Trip Report
2002 WM Furniture and Wood
Working Machinery Fair and Trade Servicing
Shanghai & Beijing,
Peoples Republic of China, (PRC)
March 6th to
March 16, 2002
A. Travelers:
Allan Czinger Programs Manager
Softwood Export Council
(SEC)
Portland,
Oregon
B. Purpose of Travel:
To make and maintain industry contacts, and to
attend the 2002 W.M. Furniture Fair in Beijing.
C. Itinerary:
March 6th: arrive Shanghai, China.
March 7th – 10th: site visits and trade servicing in the
greater Shanghai area.
March 11th: travel to Beijing, China.
March 12th – 15th: attend the 2002 W.M. Furniture Fair trade
show.
March 14th: day trip to Tianjin, China.
March 15th: participate in AHEC / SEC reception.
March
16th: return to Portland,
Oregon, USA.
D.
Summary of Meetings and Objectives:
Meeting with Starcorp Furniture
Shanghai Co. (Starcorp)
For
this meeting I was assisted by Ellen Xin, the State of Oregon Trade Consultant
for the People’s Republic of China (PRC).
We met Mr. Xing-Ding Yang, the Owner and Chairman of Starcorp.
Starcorp
is a joint venture with an Australian company, and manufactures higher quality
softwood and hardwood furniture, and furniture components for export to
Australia, UK and the USA. Starcorp is
currently shipping two hundred 40’ containers per month of finished furniture.
The
hardwood species that Starcorp utilizes include US White and Red Oak, Poplar,
domestic Birch and Tulipwood, and Australian Ash. The softwood species Starcorp
currently utilizes include: New Zealand
Radiata Pine, Northern European Pine and Spruce, and US/Canadian
Douglas-fir. Mr. Yang mentioned that he
was also importing Radiata Pine logs at another facility, where he would
process the logs into kiln dried lumber.
Mr. Yang stated that price is an important factor when
purchasing decisions are made. Starcorp
also manufactures furniture parts according to the specifications of its
customers. If a particular customer
requires a particular grade or species, Starcorp
would comply the customers’ needs and wishes.
Mr. Yang then gave us a tour of the manufacturing facility. An interesting fact is that the facility was
using reclaimed Douglas-fir timbers that were taken from an old building, and
were being used for bedposts and edge-glued panels.
Mr. Yang said that he tried to source most of his lumber directly from the supplier and mentioned that he could handle purchase of lumber by the container.
Meeting with Jebsen & Co., Shanghai (Jebsen)
This meeting was with Ellen Xin, the State of Oregon Trade Consultant
for the PRC; Ken Cao, Business Development Manager at Jebsen. The meeting took place in Jebsen’s offices
located in Shanghai. Took the
opportunity to give Ellen and Ken a brief introduction on the SEC, and to
discuss SEC’s marketing strategy for the PRC.
Ellen
and Ken then explained Jebsen’s relationship as a representative for the State
of Oregon. Jebsen is a large company
with a long history in China. Jebsen
started in 1895 as an import/export and shipping company operating in China and
Hong Kong. The company is now a
marketing, public relations, and distributions company with offices all over
China, Hong Kong, and Macao. In
addition to public relations, Jebsen also deals in consumer goods, industrial
products, and car accessories.
Meeting with Shanghai Foremosta Houseware Co., Ltd., Foremosta Group (Foremosta)
This
meeting took place at Foremosta’s Shanghai factory where I met with Mr. Gene
Hou, a Manager at Foremosta. I was also
accompanied by Ellen Xin. Foremosta is
a subsidiary of a Taiwanese company, and produces ready-to-assemble (RTA)
furniture and furniture parts for export to Europe and North America. The quality and price of the furniture in
their showroom was in the lower-middle end.
Foremosta’s products would be found at a Storables or B&Q type of
store in the US or the EU.
The
facility had approximately 700 employees, and started operations in the PRC in
1995. The species of wood/lumber that
Foremosta uses to manufacture their furniture include: white woods from Northern Europe, Radiata
Pine from New Zealand/Chile, Korean Pine from Russia, Ash from Australia, and a
Domestic (Chinese) Birch. I gave Mr.
