Category: Marketing

By Leslie Scarlett Sanchez

Department of Wood Science and Forest Products

Virginia Tech

   

The use of wood pallets is expected to grow, therefore; the sourcing of wood materials for pallet manufacturing requires attention. It is believed that wood pallet manufacturers will face increasing competition for raw materials from producers of wood-based composites, paper and paperboard, and biomass-based energy. Part of our research at VT is focused on identifying suppliers of wood pallet materials, meaning if they are domestic and/or imported. And going a little far, we would like to identify new possible sources of raw material, due to the increasing competition in the acquisition of wood pallet materials. An overview of roundwood production from 1997 to 2008  and main producer countries is presented in this research brief.  

Roundwood production  

Roundwood production is divided in two types: Hardwood and Softwoods. Figure 1 shows the respective quantities for each one and their respective trends through 1997 and 2008 in the United States. It can be seen that there is a decrease over the years for hardwood production. However, softwood production is increasing since 2002 until 2005, and decreases through 2008.  

It is also important to identify the amount of roundwood in the World as shown in Figure 2. Similar to Figure 1, it shows an increase in roundwood production.  

 Figure 3 shows the production of roundwood of the 10 ten most important country producers by volume and their share respect to total production.   

Comparison between Global and U.S Timber. 

 For our research it is also important to identify information regarding domestic pallet production, global imports of pallets, and also, in order to know the state of timber stocks and production in all countries, data about the global and U.S. timber production was collected. This information is shown and compared in Figure 4.  

Table 1 contains the data depicted in Figure 4. It can be seen that global timber production is slightly increasing over the decade of analysis, from 3.2 billion m3 in 1998 to 3.6 billion m3 in 2007. On the other hand, the timber production in the U.S. had decreased during the same time span. U.S. timber production represents approximately 13.5% of the global timber output. Domestic pallet production in the U.S. shows a significant increase from 2003 and 2008 years, of about 35%. Pallet imports to the U.S. have also increased, although to a much lower rate than domestic production, approximately 25 %. Imports represent 8.7% of the domestic pallet production in the U.S. 

Table 1. Pallets and Timber Production in the US and World (FAO, 2010; U.S. Census Bureau, 2010) 

   

References:   

• FAO. (2010). FAO Statistics-US Hardwood and Softwood Roundwood Production.   Retrieved January 2010, from http://faostat.fao.org/site/626/default.aspx#ancor
• FAO. (2010). FAO Statistics-Global Roundwood Production.   Retrieved January 2010, from http://faostat.fao.org/site/626/default.aspx#ancor
• U.S. Census Bureau. (2010). Annual Survey of Manufacturers – Wood Pallet and Container Value of Shipment, Years 2000 to 2008. Retrieved January 2010, from Department of Commerce – Census Bureau: http://www.census.gov/manufacturing/asm/
• U.S. Census Bureau. (2010, January 2010). Foreign Trade – Imports, Years 2000 to 2008.   Retrieved January 2010, from http://www.census.gov/foreign-trade/

By Scott Lyon, MS Candidate

Virginia Tech

Introduction 

In the future, there will be a greater need for international forest products in Central America due to increasing population size, deforestation, and tourism.  According to Salamone (2000), “the United States forest product companies have overlooked Central America as an opportunity to expand their markets.” Due to improvements in health care, sanitation and education the Central American population has almost quadrupled from 11 million in 1950 to 40 million in 2008 (Fox 1990; World Bank 2010).  

Deforestation has been and continues to be a major issue today for all Central American countries. The Panamanian government removed Law No. 7 that provided tax incentives for landowners to reforest their properties. This removal resulted in illegal logging and a decrease of reforestation projects (Munoz 2007). The natural forests of Costa Rica have been exploited due to shortages of wood for housing and furniture (Montagnini et al 2003). 

Even in a global recession, tourism has been growing in Central American countries.  Nicaragua had an 11% increase in tourists in the first five months of 2009 (Rogers 2009) and in the first year of breaking ground for the expansion of the canal in 2007, Panama has experienced an 11.2% increase in investment for tourism. Another example is Ecotourism, that has played a big part in Central America’s tourism trade since 8% of the world’s animal and plant species live in Central America (Schieber 2009).  More wood products will be needed as tourism increases in Central America; a shortage of hotel rooms was observed in 2007 due to a 19% increase in tourism since 2005 (Fallas 2008). 

