Did you see in Woodworking Network and FDM+C Daily News the following item? “Stanley Furniture Co. will sell nearly all of its assets to Churchill Downs, a limited liability firm linked to the Vietnam Trade Alliance.” It is not the first one. What does this mean to our industry?
Also, another news item said that Chinese hardwood plywood will be getting as much as an additional cost of 178% via a teriff. What will happen to the cost of plywood, even for made in USA material.
And another item is that the demand for RR ties (oak is favored) is expected to increase this year, with tie prices going over $40, which means a price of around $1000 per MBF. The price increase is to convince hardwood sawmills to saw ties and not lumber. And with a shortage of hardwood logging crews.... and with Chinese now putting shipping containers right into the woods and paying loggers more than sawmills, what will be the effect on hardwood supplies and prices for our sawmills?
I can see how this policy certainly helps the shareholders who own Weyerhauser & Georgia Pacific.
How does it help woodworkers and people who want to build, buy or remodel houses?
This is not a whole lot unlike protective tariffs for the solar and/or steel industry. Those trade groups also have a hard time competing with foreign manufacturing. We may protect a few jobs in our steel mills but this ignores all the steel dependent fabrication that happens down stream. There are more workers in the tertiary industries than in the primary ones.
This discussion, however, is a political one and this is a business forum.
It is furthering of trade and of comparative advantage:
"Absolute advantage refers to the ability to produce more or better goods and services than somebody else. Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume. Her opportunity cost of secretarial work is very high."
The US is evolving into a service country and manufacturer of capital goods. It is to the US's interest to trade with other countries that have cheaper labor.
Since we have very low unemployment, we are better served to focus on the most profitable items. Also a part of comparative advantage.
The world's economy was/is built on comparative advantage. It is a good thing.
The Chinese economy will continue to slow in growth because of a shrinking work force similiar to Japan's.
The US work force is growing which will cause the US economy to grow. This because of the millennials entering the work force and starting families.
The dollar is very strong which means that it is not competitive on manufactured goods. The manufactured goods that the US is competitive on is producer/capital goods. Because countries that have lower wages are not good at building airplanes and similiar.
I do believe that these changes that we see, including those that I presented, will affect wood supplies and prices and will also make us consider more carefully how we plan for and conduct our business, both as individuals and as an industry collectively. They have already happened, so what business decisions do we make in response? So, this is the proper forum for this discussion.
As a reaction, one change our industry might consider is getting involved in securing our wood supplies of lumber, by working more closely with sawmills and timberlands. As prices go up, any yield increases will offset, in part, raw material increases- -over 2/3 of the cost of most wood products is the wood itself. As we see more competition from outside North America, our industry needs to point out, to the consumer, the advantages of “Made in the USA.” And the list of ideas goes on, hopefully with input at this forum.
Indeed, wood related business decisions will shape and determine our future...or should we just let the future happen?
Cabmaker- Gene's questions were not political, you made the discussion political. Weyerhaeuser and Georgia Pacific have zero interest in Hardwood Lumber or Hardwood Plywood today these questions have nothing to do with them or their shareholders.
I have no clue how to answer the first question re Vietnam.
The second question is pretty straightforward Chinese hardwood plywood on average was 50% less expensive than domestic production. While the ITC still needs to affirm or deny the DOC order assuming the duty stays at 178% what will that mean for the cabinet of furniture industry? Ignoring the massive cabinet factories will smaller to medium size custom cabinet manufacturers switch to domestic production? None of the ones i do business with will, they are all actively looking at vinyl/paper covered particle board, domestic suppliers have already raised their prices twice this year. Having sold a very significant amount of Chinese plywood from a very select group of mills while also selling domestic production I can state as a fact in the past 5 years I had zero claims on Chinese products and tens of thousands of dollars in domestic product claims. The Chinese product was cheaper and in almost every case better with thicker veneers and better core construction, while i generally agree with free trade there is little doubt there were some shenanigans goings on with Chinese government support.
The RR tie question is an interesting one, there has been a shortage of hardwood logging crews since at least 2008 and the problem is not getting better anytime soon. Assuming 2/3 of a hardwood log is low grade (#2com or lower) there will be increased production of ties which should mean excess supply of upper grade material which if China doesn't buy all of it the inventories will build and the price will go down until it moves.
