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International Trade in Wood Products

The United States is both the world’s largest importer and producer and the second largest exporter of wood products. Imports and exports of both raw and value-added wood products can directly affect domestic demand for timber. Increasing forest product imports may correspond with reduced demand for domestically grown timber, thus helping to depress domestic stumpage prices both in the short and long run. In this section we examine exports and imports for both raw materials and finished wood products.

Trade in wood products needs to be viewed in the context of international economic conditions. While there are many reasons for changes in trade flows, the increase in imports and expanding overall U.S. trade deficit in forest products during the 1990s may have been related to the rising value of the U.S. dollar relative to foreign currencies during that same period (fig. 21). Economic doctrine suggests that exports increase and imports decrease when a domestic currency weakens relative to currencies of a nation’s trading partners. Since 2002, the value of the dollar relative to the value of other currencies has declined, which suggests that the comparative position of U.S. manufacturers may be improving. However, changes in exchange rates take time to play out in terms of trade flows, and some evidence suggests that exchange rate shifts make little difference in the long run in forest products trade, as other costs of production and supply-and-demand factors adjust to accommodate them (Uusivuori and Buongiorno 1991). It is too early to say definitively how recent weakening in the dollar will affect forest products trade.

Raw Material Trade

Wood pulp—The value of wood pulp imports and exports demonstrated a cyclical pattern with no strong trends between 1989 and 2003 (fig. 22). The U.S. balance of trade in wood pulp has been roughly even in recent years, i.e., imports have equaled exports. However, U.S. southern ports exported approximately seven times what was imported. Between 1989 and 2003, Canada was the largest and Brazil the second largest source of wood pulp imported into the United States (fig. 23). For producers in the U.S. South, the level of Brazilian imports—primarily hardwood pulp—factors mostly into local markets, and these imports are used to meet specific furnish demands. Brazilian imports into southern ports have risen sharply since the early 1990s (fig. 24 and fig. 25). Still, overall imports into Southern States in 2004 only accounted for between 2 and 3 percent of total southern wood pulp consumption.

Wood chips—Unlike patterns of trade in wood pulp, patterns of trade in wood chips have changed substantially since the late 1980s. Until 2003, Canada was the leading source of wood chips imported into the United States, providing chips for Northern U.S. producers. However, after peaking in 1997, Canadian wood chip sales to the United States have declined to less than one-third of their peak level (fig. 26). Producers in the southern hemisphere have also supplied wood chips to the United States at various times. In the mid-1990s Chile provided as much as one-third of total wood chip imports into the United States. In 2004, imports from Brazil increased more than fivefold compared to 2003, and Brazil became the largest supplier of wood chips imported into the United States. Imports from Brazil are delivered mainly to Southern U.S. ports (fig. 27 and fig. 28). Southern chip imports in 2004 represented only about 0.9 percent of total southern pulpwood consumption and about 3 percent of total southern hardwood pulpwood consumption. Most of these imports enter the United States at Mobile, AL, and a few ports in Florida, so localized impacts on hardwood markets near these ports could be significant.

The surge in Brazilian chip imports is the expected response to domestic price increases resulting from local scarcity of hardwoods. In addition, eucalyptus chips, a highly preferred fiber source for some paper grades, may be preferred over native hardwoods. The extent to which hardwood chip imports from South America might increase over the coming years is unknown. However, it is likely that prices of chip imports from South America now define a ceiling for domestic hardwood stumpage prices in certain areas of the South.

Since the beginning of our time series on wood chips, 1989, the United States has had a large trade surplus in wood chips (fig. 29), i.e., exports have far exceeded imports. Since 1999, however, the trade surplus in wood chips has fallen steadily, from around $515 million in the mid-1990s to $126 million in 2004.

Roughly 80 percent of wood chip exports from the United States have been shipped to Japan; the remainder flows to Canada (fig. 30). While exports to Canada have increased somewhat in recent years, exports to Japan have fallen off dramatically. Between 1991 and 2002, nearly all of the wood chips exported from Southern U.S. ports were shipped to Japan (fig. 31 and fig. 32). Exports of wood chip exports from southern ports essentially ceased by 2002.

This decline in southern chip exports—primarily hardwood chips—to Japan was equivalent to 5 percent of total southern pulpwood production in 2003 and nearly 16 percent of southern hardwood pulpwood production. Most of the imports and exports of wood chips into and out of southern ports have been through Mobile, AL, and we might expect the economic impacts of demand shifts to radiate outward in declining fashion from this port of entry.

Final Products Trade

Lumber—The United States is a large net importer of softwood lumber, and the vast majority of its lumber imports are from Canada (fig. 33). Lumber imports from South America, although relatively small between 1989 and 2004, have been rising steadily. The United States exports some lumber, but the balance of trade favors imports, and the trade deficit is growing (fig. 33).

The importation of lumber from Canada has an important influence on domestic timber markets, but the effects on southern markets are likely to be indirect. Lumber from Western Canada more directly substitutes for lumber of species that grow in the Western United States (Nagubadi and others 2004). The lumber products that are now imported into the United States are generally not directly substitutable for treated lumber produced in the South.

As it is in overall timber products, the United States is the world’s largest producer (60 percent) and its largest consumer (52 percent) of temperate hardwood lumber. About 8 percent of domestic production is exported to various countries. Hardwood lumber is a much more heterogeneous commodity than softwood lumber, so its production and trade serves a wide variety of end uses, from flooring to furniture to shipping pallets. Aggregate data provide only a very general description of trends in this sector. Also, we cannot split out trade data for the Southeastern United States, so we use data for the United States as a whole to evaluate hardwood lumber market changes. Note that about 10 percent of hardwood exports are from the Pacific Northwest [especially red alder (Alnus rubra Bong.)] and about 90 percent are from the Eastern United States.

Exports of hardwood lumber increased from about 2 million m3 in 1989 to just over 3 million m3 in 2004 (fig. 34). North America is the destination for the greatest share of hardwood lumber produced in the United States, followed by East Asia and the 25 countries of the European Union. All other countries together receive about 10 percent of hardwood exports from the United States. The distribution of exports among these destinations has changed somewhat since 1989, with shipments to Europe declining and shipments to other countries in North America, i.e., Canada and Mexico, increasing substantially (fig. 34). Shipments to East Asia have been essentially constant in aggregate, with a changing mix of destinations. Specifically, shipments to China have increased by a large amount since the 1990s while shipments to other countries in Asia have declined by a comparable amount.

Southern exports of softwood lumber have been relatively small and have declined over the last decade (fig. 35). Softwood lumber exports in 2004 were only about one-third the amount exported in 1992. Southern softwood lumber exports account for only between 1 and 2 percent of total southern softwood lumber production.

Panels—Trade in panel products is weighted toward imports. For example, the United States imported about 15 percent of plywood consumption and 38 percent of OSB consumption in 1999 (Spelter 2001). Nearly all of these panel imports came from Canada. Particleboard, wafer board, and OSB imports from Canada grew strongly in recent years, increasing from $1.53 billion in 1999 to $3.16 billion in 2004. U.S. exports in this category are negligible (fig. 36).

OSB markets are in a period of rapid expansion, and new mills in Canada and the United States are planned (Spelter 2001). North America will continue to dominate world production in this commodity class, but the trade balance within North America—especially between Canada and the United States—could change as the sector expands. A decline in pulpwood demand in the South may give the United States additional comparative advantage for the siting of new North American mills.