Hou some information on Western US Pine species and asked him if he had ever
used any Western US softwood lumber species before, such as Ponderosa
pine. Mr. Hou replied that he had
little experience working with Western US softwood species and had not yet been
approached by anyone representing or selling these species.
According
to Mr. Hou, when considering a new specie, price is of extreme importance. He
would however also take into account other factors such as recovery and
workability. Mr. Hou also mentioned
that he would like to deal as direct as possible with a manufacturer, therefore
cutting out the middleman and reducing costs.
He mentioned that he would like to see some samples of US product and
work with a few test loads before he purchased a large amount of new
specie.
With regard to the use of environmentally certified lumber, it was not a big issue for his company, as he was making furniture and furniture parts according to his customers’ needs and requests. He had received information on the Forest Stewardship Council (FSC).
Meeting with Longtou Trading and Investment (LTI)
I met with Jiang Yue Qin, Sales Manager at LTI. LTI is a New Zealand business with offices, and trading and manufacturing operations based in Shanghai. They act as agents for several New Zealand and Australian companies in marketing kiln dried lumber and logs into China.
LTI is currently shipping approximately 10,000 m3 per month of Radiata Pine logs and KD lumber into China, which they will remanufacture or sell to furniture manufacturers and pallet manufacturers all over China. LTI has several warehouses and is currently building a new facility in China.
According to Ms. Qin, in order to be successful in selling to the Chinese market, one must first have the right product at the right price. Most importantly is to have an on-the-ground presence. The Chinese industry puts a lot of stock in relationship building and trust. In a business climate where the legal system and associated contracts are unreliable at best, the Chinese value a level of face-to-face contact and hands-on negotiation that is difficult to achieve without an office or representation in China.
LTI deals heavily in Radiata Pine; however, they mentioned that they were interested in receiving pricing information on Hemlock and Douglas fir lumber. Ms. Qin indicated that some of her customers had knowledge of Ponderosa Pine, but it was difficult for her to source adequate supply.
Meeting With Qing-He Wood Enterprises Co., Ltd.,
Shanghai (Qing-He)
Qing-He and Yuelin Industrial and Trading Co. are part of a group of a major importer and wholesaler of lumber and building products named Long Hoh. Long Hoh is owned by a Taiwanese company named Long Hoh Enterprise Co. Ltd. The organization has offices in Taiwan; Shanghai, China; Belize City, Belize; BC, Canada; Singapore; and Bellevue, Washington, USA.
Long Hoh imports tropical hardwood lumber from Southeast Asia, and temperate
hardwoods from the US. Long Hoh also
imports softwood logs, cants and KD lumber from the US, Canada, Russia,
Northern Europe and New Zealand. Shanghai Yi Lin Industrial and Trading Co. (Yi
Lin) is an importing and wholesale division of Long Hou. I met with Ms. Li Rong Wang, Sales and
Purchasing Manager for Yi Lin. Yi Lin
among other things is also an agent for Rayonier MDF New Zealand. Yi Lin also imports Radiata Pine logs and
lumber from New Zealand, as well as Alaskan Yellow Cedar from Canada and
Alaska.
Long Hoh currently purchases between 50-100 containers of Alaskan Yellow Cedar cants and lumber a month. The cants and lumber are then processed into finger-jointed lumber and edge-glued panels at the Qing He facility in Shanghai. The edge-glued panels and finger-jointed lumber are then re-exported to Japan.
Yi
Lin’s customers in China vary. The bulk
of the their customers in China are medium sized furniture manufacturers. Yi Lin also re-exports some products to
Korea and Taiwan.
2002 WM Furniture and Wood Working Machinery Fair, Beijing China
I
had the opportunity to assist John Chan and Annie Ho at the American Harwood
Export Council booth at the 2002 WM Furniture and Wood Working Machinery
fair. As this was my first trade show
in China, I was there mostly to learn more about the Chinese market as well as
to observe the competition.
In addition to the American Hardwood Export Council, there was a contingent of US states promotion organizations and private companies. The show had delegations from Ohio, Pennsylvania, North Carolina, and Virginia. There were also a few independent US manufacturers and wholesalers that had representation at the show, which included Northwest Hardwoods, Baile, and North Pacific Lumber-Wholesalers.
