us markets for brazilian softwood moulding & · pdf fileus markets for brazilian softwood...

Mariane Bueno de CamargoMay 21, 2008

US Markets for Brazilian Softwood Moulding & Plywood

World Forest Institute http://wfi.worldforestry.org

Almost 60% of Brazilian wood products exporters are sent to US;

GDP (2007est.): $ 1.269 trillion USDU.S is $13.79 trillion

Per capita (2007 est.): $ 9,700 USDU.S is $ 46,000

Exports: $159.2 billion f.o.b (2007 est.)Planted Forest Products Exports: $ 6.1 billion Imports: $ 115.6 billion f.o.b (2007 est.)Planted Forest Sector Imports: $ 1.4 billionSource: CIA (Central Intelligence Agency), April -2008

Brazil’s Economy

Moulding: 90% of Brazilian exports go to US. World’s second largest exporter to US

Softwood Plywood: 22% of Brazilian exports go to US. World’s largest exporters to US


Occupy about 5.98 million hectares;

Planted Forests supply approximately: 191 million cubic meters of wood (specifically from Pine and Eucalyptus)

Other species planted:

Acacia (Acacia spp)

Teak (Tectona grandis)

Rubber wood (Hevea brasiliensis)

Parana pine (Araucaria angustifolia)

Parica (Schizolobium sp)

Poplar (Populus sp)

(7.1%)

• 1.8 million ha of Pine sp. reforestation (30.2%)

• 3.7 million ha of Eucalyptus sp. reforestation(62.7%)

Brazil New Zealand Sweden

MA

I (m

³/ ha

/ Yea

r) 2822

410

USA

3825

6

MA

I (m

³/ ha

/ yea

r)

Brazil Australia USA/Sul

Hardwood

Source: ABRAF (Associacao Brasileira de Produtores de Florestas Plantadas), adapted by Mariane Bueno de Camargo

Plantation Forest


Sawnwood19%

Pulp and Paper30%

Others19%

Charcoal22%

Recconstituted Panels

5%Plywood

5%

Recconstituted Panels Plywood Sawnwood Pulp and Paper Charcoal Others

Source: STCP, ABIPA, BRACELPA, AMS – 2006. Adapted by Mariane Bueno de Camargo

Percent of Roundwood Consumption from Planted Forests by Segment (2006)


US: A Great Customer

More than 300 million habitants

30% of the US territory is covered by forests

American timber industry is one of the largest in the world, but with historically led to rapid deforestation

Vast majority of the North American population lives in wood homes

70% of American GDP is driven by consumption

Economy is seen as one of the most open and transparent

Few restrictions against foreign investment and imports

Trade agreements with several countries (NAFTA, APEC, G8, SFP, etc)

Recently, changes in public opinion regarding the use of federal forest lands and growing environmental restrictions… lead to a sudden increase in wood imports to meet demand


Source: Beck Group

Pinus ponderosa is now less available due to ponderosa forest health decline

Brazilian exports do not get prices higher than Ponderosa. Indeed, Ponderosa is considered a higher grade material.

US Changes and BR Challenges


Softwood Moulding


Mouldings are profiles obtained from reprocessing of lumber or blocks and blanks.

The largest consumer of moulding is the construction segment

52% New Houses

10% Industrial use

38% Remodeling & Repairs

The average age of homes in the United States is around 33 years old

US Moulding Market

11% Industrial Use


0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000

500,000,000

Line

ar M

eter

s

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL CANADA CHINA CHILE MEXICO NEW ZEALAND OTHERS

2007, Market share declines:

Brazil: 18%Chile: 19%Mexico: 23%

China: 4.1%Canada: 12%

Source: FAS Commodity Aggregations (2008)

Softwood Moulding – Big Players


27,113

312,453332,084

241,026

203,510

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

US$

x 1

000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL CANADA CHINA CHILE MEXICO NEW ZEALAND OTHERS


Last year, Brazil overtook Chile to become the Biggest

Player in Value of US imports softwood moulding

US Imports of Softwood Moulding (Value)


230,438

125,199,424

95,706,382

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

Voum

e (L

inea

r Met

ers)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL CANADA CHINA INDONESIA MALAYSIA OTHERS


US Imports of Hardwood Moulding (Volume)

The largest exporters in this market are all from Asia


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

U$U

(x 1

000)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL (**)

CHINA (*)

INDONESIA (*)

MEXICO (**)

OTHERS

BRAZIL (**) CANADA (**) CHINA (*) CHILE (**) INDONESIA (*) MALAYSIA (*) MEXICO (**) NEW ZEALAND (**) OTHERS

(*) Main: Hardwood Moulding

(**) Main: Softwood Moulding


US Moulding Imports in General (Value)

1997= US$385 million2006= US$1.3 billion

36

383

305


Composite products and alternate technologies are placing increased pressure on traditional manufacturers of softwood moulding. These products are:

Finger Joint MDF Plastic

Finger joint materials are predominant in the American marketplace

The Growth of MDF has remained constant, even with rising cost of production and raw material

Solid Linear Moulding - Competition


73%67%

63% 60% 61% 58% 54% 50% 47% 45% 43%36% 35%

22%24%

26%26% 25% 27% 25%

28% 32% 35% 38% 39%

40%

5% 8% 11% 13% 14% 15% 17% 18% 17% 17% 17% 18%25% 26%

57%

33%

39% 39%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

US Produced Wood Mouldings Imported Wood Mouldings MDF/Plastic Mouldings

MDF put strong pressure on manufactures of Solid Moulding, but it will not replace FJ

Plastic and vinyl also have a share in the market, but more specifically in the windows and doors industry.

