In February 2013, the US Department of Commerce approved a 23% Countervailing Duty on Chinese imports of hardwood plywood. While supposedly aimed at protecting domestic manufacturers, the overall beneficial effect on the hardwood plywood industry is highly debatable. Since the increased prices on imported ply have surfaced, prices of domestically manufactured hardwood plywood have risen as well. While this may seem like your typical healthy competition, the governmental intervention makes it a bit more complicated than that. Add in a prospective Anti-Dumping margin that could further increase import prices, and the hardwood plywood industry could really be a mess.
While high prices seem like a bad thing to customers, when it comes to industry-wide, future-focused considerations, it’s the ultra-low prices that are really worrisome. However, in the case of price hikes by domestic hardwood plywood, the issue is entirely different. These domestic producers of plywood were the ones to instigate the Countervailing Duty for starters. Their reasoning was rooted in the fact that Chinese plywood manufacturers were able to offer much lower prices because the Chinese government subsidizes their industry. It seemed to make sense for the US manufacturers to ask their own government to help them out. No problems so far.
Once the Countervailing Duty was enacted, though, domestic plywood manufacturers suddenly and proportionately increased their prices, supposedly due to “increased raw materials costs.” Really? It seems like perhaps instead of enjoying their newfound appeal due to the higher prices of Chinese imports, domestic plywood manufacturers were simply raising their prices out of greed. The result is that instead of helping domestic products to be chosen over imports, the same pricing issue that existed before the government got involved exists once again.
On April 29, 2013, the Department of Commerce announced preliminary anti-dumping (AD) rates that will largely punish Chinese suppliers for selling at or below market cost. Added to the new Countervailing Duty, the aim of this new duty is intended to make buying higher-quality domestic hardwood lumber a virtual no-brainer for American customers. However, if the domestic manufacturers respond to this new intervention like they did to February’s Countervailing Duty, the original goal will not be achieved, and those who rely heavily on hardwood plywood will suffer.
Certainly, there’s more to the domestic manufacturers’ side of things than we’ve already explored. Some simply cannot keep up with the increased demand for their products and have no choice but to raise prices in order to quell the demand. Regardless of the motives behind the price hikes, these rising hardwood plywood prices will take some careful restructuring of bids and strategic planning from builders. We at J. Gibson McIlvain will try our best to keep a finger on the pulse of these developments and advise our customers accordingly.
J. Gibson McIlvain Company
Since 1798, when Hugh McIlvain established a lumber business near Philadelphia, the McIlvain family has been immersed in the premium import and domestic lumber industry. With its headquarters located just outside of Baltimore, the J. Gibson McIlvain Company (www.mcilvain.com) is one of the largest U.S. importers of exotic woods. As an active supporter of sustainable lumber practices, the J. Gibson McIlvain Company has provided fine lumber for notable projects throughout the world, including the White House, Capitol building, Supreme Court, and the Smithsonian museums.