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    Faster-growing Trees, Value-added Products

     

     
     
    © International Trade Centre, International Trade Forum - Issue 2/2001

    Value-added wood exports have a bright future. The value of further-processed wood exports from producer countries of the International Tropical Timber Organization (ITTO) totalled just under US$ 4.2 billion in 1996-1997, the highest points recorded in COMTRADE statistics so far. The following year (1998) saw a 17% drop to US$ 3.5 billion. Despite the lack of comprehensive data for 1999, it is believed that exports stabilized in most countries. Some reported vigorous export growth during 1999-2000.

    Asia-Pacific leads the way

    Asian producer countries were the overwhelming leaders in exporting further-processed products, accounting for 83% of all deliveries in 1998. Malaysia and Indonesia have been the two top performers, reaching an annual benchmark of more than US$ 1 billion each after the mid-1990s. Tough market conditions and devalued local currencies in the Asian economic crisis led their exports (denominated in current US dollars) to decline for the first time in the decade in 1998-1999.

    The Philippines appeared to be the only Asian major producer whose export growth continued unabated during the economic downturn. This was largely due to its continued success in the United States, which absorbed growing amounts of Philippine furniture during the late 1990s. In fact, the Filipino industry has been importing increasing volumes of American hardwoods and designing furniture collections with local companies in order to manufacture furniture to meet the demand in the medium- and high-end market in the United States.

    Outside Asia, Brazil has made an impressive entry into the global market for further-processed wood products. It has already topped the Philippines and is closing up on Thailand. Its successful macroeconomic and currency stabilization programme in the mid-1990s supported growth in exports. Another positive factor was the creation of the MERCOSUR (Mercado Común del Sur - Common Market of the Southern Cone) free trade area with Argentina, Paraguay and Uruguay. More recently, the devaluation of Brazilian real has helped exporters win new market shares. Exports from other producer countries are small, while the region as a whole accounts for 16% of the producers' exports (US$ 552 million).

    African producers have not been able to gain a significant place on the international market for further-processed wood products. Total exports were roughly 1% of producers' exports. Côte d'Ivoire was the regional leader. It accounted for 50% of producer exports in further-processed products. Ghana was also prominent, with US$ 14 million of trade in 1998. These two leading African exporter countries compared in size with Latin America's second- and third-ranked exporters, Bolivia and Honduras.

    Types of exports

    Trade in furniture and parts were the mainstay of ITTO producers' exports in 1998, accounting for 64% of total value (US$ 2.2 billion). Asian producers were by far the biggest suppliers, particularly Malaysia (US$ 911 million).

    Indonesia, by contrast, gained most of its revenue from exports of builders' joinery items (US$ 407 million). Most of those revenues (US$ 271 million) came from concrete shuttering and assembled parquet panels. Doors and door frames fetched US$ 89 million; windows and their frames, US$ 47 million. Altogether, builders' joinery accounted for 24% (US$ 837 million) of the earnings of ITTO exporters in further-processed wood products.

    Profiled wood accounted for 11% of all ITTO producers' exports (US$ 400 million). It has become a major export business for countries like Brazil, Côte d'Ivoire, Indonesia, Malaysia and Thailand. This category is rather diverse. In Malaysia, for example, it covers not only general mouldings but also surfaced four-sided goods, tongued-and-grooved wood, doorstops and jambs, casings, joinery and furniture components as well as unassembled strips and friezes for parquet flooring.

    Export outlook: positive

    World trade in furniture and other further-processed wood products is on the rise. Furniture exports have risen worldwide from 17% of production in 1993 to 24% in 1997. In 2001-2002, the proportion is expected to grow further and reach 28%. The trade is experiencing a dynamic growth phase and developing countries have been able to expand their share of international trade at the expense of developed country producers.

