NEWS RELEASE

RTG REPORT: Japan Part 2 – Wood Market & Consumption Trends

Despite fading housing starts, non-residential construction remains an opportunity!

January 7, 2021 — Vancouver, BC 

RUSS TAYLOR GLOBAL is pleased to announce a second complimentary report that summarizes Japan’s wood industry and consumption trends. The Japan Part 1 report (released in December) covered log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s. The new Japan Part 2 report discusses trends in business, demographics, housing, other end uses, and lumber prices.

Japan remains a most important market for global exporters of higher quality and value-added/engineered products. Understanding and reviewing some of the major demand and demographic trends and issues in Japan (in combination with import and domestic production trends) should be useful to most industry players.

The full Part 1 & 2 Report is available by request: simply send an email to: russtaylor@russtaylorglobal.com or visit www.russtaylorglobal.com for further details or to join our email distribution list.

Highlights of the RTG Part 2 Report are summarized here:

Recent Business Conditions

Japan’s Cabinet has approved an additional economic package worth 73.6 trillion yen (US$707 billion) to keep the economy on a recovery track. The government estimates the stimulus measures will boost Japan’s GDP by around 3.6%. As well, the Cabinet Office index of business conditions for November continued its upward trend, rising 5 points from the previous month to 89.7 against the 2015 base of 100 – this represented the second largest month-on-month increase since records started in January 1985.

Consumer confidence in Japan improved for the third consecutive month in November, but the pace of improvement slowed.

Population & Demographics Trends

Japan’s population peaked about 2010 and its’ indigenous population is now shrinking at an annual rate of about 500,000 persons. Japan is one of the world’s fastest aging nations with almost 30% of the population over 65 years of age. This is one of the reasons for Japan’s low unemployment rate and reflects the country’s contracting labour force and chronically tight labour market. Demographics will remain a headwind for economic growth over the coming years as “guest” workers and productivity gains are not expected to make up for the shrinking workforce and the increasing cost of elderly care.

Housing Starts

Japan’s culture of living with wood, plus government stimulus targeted at increasing use of domestic wood in construction, and favorable changes to building and fire codes, have supported the steady increase in the proportion of wooden housing starts since 2007. Before COVID-19 hit, the Government of Japan was in the process of implementing progressive taxes from 2019 through 2025. This was to provide a budget that would exceed US$700 million per year by 2025 for programs to support development of Japanese commercial forestry, logging, wood products manufacturing, increased promotion, and wood consumption in Japan. The proportion of wooden housing starts is expected to grow to eclipse a market share of 60% within the next 5 years from its current level of 56%.

Total housing starts are predicted to reach about 800,000 units in 2020 – a large drop from 905,000 in 2019. This was not only caused by COVID-19, but also from the increase in the consumption (VAT) tax from 8% to 10% that occurred in late 2019. Following an expected rebound in 2021, the overall housing starts trend is then expected to move lower over the next 5 years.

Non-Residential Demand

The main non-industrial end use segments include elderly, medical care and social welfare facilities that top the list, followed by agricultural buildings and mixed residential and commercial buildings, restaurants, and accommodations. Wood frame construction has consistently accounted for around 10% of total floor area in non-residential construction. Based on housing starts, the wood market share is probably stronger due to the success of wood frame in elderly care facilities and the commercial units surrounding those facilities (seniors homes need 7-Eleven-type stores close by), although the average floor area in these sectors is low. With government incentives in place to encourage increases in wood construction in non-residential uses, it is conceivable that wood’s share could double or even triple the current floor area by 2025.

A number of key factors (pros and cons) driving the Japanese market and demand over the next five years conclude the report.

The full Part 1 & 2 Report is available by request: simply send an email to: russtaylor@russtaylorglobal.com  or visit www.russtaylorglobal.com for further details or to join our email distribution list.

For further information, contact:

Russ Taylor, President

RUSS TAYLOR GLOBAL – Wood Business & Market Consulting

Email:  russtaylor@russtaylorglobal.com

Mobile: +1 604 897 5666

Web:    www.russtaylorglobal.com

Excellent Explanation of the Global Container Shortage and Soaring Rates

Everyone in the global trade of logs and wood products have witnessed rapidly rising ocean container rates along with container shortages in the last few months. We all keep hearing many reasons for this, but it is still somewhat of a mystery to some.

