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The big gamble that American timber companies have placed on China over the past two decades is collapsing.
China saved the industry after the financial crisis of the last decade. Customers were continually buying oak and ash boards, while furniture and building production was declining in the United States.
Now, after Beijing has imposed retaliatory duties of up to 25 percent on imports of US lumber and other wood products, hardwood lumber exports to China have dropped by 40 percent this year.
Falling demand pushed down US lumber prices in August by 20% from the previous year and prompted businesses to seek government assistance. The slowdown in the Chinese economy has also reduced demand.
"It's a crisis we've never faced before," he said.
Matthew Gutchess,
President of Gutchess Lumber Co. in Cortland, NY. "Demand elsewhere simply does not absorb what China is losing."
Gutchess's turnover has dropped 25% this year. In response, the company reduced overtime and suspended contributions to the 401 (k) employee pension plans.
Baillie Lumber Co. of Hamburg, NS, another major producer, has removed dozens of jobs. Northland Corp., a lumber processor in La Grange, Kentucky, halved its 75-person workforce.
"Were we too dependent on East Asia and China? Of course we were, "said
Orn Gudmundsson Jr.,
General Manager of Northland. "But there was no viable alternative."
Northwest Hardwoods Inc. of Tacoma, Washington, one of the largest domestic producers of hardwood lumber, is currently closing factories in Buena Vista, Virginia, and Mt. Vernon, Washington, which employs 100 people.
Northwest Chief Executive Officer
Nathan Jeppson
said the Trump administration's attempt to obtain trade concessions for the entire United States had had an adverse effect on a hardwood lumber industry that relies on exports to China.
"We are feeling stuck in a much bigger chess match," said Jeppson. "My fingers hurt me for how long they have been crossed."
Photo:
Zach Gibson for the Wall Street Journal
The White House said the president was fighting against unfair trade practices that hurt US manufacturers.
China is the main export market for American hardwoods, particularly high-quality materials used in the manufacture of furniture such as oak furniture and cherry wood dining tables. In the United States, lower grades are still required for the manufacture of shipping pallets and railway ties. Softwoods, such as pine, are mainly used for construction.
US mills started to increase their exports to China two decades ago. At first, it had been transformed into furniture and exported to countries such as the United States.
Today, most of this product remains in China to fuel growing interest in oak furniture and cabinets among the growing middle and upper classes, according to the newspaper.
Michael Snow
from the American Hardwood Export Council, a commercial group.
The United States sent 54% of its total volume of lumber exported to China in the first seven months of 2018, compared with less than 5% in 2000, according to the council. In the first seven months of this year, the share of exports has fallen to 41%.
Other countries have increased their share of the Chinese market. Russia and Gabon now account for 17% of imports by value in July, compared with 12% in July.
Mr Snow said that the closure of US sawmills could lead to the shipment of more American logs abroad to be cut down in timber. He said it was unclear whether these jobs would be reinstated when the trade dispute would mitigate.
Some sawmills want to encourage American consumers to buy more hardwood products, such as furniture and flooring, as the trade dispute continues.
Jim Hourdequin,
The general manager of Lyme Timber Co., a land-based private equity firm for hardwood production, wants the industry to fund a marketing campaign similar to "Got Milk?" Commercials that 39; dairy industry produced in the 1990s. A push for such a program failed in 2015 after the opposition of some parts of the hardwood industry.
The US Department of Agriculture has donated more than $ 5 million to the lumber industry through its agricultural trade promotion program, said a spokesman for the department.
Some forest company leaders have met with members of Congress and the Trump administration to seek help similar to that received by farmers since China cut back on crop and livestock purchases in the United States. The Commerce Department said it did not have a mechanism to distribute trade relief to the industry.
"There is no doubt that these tariffs have virtually destroyed a segment of our industry," he said.
Steven M. Anthony,
President of Anthony Timberlands. "If they transfer money, I guess we have to get our share."
Photo:
Zach Gibson for the Wall Street Journal
Write to Austen Hufford at [email protected]
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