    Global trade in processed timber products is expected to continue to expand at a healthy rate of 9% to 10% per year. A slightly higher average rate was achieved in 1995-1999 despite the Asian economic crisis. A weighted average for all ITTO producers shows a 13.5% growth rate per year over the period. Taking the 1998 figure for ITTO producers' exports (US$ 3.5 billion) as a base, average growth would make exports worth nearly US$ 7 billion by 2003 (this projection is partially dependent on growth rates in the United States and Europe).

    Competitiveness

    The leading producers of tropical processed products such as Malaysia, Indonesia, the Philippines and Thailand in Asia, and Brazil in Latin America, have already established their firm presence in export markets. They also have fairly well-developed domestic markets and a strong primary processing industry. These are the three key elements for a successful export-oriented further-processing industry.

    By contrast, many African countries and smaller Latin American and Asian producers are still struggling to strengthen their primary processing sectors, to consolidate domestic markets for wood products, and to curb the unsustainable export of unprocessed logs. But these countries should not assume that lower costs for raw material and labour are sufficient to guarantee the competitiveness of their further-processed wood products in exports. The low productivity of local workers, lower raw material recovery rates and higher freight costs offset part of the initial advantage. Labour productivity is an essential parameter in improving the competitiveness of wood processing in tropical countries, as wages are bound to increase in the future.

    Lesser-used species: expanding choice

    For the time being, the timber industry uses a limited number of well-known species in international trade.

    For environmental reasons, production of large-sized logs from the natural forests of the ITTO producer countries will continue to decline, particularly in the Asia-Pacific region. The primary and further-processing industries have already started to adjust their manufacturing methods, technologies and designs. Increasingly, logs of smaller dimensions (e.g., rubberwood, gmelina, acacia, eucalyptus, teak and pine) from fast-growing plantations will be used. Malaysia and Thailand have demonstrated the possibilities offered by plantation wood, with some 80% of their furniture exports based on rubberwood. In the Latin America-Caribbean region, Brazil is making strides towards establishing eucalyptus as an environmentally benign material for solid wood furniture and joinery products. As teak obtained from natu-ral stands have become more scarce in Myanmar, the key Asian producer country, more producers are turning to plantation-grown teak, if end-use spe-cifications allow it. In addition, new bio-composite boards - extracted from oil palm residues, coconut shells or flattened bamboo - will be employed to help overcome the raw material shortages.

    In Africa, Ghana appears to have adopted the most decisive efforts to seek markets for its lesser-used timbers. Within the European Union, the Netherlands has taken a prominent position in testing and launching lesser-used tropical species to match the market needs in applications where the visual appearance of wood is not the primary selection criteria. A few simple lessons have been learnt from the experience so far:

    - Seek to establish partnerships in the consuming countries with players who have commercial interests to diversify selection of imported woods.

    - Let them carry out the appropriate testing and matching to end-uses as early as possible.

    - Adjust your processing industry to meet the quality requirements in the established niches.

    - Enter into applications where the lesser-used species can serve their functional purpose and substitute a higher-value timber, which can yield a higher revenue in another use.

    - Take full advantage of timber certification as a promotional tool.

    A way forward: Africa first

    The tropical further-processing wood industry must be systematically developed, if it is to contribute to national economies, export revenues and sustainable development. African producers should be the priority recipients for international technical assistance.

    In Africa, most woodworking companies have adopted a step-by-step approach for adding value to their output. The first step is usually to produce kiln-dried planks, flooring strips or dimension lumber, and then to proceed to mouldings, finger-jointing and edge-gluing. There are also successful examples of more direct entry into the finishing, but these are all based on a massive import of knowledge - and expatriate staff - from foreign companies. These companies usually bring in both technical experience and a ready access to distribution channels which, as a rule, lead to sales into captive markets. As it was strongly voiced by ITTO's African members in a recent meeting in Yaoundé, a new breed of African entrepreneurs should be mobilized and supported both technically and financially, to take over the development task of further processing on their own continent.

    Jukka Tissari, ITC Market Development Officer, may be contacted at tissari@intracen.org



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