One of my colleagues sent me a link of a very informative video that was made by the Japanese freight forwarding company, HPS Trade. These two videos help explain the reasons for the container shortages and also that this problem is not likely to be resolved soon. For those in the trade, this may not be anything new, but it is a short and succinct explanation of what has been happening. It also helps explain why there is likely to some further supply shortages coming in key market such as Japan and China in 2021Q1, and this sets the stage for further price escalation of logs and lumber in 2021-Q1.

Here are the two videos:

Nov 12, 2020: Why there is a serious “Container Shortage” problem in late 2020? (7 minutes)

https://youtu.be/kyj2o_Bc22E

Dec 13, 2020: Effect of Container Shortage in 2020! Reason why there have been large Ocean Freight increase sand Vessel Delays. (9 minutes)

https://www.youtube.com/watch?v=uxT1onuHjA8

Enjoy, and I welcome any additional perspectives on this topic!

Russ Taylor

russtaylor@russtaylorglobal.com

NEWS RELEASE

COMPLIMENTARY REPORT: Japan’s Wood Imports and Industry

Despite weakening demographics, there are still some growth sectors and good business in Japan!

December 17, 2020 — Vancouver, BC 

RUSS TAYLOR GLOBAL is pleased to announce a complimentary report that summarizes Japan’s wood imports and industry, including historical trends, key issues, and major developments. The Japan Part 1 report covers log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s.

Despite the runaway US market right now, Japan is still a most important market for global exporters of higher quality and value-added/engineered products. Understanding and reviewing some of the major industry/market trends and issues in Japan should be useful to most industry players.

A Part 2 report (“Japan Market and Consumption Trends & Outlook”) will be released in January.

The full Part 1 report is available by request: simply send an email to: russtaylor@russtaylorglobal.com .

Highlights of the report are summarized here:

Total Imports

Japan’s imports of logs and wood products essentially peaked back in 1973 at 120 million m3 (roundwood equivalent basis, or RWE). While total imports got close to this level later in 1978-79 and through the 1988 to 1997 period, the current level of imports have been much lower at around the 80 million m3 (roundwood equivalent) level over the last decade. Japan’s total wood imports (RWE) have been trending somewhat higher since 2009 – a good omen despite an aging and declining population – but current levels of total log and wood imports are below those of 1970s.

Log Imports

Japan’s imported log volumes have trended downward since engineered wood products (EWP) were introduced, including into post and beam (Zarai) house construction. From a peak in the 1970s of an average of 40 million m3, log imports have dropped steadily. South Sea tropical log exports have almost disappeared, as have Russian and Chilean logs – all since the mid- to late 2000s. All that remains is a small volume of radiata pine logs from New Zealand with Douglas-fir from Canada and the US PNW that are holding at relatively steady volumes since 2008, where current log imports are in the 3-4 million m3 range. Softwood log imports have dropped from a peak of 18 million m3 in 1987-89 period to about 3-4 million m3 currently. Log import volumes are expected to remain relatively stable over the next few years from steady demand at plywood and sawmills.

Softwood Lumber Imports

Softwood lumber imports have been in a slow decline since the start of the 2000s and have moved from almost 9 million m3 to around 5-6 million m3 today. It is expected that this threshold level could hold, given the quality and specifications of imported softwood lumber that is not available from domestic forests.

Canada and the USA have lost import volume and market share in Japan, while European exporters (especially Scandinavia) as well as Russia, Romania and Chile have held their volumes relatively constant. Lumber imports are forecast to decline again in 2020 from COVID-19 impacts; through October 2020, imports were 10.5% below 2019’s pace.

Japan’s Self-Sufficiency of Wood

Japan’s increase of maturing sugi and hinoki forests has been increasing its self-sufficiency of domestic timber usage as compared to its total wood consumption. From over 90% self-sufficiency in the 1950s, this rate dipped almost steadily until it bottomed in the early 2000s to under 20%. With an increased domestic harvest, the rate is approaching 40% in 2020 and means that Japan will need less imports to meet its wood demand; Japanese log, lumber and plywood exports are expected to all increase.

 Plywood and EWP: Key trends include:

• Imported plywood: has seen a steady reduction, where almost of all the volumes remaining are tropical hardwood plywood. Softwood plywood imports are almost non-existent.
• Domestic glu-lam production: output was 1.915 million m3 in 2019 and this is expected to surge by at least 50% by 2025.
• Imported glu-lam: is around 800,000 to 900,000 m3 and a flat trend in demand is forecast over the next few years.
• Domestic LVL production: Strong domestic capacity growth is expected through 2025 – especially in non-structural LVL – with domestic production doubling to around 370,000 m3 (170,000 m3 structural and 200,000 m3 non-structural).
• Imported LVL: Imports were about 510,000 m3 in 2019 and this volume is expected to hold near this threshold for the next 3-4 years.
• Cross-laminated timber (CLT): is still a niche product so far in Japan and is likely to remain so over the next few years.