Source: Freedonia, 2005

** MDF and another materials

* Just Solid Wood Moulding and Finger Joint

13,6%26,3%60,1%Other Cuts

48,6%1,2%50,1%Stair Work

14,2%7,2%78,7%Mouldings

Other **PlasticWood *Materials Used

MDF/Plastic substitutes increased greatly between 1989 –2003

Large part due to factors such as declining Pinus ponderosa availability

American companies have opted to produce MDF, more as a matter of survival in the market, since this provides an alternative, low cost product

Some experts predict that MDF will reach 1/3 of the moulding market


Hardwood 14.5%

Finger-Jointed Softwood 58.8%

Solid Softwood 9.3%

Veneer Softwood 4.1%

MDF 11.8%Others 1.5%

The main advantage of finger joint moulding (FJ) is that it is less susceptible to moisture than MDF and is more cost effective in smaller dimensions. MDF, on the other hand uses wood more efficiently and is an inexpensive alternative in larger dimensions.

Main Materials Used in Interior of New US Homes


There is a strong competition between domestic and offshore markets in relation to prices. The price difference is likely to continue to decrease in the future.

Prices are directly influenced by:

Different moulding and quantity requested

The change in these mouldings profiles, or the configurations of the production, with the fixed costs, carries price increases.

Moulding - Prices

Lumber: North America – FOB Mill

Since July, 2007 US Imports of certain profile products (frames and jambs) from Brazil, subject to a 3.2% duty


Architra

ve

Baluster

Base Cap

Casing

Chair rail

Corner guard Crown MouldingHandrail

NewelRiser Moulding Tread Moulding

S4S MouldingWainscot Moulding

Moulding Types


Softwood PlywoodSoftwood Plywood


70% of the total plywood production in Brazil is Softwood

Brazil’s focus is on production for the international market (5th biggest player)

In 2007, the US imported more than US$ 2 billion of Brazilian plywood

Main countries that compete with Brazil in the American market are: Canada, China, Chile and Mexico.

Major markets for Brazilian softwood plywood: European Union (31%) and the United States (50%).

34% Construction 45% Furniture

US Plywood Market

17% Packaging


0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Cub

ic M

eter

s

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL CANADA CHINA CHILE MEXICO Others


Softwood Plywood – Big Players

2007:

Reduction of production: 16.6%

Reduction of exports to US: 61%

1.4 million

2007, Market share declines:Brazil: 74% Canada: 37%

363 thousand


314,681

188,133

119,365

72,836

167,089155,264

81,53895,502 90,491

912 594562

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

US$

x 1

000

BRAZIL CANADA CHINA CHILE MEXICO OthersSource: FAS Commodity Aggregations (2008)

Between 2004-2006, Brazil was the Biggest Player in Value of U.S imports soft plywood

In 2007, it dropped signific

antly, staying at th

ird place

U.S Imports of Softwood Plywood (Value)


1.432.137

2.032.986

382.035

512.668

1.839.741

282.789406.811

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

Volu

me

(Cub

ic M

eter

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

BRAZIL CANADA CHINA INDONESIA MALAYSIA RUSSIAN OTHERS


US Imports of Hardwood Plywood (Volume)

In less than 11 years China’s market share grew from 1% in 1997 to 54%

in 2007


1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

BRAZIL (**)

CHINA (*)INDONESIA (*)

MALAYSIA (*)OTHERS

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

US$

(x10

00)

BRAZIL (**) CANADA (*) CHINA (*) CHILE (**) INDONESIA (*) MEXICO (**) MALAYSIA (*) RUSSIAN (*) OTHERS

(*) Main: Hardwood Plywood

(**) Main: Softwood Plywood


US Plywood Imports in General (Value)

US$2 million

US$315

US$73

1997: US$758 million

2006: US$ 2.2 billion

2007: US$ 2 billion


Structural panels (OSB, Plywood and LVL)

Non structural panels (Plywood, MDF and Particleboard)

Plywood

Particleboard LVL

(Laminated Veneer Lumber)

MDF

(Medium Density Fiberboard)

OSB

(Oriented Strand Board)

Composite Panels- Competition


Structural Panel Market (BSF, 3/8-Inch Basis)

Source: RISI

The use of OSB in housing is projected to continue growing at a steady rate.

