delegates had little knowledge of the expansive forests sweeping inland from the Pacific Coast.
The Canadians, Sherman added, had told Asian buyers that few if any worthwhile wood products could be found south of the border. The buyers have learned otherwise over the past few days.
“They were surprised to see what we offer,” said Sherman. “We’re very excited about the potential of long-term relationships and building new partnerships in this (Asian) market.”
Gordy Sanders, manager of Pyramid Mountain Lumber, said the delegation’s morning visit went well. While the Seeley Lake mill currently has more customers looking for product than it has lumber to sell, he said, it never hurts to distribute materials across multiple markets.
“Hopefully, as part of this reverse trade mission, and between the different companies and businesses they visited in Montana and Idaho, they’ll find opportunities to provide some short- and long-term needs,” said Sanders.
Sanders said the plant, which employs around 150 workers, has the ability to ramp up production now. But doing so is a decision based on several factors, including the availability of raw resources – the size and species of wood, and the cost.
Sanders wasn’t aware of any Montana mill currently running at full capacity.
“We have the capability to ramp up or increase production, but it’s all a function of what we can bring into the plant site, as far as raw materials go,” Sanders said. “That’s the limitation that keeps us at the operational level we’re at. All mills in Montana would look to increase production if the materials to support that were to increase.”