The full Part 1 report is available by request: simply send an email to: russtaylor@russtaylorglobal.com .

A Part 2 report (“Japan Market and Consumption Trends & Outlook”) will be released in January.

For further information, contact:

Russ Taylor, President

RUSS TAYLOR GLOBAL

Email:  russtaylor@russtaylorglobal.com

Mobile: +1 604 897 5666

Web:    www.russtaylorglobal.com

November 20, 2020

Vancouver BC

ANNOUNCEMENT

I am pleased to formally announce the formation of RUSS TAYLOR GLOBAL, a “re-invented company” that features Wood Business and Market Consulting. Russ Taylor is going back to his roots when he started his first consulting company, R.E. Taylor & Associates Ltd., back in 1992.

Russ’s return to consulting work, as well as selected strategic analysis areas, follows on from his 25 years of leading International WOOD MARKETS Group and then the completion of a three-year employment contract with FEA as part of the WOOD MARKETS’ sale agreement. Russ may have “retired” from FEA, but not from the wood business! Russ will now be working with his extensive global network of experts.

As an independent third-party resource with no strings attached, Russ and his network are available for client needs when it comes to difficult-to-find information, for short industry/market perspectives, as well as in-depth analysis on specific topics.

Feel free to contact Russ with any inquiries, or view the RUSS TAYLOR GLOBAL website for specific areas of specialization and expertise:

Russ Taylor, President

RUSS TAYLOR GLOBAL

Wood Business & Marketing Consulting

Vancouver BC Canada

WEB:              www.russtaylorglobal.com

E-MAIL:          russtaylor@russtaylorglobal.com

MOBILE:            +1 604 897 5666

SKYPE:                retaylor

September 2020

International Consultant & Publisher of Strategic Industry Reports

For over 30 years, Russ Taylor has been providing clients and subscribers with leading-edge insights on developments in the global timber and wood products markets. Here is a profile on his work, consulting and business history.

Beginnings

Russ Taylor started his career as a forester for Northwood Pulp in the mid-1970s and then worked for Interfor for six years in the 1980s as a sawmill sales manager as well as directing a custom cutting and remanufacturing division.  He initiated his timber and wood products consulting career in 1988 with Widman Management Consulting and that business was later sold to Sandwell Inc.

In 1992, R.E. Taylor & Associates Ltd. was formed based on Russ’s initial fifteen years’ experience in forestry and wood products and his five years of domestic and international consulting. The company continued to expand and evolve around the specific needs and wants of its growing list of clients.

In 1995, International WOOD Markets Research Inc. was created with the objective of publishing selective market reports to complement the firm’s ongoing consulting projects. At that time, he had no idea that this was the start of being recognized internationally as one of the leading publishers of ground-breaking wood products analysis, research and forecasts.

In 2006, the two companies were amalgamated into one: International WOOD MARKETS Group Inc. (this business was later sold to FEA in August 2017).

Russ’ consulting business evolved from having a strong domestic focus on North America to one that encompasses many of the market hotspots around the world. Here is a summary of where he has come from.

Southern Hemisphere

R.E. Taylor & Associates Ltd. was one of the few offshore firms to develop a client base in New Zealand in the early 1990s around plantation pine lumber and mouldings. By the mid-1990s, company president Russell Taylor was firmly established as the leading consultant conducting market research for New Zealand firms in export markets (including the U.S., Japan, Korea, Taiwan and Europe). Peter Butzelaar joined the firm in 1995 and solidified the company’s status by collecting plantation-pine moulding prices and various supply statistics.

With a strong background in radiata pine products and markets, the consultants moved on to Chile, and then Brazil and Uruguay, in order to further expand their collective knowledge, contacts and clients in the plantation-pine lumber, moulding and millwork sectors.

One of the firm’s largest-ever projects was in South Africa, where rigorous due diligence work was conducted by Gerry Van Leeuwen for six months on behalf of Global Environment Fund with an investment interest in plantation forests, sawmills and plywood mills. Upon being awarded the winning bid, the client retained our company for an additional six months to develop a production and capital plan, prepare a strategic marketing plan, and assist in recruiting an entire management team for newly named company, Global Forest Products.