The Quebec Wood Council and BC Wood Promotions Board had a booth as well as the German Timber Federation and the Malaysian Timber Council. An interesting fact to note was that there were no Russian companies presenting at the show, but a few Russian groups did stop by the booth.
Approximately 500 visitors stopped by the booth and picked up brochures on American wood grades. The WM Wood Working and Machinery show targeted the furniture manufacturing industry. For the most part the visitors to the booths seemed to be professionals who were genuinely interested in learning about American wood grades and finding contacts for supply.
Meeting with Markor Woodworking, Tianjin, China (Markor)
This
meeting was with Mr. Kou Weijun and Mr. Travolta with the Material Planning and
Purchasing department at Markor. I was
assisted by Jessie Shi with the AF&PA Beijing office.
Markor is one of the leading furniture manufacturers in China
and exports its products to the US, Canada, Europe, and other markets. Markor has five manufacturing facilities in
China producing a full range of furniture products. The main manufacturing
facilities are located in Tianjin and Xinjang in China. The company employs approximately 5000
people.
Mr. Travolta informed us that Markor recently reached an
agreement with Ethan Allen (USA), to develop a chain of retail stores in the
PRC. The agreement calls for the two companies to collaborate on the development
of a retail format that will market two retail concepts: the Ethan Allen retail
program and the Markor retail program. The objective is to open the first store
by the summer of 2002 and to follow-up with additional stores thereafter.
Markor
imports a large amount of Radiata Pine from New Zealand for usage in their
facilities, approximately 5000 m3 a month. In addition to Radiata Pine lumber, Markor also uses US
hardwoods, Northern European Spruce, Malaysian Rubber Wood, and Domestic Birch
and Ash. Markor currently is not using
any US softwood species, but with the right price would not rule out using US
softwood species such as Ponderosa Pine.
Currently the grades and thickness of Radiata Pine that Markor uses are
based on buyer and seller agreements.
Mr. Travolta mentioned that due to the fact that so much of Markor’s
furniture was going to the US, his sourcing decisions are based on the tastes
of the US market place. If the US
market demands US softwood species to be used in its furniture, then he would
make adjustments in his sourcing of lumber supply. However the US market seems to accept the look (and price) of
Radiata Pine furniture.
Oriental Home
Orient Home is a big
box type home center catering to Chinese consumers. I met Mr. He, the Purchasing Manager for Oriental Home, and was
accompanied by Grace Zhang, Director of the AF&PA Beijing office. According
to Mr. He, Orient Home has a total of seven stores in China, with three in
Beijing and four in other cities including Shanghai. Orient Home’s client base is 90% consumers, (private home or
apartment owners), the other 10% comprises of contractors and other
professional customers.
The
products at Orient Home were mostly made in China. There were a few imported products including some Canadian doors
and windows. There was relatively
little hardwood or softwood lumber.
According to Mr. He, the softwood lumber that he did sell would be used
as a sleeper that would separate a concrete floor and a hardwood floor. The moulding and millwork sold at Orient
Home tended to be darker color tropical hardwoods. The species that I saw at Orient Home were Teak; and Sapeli, an
African specie.
Although Oriental Home had all the trapping of a North American Style Big-Box home center, I did not see much of an opportunity to sell US primary and secondary softwood lumber products.
AHEC/SEC Reception
I
had the opportunity to attend a reception dinner for the US states promotion
dinner. The dinner was jointly
sponsored by the American Hardwood Export Council and the Softwood Export
Council. There were approximately 120
attendees which include members of the Chinese furniture and interiors industry
as well as key government and association types. AHEC Hong Kong Office Director John Chan gave a brief speech to
the group, then was followed by a few words from the U.S. Agricultural Minister
Counselor Larry M. Senger.
E. Conclusions and Recommendations:
Opportunities for increased growth of exports of US softwood lumber to China do exist. According to the March 2002 FAS FFPD Trade Statistical Annual, exports of US Softwood lumber to China increased from $2.3 million in 2000 to $12.6 million in 2001, an impressive 548% gain, at a time when other US export markets are in a decline.