The purpose of this research is to evaluate potential market opportunities for Virginia forest product companies in Central America. 

Virginian forest product companies have reduced the amount of wood products and furniture exported to Central American countries  (Figures 1 and 2) because past unstable financial markets, higher freight rates, tighter credit lines, and soft housing markets (VDACS 2008). The North American Industry Classification System (NAICS) for wood products manufacturing (321) and furniture and related products manufacturing (337) exported from Virginia to Central America is shown is Figures 1 and 2, respectively. 

In 2009, Guatemala, El Salvador and Honduras were the only Central American countries importing wood products from Virginia (Figure 1).  Most Central American countries increased in amount of furniture and furniture parts being imported from Virginia in 2009, except for Panama (Figure 2).     

In spring 2010, the research team from Virginia Tech visited top forest product importers in Panama and Costa Rica.  The objectives for the visit were to (1) investigate local production, (2) investigate local demand, (3) identify potential trade barriers, and (4) look into the future demand and production for wood products. 

Methods 

Personal interviews were conducted with Costa Rican and Panamanian forest product companies, and governmental and non-governmental agencies. Two questionnaires were developed from secondary research of the Central American forest product market. 

Results 

The Costa Rican and Panamanian governmental officials stated that their governments do not promote the use of wood products in their country.  Due to lack of government support the state of the forest products industry in Panama has declined since 1993 and today only 5 companies exist with more than 50 employees in Panama.  The forests are owned by the government and a request to harvest must be submitted to the Panamanian forestry agency.  Most of the land available for planting high valued timber species has disappeared because of urbanization. The remaining available land has poor quality soils and is not sufficient for planting.  

The wholesalers interviewed in both countries had 100-500 employees on average, with one wholesaler with over 2,000 employees.  The wholesalers’ wood product lines currently consists of cabinets, flooring, furniture, millwork, and home improvement items.  Their customer, base which primarily uses insect and decay resistant cement and steel, consists of retailers, homeowners, contractors, and government offices.  Historically these items have been preferred building materials because of the hot and humid climate in Central America, but cement and steel require a lot of energy and produce large amounts of carbon dioxide and other pollutants during the manufacturing process.  The Costa Rican Government  has mandated that the country be carbon neutral by 2021; this gives wood product companies an opportunity to expand more into building construction.  

The companies interviewed largely import pressure treated lumber, softwood lumber (10-15 containers/month), panels (1-10 containers/month), hardwood veneer (1-10 containers/month), flooring, and furniture/parts (1-10 containers/month).  Some of the wood product wholesalers conducted business with wood product brokers in the U.S. for softwood lumber (Southern yellow pine) and panels, but all of the buyers were familiar with Southern yellow pine lumber from the United States. The companies in Panama and Costa Rica primarily import softwood lumber from Chile (See Figure 3), Brazil, Honduras, and Uruguay, which is dried to 12-14% moisture content.  Imported panel products consist of oriented strand board (OSB), plywood, medium-density fiberboard (MDF), particle board, and B-B plywood; Oiled face & Edge-Sealed edges (BBOES) plyform. 

The majority of the buyers were familiar with Appalachian hardwoods and they were willing to import them if they were competitively priced with native tropical hardwood species in the region. Appalachian hardwoods can be used in doors, mouldings, cabinets, furniture, flooring and ceiling panels.  Flooring and furniture are primarily manufactured by using dark reddish species, therefore, black cherry (Prunis serotina) and black walnut (Juglans nigra) from the Appalachian region could be a substitute for the tropical hardwood species currently used, such as Guanacaste (Enterolobium cyclocarpum) (Figure 4). 

This research supports the claim that United States forest product companies have not put enough effort into entering the forest product market in Panama and Costa Rica. Main conclusions indicate that the majority of the general public is unfamiliar with the properties and uses of wood as a building material since steel and cement are the currently preferred building materials.  Forests in Panama and Costa Rica are not being harvested and the industry lacks support from the government, causing a reduction in the amount of raw material and production. An outside source of wood is needed to meet the needs of a growing region infrastructure.  

References 

Fallas, H. 2008.  Country Caters to Tourists with Tight Supply of Rooms.  La Nacion. Section of Economy. March 10. Available at: http://www.nacion.com 

Montagnini, F. et al. 2003.  Enviornmental Services and Productivity of Native Species Plantations in Central America.  XII World Forestry Congress, 2003.  Quebec City, Canada. 