The firm’s Southern Hemisphere adventures continued to Australia, where in 2001 they were retained by Hancock Victoria Plantations to secure a major sawmill investor to utilize timber from an expanding plantation pine forest. This was accomplished in 2002, and one of the largest companies in Australia is now successfully operating a state-of-the-art sawmill.

He continues to conduct various projects for clients throughout the Southern Hemisphere. In addition, he initiated an ongoing series of reports starting in the late 1990s: Clearwood (Pine) Lumber, Moulding & Millwork Sector.

Asian Tigers

Ongoing market analyses were conducted throughout Japan, South Korea and Taiwan since the early 1990s for a variety of clients. After the currency crisis of 1997, a much lower level of activity resulted, but statistics and industry trends are still accessed and analyzed on a regular basis.

Europe

He started spending time in Europe in 2000, with initial efforts focused on assessing rapidly expanding sawmilling and lumber-export activities. With European lumber exports doubling each year in the first half of that decade, he made multiple trips to Europe to closely monitor the pulse and the cost structure in sawmilling, engineered wood, plywood, OSB and some finished products.

He has visited more than one hundred sawmills of the larger and medium-sized companies in Europe, including in Sweden, Finland, the Baltic States (Estonia, Latvia, Lithuania), Germany, Austria, Czech Republic, Romania, U.K. and Scotland. The results and strategic insights from these trips (and other global regions) are compiled every two years into the Global Sawnwood Cost Benchmarking Report (this report continues today).

Russ Taylor has been involved in the United Nations Economic Commission for Europe (UN–ECE) since 2005 through its Timber Committee and UN–ECE/FAO Team of Specialists on Forest Products Markets and Marketing. He remains the coordinator of the UN-ECE Sawn Softwood Chapter of the Forest Products Annual Market Review. He is also connected to various European associations and to a variety of technical and market experts, and he makes regular conference presentations in Europe to industry associations/groups.

Russia

His initial involvement in Russia was very timely and strategic. After having the opportunity to complete a few small consulting assignments in the Russian Far East in 2000, a steady stream of work was conducted on an ongoing basis. The experience and network gained throughout Russia was a combination of work conducted by Gerry Van Leeuwen, who covered Siberia and the Russian Far East, with Russ Taylor initially exploring Western Russia. The team developed a unique insight into the opportunities, constraints and risks of doing business in Russia. Their travels and project work led to the publication of three multi-client reports on Russia starting in 2004.

They also were able to share their extensive industry contacts in Russia with clients overseas through several industry tours in which representatives from many international companies accompanied them to see the forests and mills of Siberia and Western Russia.

China

The business prospects around China’s wood products imports and exports were initiated in 2001 by Russ Taylor and were led by Jane Guo starting in 2005. Dozens of consulting consignments were conducted during the frenzy of “buying from China”, and later the selling of raw materials to China.

Several multi-client reports (The China Book — Outlooks) were released starting in 2004. Russ also was involved in organizing or co-organizing 12 industry/market conferences in China. In 2006, the monthly China Bulletin was initiated and continues today.

Russ remains one of the world’s experts on the Chinese processing industry and the competitive positioning of log and lumber exporters to China.

North America

The U.S. market is one of the cornerstones of Russ’s consulting activities and has been an active area for market research, industry/segment analysis, and product/market development and assessment. Project work has been conducted for Canadian firms looking to evaluate opportunities in the U.S., for offshore companies assessing the U.S., and in many cases, for U.S. companies investigating domestic opportunities or competitive threats.

Russ’s extensive industry knowledge allowed him to initiate two landmark publications that have anchored his reputation within the global wood products sector:

• WOOD Markets Monthly International Report: (starting in 1995)
• WOOD Markets — The Solid Wood Products 5-Year Outlook for North American & Offshore Markets (starting in 1996)

Starting in 2011, Russ launched the very successful annual conference series, the Global Log & Lumber Conference, that continues today.

Through his ongoing participation (as a speaker) in association-sponsored events, he is well known to the “who’s who” in the global forest and wood products industry. Russ has made over 300 conference or meeting presentations over the years.

What’s Next?

Russ continues to evaluate industry and market trends, issues, challenges and opportunities. With his extensive global network, he is positioned to accept any project challenge or specific issue facing elements of a company’s business plan in the global wood products sector. Russ is always ready to address the tough and/or difficult questions from clients – that is the goal of Russ Taylor Global!