Market Developments for Value Added Wood Products

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Market Developments for Value Added Wood
Products

• Jukka Tissari
• Market Development Officer - Wood Products

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Contents

• Global trade in Value Added Wood Products (VAWPs)
• Competitive environment
• Conclusions

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Products covered (SITC)

• 248.3/5 Profiled wood
• 635.3 Builders joinery and carpentry
• Ex-821 Wooden furniture

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OECD Imports of three VAWPs
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OECD Imports of Wooden Furniture by Type
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OECD Imports of BJC by Type
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OECD Imports of Wooden Furniture by Major Markets
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OECD Imports of BJC by Major Markets
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OECD Imports of Profiled Wood by Major Markets
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Imports of Wooden Furniture by Origin USA
Japan
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Imports of Wooden Furniture by Origin Germany
UK
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Imports of BJC by Origin USA Japan
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Imports of BJC by Origin Germany UK
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Imports of Profiled Wood by Origin USA Japan
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Imports of Profiled Wood by Origin Germany UK
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ITTO Consumer Imports of Tropical Wood Products
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Major Tropical VAWP Exporters (1999)
 
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Changes in ITTO Export Structure
Asia-Pacific
Latin America-Caribbean
Africa
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Competitive environment drivers

• 1. Government policies to add value, taxes on
  primary products, investment incentives
• 2. Technological developments in the processing
  of plantation species and lesser-used species
• 3. Foreign direct investment
• 4. Wage and cost advantages
• 5. Falling tariffs under GATT/WTO agreements
• 6. Rapidly growing domestic/regional markets
• 7. Improved shipping services
• 8. Specific export import promotion programs

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Competitive environment challenges

• 1. Growing out-sourcing of semi-finished products
• 2. Tightening certification and labelling
  requirements on furniture (e.g. the USA in the
  next 2-3 years)
• 3. Substitution pressure from new materials
• (natural fibres and synthetics)
• 4. Higher potential supply for more diversified
  plantation wood products
• 5. Product standards and design
• 6. Consolidation of distribution
• 7. Mounting of non-tariff barriers on trade

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On competition

• 50 US-furniture plants closed by mid-2001
• high-end producers with customisation and rapid
  delivery will survive
• manufacturers transform into assembly, finishing
  lines or distributors/marketers
• out-sourcing of semi-finished products and
  components from China, Asia-Pacific, Latin
  America
• still capture most of the value-adding potential
  in design, distribution and marketing functions

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On competitiveness

• from comparative advantage to competitive
  advantage
• In Europe flexible but efficient production with
  the highest technological quality, superior
  design, innovative market promotion, and swift
  distribution with minimal stock-keeping
• In the tropics moving from original equipment
  manufacturing (OEM) towards original design
  manufacturing (ODM) and ultimately to original
  brand manufacturing (OBM)

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Market access

• trade liberalization has reduced tariff
  escalation ( higher tariffs for value added
  products)
• EU, Japan and USA apply no import tariffs on FPWP
  from GSP countries, for most other countries 2-6
• eliminate tariffs on wooden furniture completely
  by 2005
• generally tropical producers retain higher
  tariffs to protect their industries
• regional agreements reduce tariffs

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On End-use markets for VAWPs

• Consumer market (DIY products, household
  furniture and BJC products)
• Commercial and industrial enterprises (building
  and construction materials, intermediate and
  finished joinery products, contract furniture)
• Institutional buyers (building and construction
  materials, office public premises furniture)

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On Certification

• In 1st and 2nd segment, the role of
  intermediaries (sourcing agents, brokers,
  importers, wholesalers, retailers, etc.) is
  essential
• complex consumer market involves large
  corporations, who manage supply chains (IKEA,
  Home Depot, BQ) and a lot of medium and
  small-scale operators
• on institutional side, many governments in Europe
  are developing their procurement policies (WTO
  rules breach?) largest volumes, less certified
  yet

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Conclusions 1

• International trade of VAWPs has liberalized,
  increasing export opportunities for DMECs.
• Around 40 of all OECD imports originate from
  developing market economies and China.
• Competition will force industrialized countries
  to transform their manufacturing industries and
  participate in the supply chains from
  cost-competitive regions like Asia-Pacific and
  Latin America.

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Conclusions 2

• The contribution of VAWP to the forest sectors of
  tropical countries will continue to grow.
• Tropical value-added processing (furniture in
  particular) tends to develop in phases gtgtgt
  standardized products gtgtgt originally designed
  products gtgtgt branded products.
• Tightening tropical wood resources call for
• Processing of more plantation woods
• Expanded (unconventional) trade flows of primary
  processed products

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