In my limited visits with Chinese industry and in talking with the participants at the 2002 WM Furniture Fair, it is clear that in the short term (the next 1-2 years) opportunity for increased sales of US softwood lumber and building products will be in the furniture and interiors sector. When the US softwood exports to China are analyzed by species, it reinforces this claim. The top 5 US softwood lumber species exported to China by value are: 1) other cedars (incense and aromatic); 2) Ponderosa Pine; 3) Southern Yellow Pine (SYP); 4) Alaskan Yellow Cedar; and 5) Sitka Spruce. These species, with the exclusion of SYP, are not traditionally used for construction purposes.
Who is buying and who will buy US softwoods? The type of furniture manufacturer that could buy US softwood is a medium-to-large furniture manufacturer of roughly 400 or more employees that is making medium-to-high quality wood furniture for export, and has the capability to work directly with a US exporter/wholesaler. These companies are making furniture for markets that demand a high quality product and are willing to pay extra for the quality.
Price is still, and will continue to be the number one factor in making sales in China. However, as the furniture export sector matures and opens up, the Chinese customers may be willing to pay a little bit more for attributes such as uniform and consistent grading, higher recovery factors, and reactive and attentive customer service. All of the above mentioned attributes are areas in which US softwood producers excel.
Competition in the softwood market in China is and will remain fierce. The New Zealanders have increased their marketing presence in China as well as the Northern Europeans, Malaysians, Russians, Chileans, and Canadians, the same competitors that the US producers have in every market in the world. The biggest competitor that the US will face in China in the coming years may be the Chinese themselves. The vast timber resource of Russia that lie just to the north combined with the natural entrepreneurial spirit of the Chinese and loose customs procedures at the boarder can only lead to increased domestic production of raw materials for the Chinese furniture industry. An interesting note is that in walking around the Beijing WM furniture show, I met with six Chinese lumber dry kiln manufacturers and most of them had both signs and promotional literature in Chinese and Russian.
It would be hard to write a report about the PRC and not mention China’s recent accession to the WTO. While it may be too soon to comment on the immediate effects of the event, it is certain that the changes will be dramatic. The WTO agreement and the corresponding reductions in tariffs and trade barriers for a wide variety of products, including forest products, will help to create a level-playing field, particularly for medium-to-small sized US companies. This level-playing field is also a double-edged sword. China’s WTO accession also puts the Europeans, Canadians, and New Zealanders on an equal footing with the US. The US industry can only expect increased competition from these softwood lumber producing and exporting regions.
The SEC recommends the continued support of promotions and work in the realm of wood frame construction in China. The western softwood industry realizes the importance of this work as well as the tremendous potential that this market segment holds. The SEC will continue to work with and support efforts by the American Forest Products & Paper Association, the Evergreen Building Products Association, and the Washington State Office of Trade and Economic Community Development.
There is tremendous potential in Chinese market for US companies producing softwood products. The numbers tell the story. The PRC will have an estimated 10 million housing starts in 2002 half of those being urban. Of the 1.3 billion people in China the developing middle class, approximately one-fifth of the population, is living in the urban centers of Shanghai, Beijing, Guangzhou. It will take a lot of effort to develop contacts and markets for US products, but the potential payoffs are huge. If US businesses get a fraction, the payoff will be enormous.
F. Principal Contacts:
James Kang Shanghai Qing-He Wood Enterprise Co.
Li
Rong Wang Shanghai Yuelin
Industrial and Trading Co.
Jian
Yue Qin Longtou Trading
and Investment
Prof.
Xu Meiqi Furniture Magazine
Jeffery
Tsao Translator
Xing-Ding
Yang Starcorp
Gene
Hou Foremosta Group
Mr.
Travolta Markor Furniture
International
Kou
Weijun Markor Furniture
International
Mr.
He Orient Home
Joung
Chan AHEC
Annie
Ho AHEC
Mable
Zhuang AHEC
Grace
Zhang AF&PA
Jessie
Shi AF&PA
George
Good AF&PA
XU
Fang AF&PA
Larry
Senger USDA-FAS
Ralph
Bean USDA-FAS
Xiufang
Sun USDA-FAS
Ellen
Xin Oregon Trade
Consultant for China (Jebsen & Co.)
Ken
Cao Jebsen & Co
Contact
info for the above individuals is available upon request.