Exporting Montana wood products: building new relationships with Asian wood product importers.

• Author: Scudder, Micah
• Position: Statistical data

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It's highly possible that nearly half the world's supply of construction cranes is presently in China. As skyscrapers, shopping malls, factories, and apartments continue to spring up everywhere, China is expected to be responsible for 50 percent of world housing construction by 2020, according to U.S. Commercial Service data.

While construction is just beginning to recover in the U.S., it is booming in Asia, and demand for wood products in Asia has been growing rapidly during the past five years. At the same time, Montana has experienced low domestic wood products sales due to reduced demand during the Great Recession (Figure 1). Could diversifying into new international markets provide opportunities to strengthen Montana's forest products industry?

That is the question a group of Montana business owners, wood products manufacturers, economic development organizations, and foreign trade specialists hoped to answer at one of the largest reverse trade missions in Montana's history.

The reverse trade mission, which brings foreign buyers to the U.S. to observe manufacturing operations and make valuable connections, came about because of a project that began almost two years ago when the Forest Business Network and the Montana World Trade Center formed a partnership. The Missoula-based organizations provide assistance to Montana businesses (see sidebar, page 11).

This spring, representatives from 12 Chinese wood buying firms and three South Korean wood importing companies traveled to Montana to learn about the state's forest products industry and to meet with wood product manufacturers. These companies represented six different regional markets in China and South Korea. The majority of them have annual sales ranging between $20 million and $75 million, and combined they have an annual import average of more than $300 million. Their interest was in finding new suppliers for logs, lumber, trim, siding, and landscape timbers. Most of these companies were primarily receiving their U.S. wood product imports from companies in the southern states or along the coast of the Pacific Northwest. None of them had traveled to this portion of the interior west before this trip, and most of them were highly interested in expanding their supplier network.

Across all industries, Montana ranks 47th for total state exports in the United States, with 40 percent of those exports being shipped to Canada. This reverse trade mission was designed to build a foundation for future trade opportunities in the Asian market to help increase the state's overall export competitiveness, with a focus being placed on the forest products industry. Forming key relationships also might help create new jobs in Montana. An econometric study conducted by the U.S. Bureau of Economic Analysis found that for every additional $1 million in sales of Montana lumber, 18 new jobs are created in the surrounding communities across all industries.

Since 2002, U.S. wood product exports to China, Japan, and South Korea have had an average annual growth rate of 18 percent (Figure 2). As domestic demand for wood products declined during the aftermath of the housing crisis, this market diversification provided a sales outlet for American wood product manufacturers. While some lumber mills in Oregon, Washington, and Idaho were able to make diversifications into this market, it has been largely untouched by Montana manufacturers.

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