Munoz, M. 2007. Menejo Forestal en Panama. La Presna.  November 25, 2007. Available at  http://biblioteca.presna.com/contenido/2007/11/25/25-portada1.html 

Quesada, H., R. L. Smith & J. Stopha 2009.  Market Opportunities for Virginia’s Wood Products in Central America.  Federal-State Marketing Improvement Program Grant. 

Rogers, N. 2009.  Tourism Grows Despite Worldwide Slump. The Nica Times. July 24-30, 2009.  Available at:http://www.nicatimes.net/nicaarchive/2009_07/0724091.htm       

Salamone A. 2000.  Opportunities in Central America.  Available at:            http://www.fas.usda.gov/ffpd/wood-circulars/jun00/camerica.pdf 

Schieber, B. 2009.  Guatemala at The International Tourism Trade Fair, FITUR 09. The Guatemala Times. January 28, 2009. 

Virginia Department of Agriculture and Consumer Services (VDACS), 2008. Virginia Forest Products Export News. Fall-Winter 2008.  Available at: http://www.vdacs.virginia.gov/international/pdf/forestnews.pdf 

Virginia Economic Development Partnership (VEDP), 2008.  Wood Products In Virginia.  Available at: www.yesvirginia.org 

World Bank, 2010.  Country Data Profile. The World Bank Group.  Available at: http://ddp-ext.worldbank.org/

Leslie Scarlett Sanchez, MS Candidate

Department of Wood Science and Forest Products

Virginia Tech

 

 

Pallets in the U.S. Market

The growth of international trade in the last decades created the need to improve not only transportation infrastructure and technology, but also the elements used during transportation process such as handling, loading, unloading, warehousing. One of these elements is the pallet. Pallets and containers play an important role in the movement of goods from place to place. They are not only used in warehouses or commercial centers, but also in all those activities that require an efficient way of transportation. Pallets allow reducing time and cost in an efficient manner, facilitating handling and transportation of raw and in-process materials, or finished products from the supplier to the manufacturer, from the manufacturer to the wholesaler, and then to the retailer. About 450 million new pallets are manufactured in the US each year, 1.9 billion are in use in the U.S. each year, and 300 million pallets are recovered by pallet recyclers each year.

Pallets definition

Pallets are the interface between packaging and the unit load handling equipment (White & Hamner, 2005). Another simpler definition is that pallets are “portable platforms”, which facilitates the movement and storage of unitized goods (Kator, 2008).

Unit loads are also important to define, as the system comprised of pallets, packaging materials, and unit load stabilizers (stretch wrap, tie sheets, corner posts, load adhesives, and strapping). Figure 1-1 shows two examples of pallets and unit loads.

 

Figure 1-1. Pallets and Unit load

Wood Pallet and Containers Imports in the U.S. Market

According to the North American Industry Classification System (NAICS), the Wood Pallet and Container product class is represented by the following sub-classes which show percentages, representing the average share of each sub-class on the total value of shipments for years 2002 to 2006. Wood pallets and containers, and wood-metal combinations made up 62% of the total product class’ value of shipments.

 

Figure 1‑2. Share of Product Sub-Categories on Wood Pallet and Container Manufacturing Product Class (based on value of shipments, Census Bureau 2009)

U.S Domestic Production

The U.S. domestic production is showed in the figure 1-3 bellow. It is evident from Figure 1.3 that exists an increase over the years. In 2000 the domestic production was $ 4,8 billion and for 2007 was 7,2 billion representing a 49% of increase in 7 years.

 

Figure 1-3. U.S. Pallet Domestic Production (Census Bureau 2009)

U.S. Imports

Figure 1-4 shows the total imports and value of shipments (domestic production) of wood pallets and containers, and the share of imports over total domestic consumption. The later was obtained by adding imports and value of shipments. The value of product shipments (domestic production) has grown from about $5 billion to $7.2 billion over the 8-year period. Imports have stayed almost constant throughout those years. As a result, the share of imports on the domestic consumption of wood pallet and containers, has decreased, from 7.7% in year 2000 to 7.1% in year 2007; a drop of 8%.

Figure 1-4. Wood Pallets and Container Imports and Domestic Production (Census Bureau 2009)

Regarding countries of origin for imports, Figure 1-5 shows the ten major exporters of Wood pallets and containers to the U.S. from year 2000 to 2008.

 

Figure 1-5. Ten Major Country Exporters of Wood Pallets and Containers to the U.S. in the year 2008 (Census Bureau 2009)