Structural Panel Composites Competition


Panels: North America – FOB Mill

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

Jan-0

3Apr-

03Ju

l-03

Oct-03

Jan-0

4Apr-

04Ju

l-04

Oct-04

Jan-0

5Apr-

05Ju

l-05

Oct-05

Jan-0

6Apr-

06Ju

l-06

Oct-06

Jan-0

7Apr-

07Ju

l-07

Oct-07

Jan-0

8

US$

/m3

(FO

B/B

razi

l)

9 mm 3 ply 12 mm 4 ply 15 mm 4 ply 18 mm 5 ply

Price of Structural Softwood Plywood

Source: Guararapes Industry S/A

The wood products market behaves like a commodities market

Strongly affected by currency exchange rates

OSB prices have been cheaper than alternative panels

Softwood Plywood - Prices

Since July, 2005 US Imports of certain southern yellow pine plywood from Brazil (HTS 4412.19.40) will continue to be subject to an 8% duty


1.3

1.6

1.5

1.71.8

1.92.0

1.8

0.0

0.5

1.0

1.5

2.0

2.5

2000

2001

2002

2003

2004

2005

2006

2007

0.0

50.0

100.0

150.0

200.0

250.0

Units (x1000) Volume Ply (x1000) BR

Source: U.S. Department of Commerce Census Bureau and FAS Commodity Aggregations

Brazil’s Softwood Plywood vs. US Housing Starts

Relation between US Housing Market andBR Plywood Exports to US


R$ 0

R$ 500

R$ 1,000

R$ 1,500

R$ 2,000

R$ 2,500

R$ 3,000

R$ 3,500

R$ 4,000

Jan

- 03

Mar

- 03

May

- 03

Jul -

03

Sep

- 03

No v

- 03

Jan

- 04

Ma r

- 04

May

- 0 4

Jul -

04

Sep

- 04

Nov

- 04

Jan

- 05

Ma r

- 05

May

- 05

Jul -

05

Sep

- 05

Nov

- 0 5

Jan

- 06

Mar

- 06

May

- 06

Jul -

06

Sep

- 06

Nov

- 0 6

Jan

- 07

Mar

- 07

May

- 07

Jul -

07

Sep

- 07

No v

- 07

J an-

08M

ar- 0

8

Monthly Exchange Average (Dollar vs. Real)

Source: Portal Brasil Net

The Brazilian Currency (Real), rose 2.5% against the US Dollar on last April 30, 2008.

Today, US$ 1 = BR$ 1.667

Up on Oil prices

Troubles relatives of the Ports.

Type of business:

Direct

Indirect

Challenges for Brazil in US Market


Housing Starts in U.S.A (1990 - 2007)

0100200300400500600700800900

1000110012001300140015001600170018001900200021002200230024002500

Jan-

90

Jul-9

0

Jan-

91

Jul-9

1

Jan-

92

Jul-9

2

Jan-

93

Jul-9

3

Jan-

94

Jul-9

4

Jan-

95

Jul-9

5

Jan-

96

Jul-9

6

Jan-

97

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Thou

sand

s of

Uni

ts

Source: U.S. Department of Commerce Census

Falling Housing Domino Effect


In 2006, forest products trade in China increased 23% over 2005

Forest products imports increased 10% over 2005

Forest products exports increased 34%

Hardwood Moulding & Plywood exports from China have grown very rapidly

Analyses of China’s forestry sector predict continued rapid growth:

Major forestry reforms involving land tenure

Foreign investment and transferability of land assets evolving over next 3-5 yearsSource: Cintrafor

Poplar sp (70%)

Eucalyptus sp (8%)

Pinus sp (7%)

Imported timber (10%)

Others (5%)

China Rising Problem for Brazil?


Distribution

Average for delivery takes 60-75 days and medium cost for customs fees is around U$ 15/m3.


Producers must redefine their products and services, using key factors like:

Greater durability

Superior quality

New applications and process improvements

All combined with aggressive pricing

Conclusion

(PNQC)


Keep your eyes on the prize, even during difficult economic times Many forecasts predict good news in the medium term The current economic downturn is a reminder that one must plan for both good and bad times

Diversification of key markets would help to mitigate declines in specific markets

Conclusion

A global vision is essential to meeting the changes and challenges facing the wood products industry


Sustainable Plantation Forests is critical to Brazil’s economy and environment


All WFI Fellows Leroy Otteson (Timber Products)

Stimson Lumber CompanyWorld Forest Investment

Flake board

The Parr Company

Plum Creek

OSAF (Oregon Society Association Foresters)

Jeld-Wen (Window & Door)

Hancock Timber Resources

Caxuana S/A – Eduardo Sortino

Guararapes Industry – Ricardo

Braslumber - Armando

Paledson Madeiras

Angie DiSalvo – WFI

Sara Wu – WFI

Steve & Diane Brice – American Family

Brazilian Family (Parents, Sisters & Brothers)

Angela Baroni

Weyerhaeuser Group

Cintrafor

The University of Georgia

Oregon State University

IWPA (International Wood Products Association)

AIFP (American International Forest Products)

All WFC Equip


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