Gene your questions are all great and people should really put some real thought into how this will impact their business. Whether you were using Chinese production or not your costs are going up, if you were or are using low grade lumber your costs are going up, interesting times.
We used to work for a major retailer. When we did a massive remodel in 2005 the CEO wanted to buy the fixtures from Southeast Asia as that is where their furniture was coming from. Construction convinced him it wouldn't happen on time.
Fast forward to 2010, same retailer ,new look, same discussion but we knocked off the furniture for details and did 80 stores, then we took the details and did stores for the next 3 years.
Last year they bought the fixtures from southeast Asia. Then the bought them again so they would fit the building.
Short story, we lost about a million in sales. Shorter story, we are a small company ( didn't miss the sales last year but would have liked to have had them).
Basically this customer have moved from custom US made fixtures to out sourcing off shore.
So it goes beyond the furniture companies. It directly affects custom kitchens, and commercial work.
So it affects what decision we need to make as business owners.
How do we differentiate custom made in the US vs custom made in Viet Nam?
In the short term until there are better management and supply controls in place we sell against the service and how long it will take to get an additional room.
Right now while we are busy when someone asks us to modify or add to off shore stuff we tell them we don't have time, what I do in the future is a different question.
We can perform faster, deliver faster and meet codes.
We lost a retailer to China last year. The new manager said the saving of about 20% made it worth the risks. Given how often retailers change their minds about what they want and how soon, I don't see how getting stuff made in China can work to their advantage but money talks! I don't understand why wood ties are still used in this country. Most of the rest of the world uses concrete. Probably lasts longer.
Virtually all freight cars in North America do not have springs. They rely on the "softness" of the wood ties to provide cushioning. The weight hauled by each car and the speed of the trains in North America makes concrete ties unacceptable, although they have been tested, ad nausium. Passenger cars have low weight and have squishy suspension systems, so concrete has some possibilities.
Have you seen a tie replacement operation with wood? Quick and easy. We also have plenty of wood resources...our forest continue to grow more wood than we harvest especially for the preferred wood tie species. WOOD ties also offer potential profit for small and medium mills.
Think about our concrete highways and their life. This is with truck loads of 70,000 pounds on 18 rubber ties and springs, etc. with payloads at around 35,000 pounds.
A loaded RR freight car weighs up to 300,000 pounds, with well over 200,000 pounds payload.
Concrete RR ties:
20 years ago the mainline that runs past my farm got double tracked, all new welded rails on concrete ties. 3 years ago BNSF relocated their mainline tracks running in to their yard. All state of the art: concrete ties, welded rails, turnouts that eliminated the high maintenance frogs and allow higher speeds. All the turn outs are heated to prevent icing. I don't know the total # of trains per day but the line that runs by my shop has 48, the one near my house has 22 and the one coming in from the south has 24. #s from a recent news article about RR crossing safety. All the RR cars here ride on coil springs. Typical main line train has about 100 cars: mostly unit trains, coal, grain, crude oil, containers. The Hobson yard fuels the engines, can do 12 at a time at the islands and the pusher engines are fueled at the same time from tank trucks. Warren Buffets railroad. There is a Caterpillar plant here that rebuilds wheel assemblies and a repair facility that maintains the cars. I've had an interest in trains since a kid.
We've started buying foreign species of wood this year. While we used to use only pine and not hardwoods, a lot of the supply issues are the same. The mills either cry about not having logs, not having loggers, can't find truck to ship the wood, export markets too strong to sell the wood here etc.....Every year it's a different excuse of why I can't have a reliable supply of wood and why I'm at the mercy of the mills shipping what they want when they want.
Now I can get as much wood as I need when I need it. Even though it takes a little over 2 months from order to delivery, it's still the same time frame American mills would drag it out to.
Another benefit is the foreign mills sell on a net tally basis of the finished size, not gross tally like the American like to pull. So if a part is .75" thick, that's what I pay for, not 1". I can also specify the widths and lengths I need.
If the Chinese want to overpay of our wood, let them. Some of the foreign species are so much better than our wood, and definitely much cheaper. Why should you have to buy twice the amount of wood you need and spend a million dollars on computerized saws only to hope you get the sizes you need out of it?
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