HARDWOOD TRADE IN SELECTED COUNTRIES OF EASTERN EUROPE

This study focuses on trade of hardwood products in selected countries of Eastern Europe, specifically the Czech Republic, Slovakia, and Hungary. It was supported by a survey conducted with companies producing products made of hardwoods. It monitors trade trends in the wood products industry, specifically focusing on lumber, wooden veneers, furniture production, musical instruments, and wooden accessories. It also addresses the current and potential import and use of the US hardwood lumber in these countries. The study is also pointing out the shortcomings of the monitored markets. The online questionnaire and follow-up phone calls were used to obtain information from companies in countries of interest. Results showed that 83.3% of Czech respondents already use imported hardwoods in their production, followed by Hungary (69.2%) and Slovakia (54.6%). Despite the relatively high values of imported hardwood products, the overall results show that there is only a small potential for an increase in import of the US hardwoods in the wood products industry in chosen countries. The utilization of tropical hardwood species will continue because of their superior properties for specialized products such as musical instruments. Results also point out the grooving importance of certified hardwoods, their utilization, and trade.

The Use of Prospect Theory for Energy Sustainable Industry 4.0

Industry 4.0 challenges facilities entrepreneurs to be competitive in the market in terms of energy by rational decision making. The goal of the paper is aimed at introducing Prospect Theory (PT) in Industry 4.0 for making decisions in order to select an optimal energy technology. To reach this goal, an approach for decision making on energy investment has been developed. In this paper, the authors have also provided a new opportunity to apply the new decision making method for strengthening Industry 4.0 by addressing energy concerns based on which rational decisions have been made. The study uses a fuzzy analytical hierarchy process for weighting the evaluation sub-criteria of energy technologies and a modified PT for making decisions related to the selection of one of the investigated technologies. The results show that it is possible to implement PT in Industry 4.0 via a decision making model for energy sustainability. Decision probability was achieved using a behavioral approach akin to Cumulative Prospect Theory (CPT) for the considered technology options. More specifically, the probability has created the same threshold-based decision possibilities. The authors used the case study method based on a company located in North America which produces hardwood lumber. The company uses a heating system containing natural gas-fired boilers. This study has also contributed to the literature on energy sustainable Industry 4.0 by demonstrating a new phenomenon/paradigm for energy sustainability-based Industry 4.0 through using PT. In this context, the main motivation of writing the article has been to promote energy sustainability via complex mechanisms and systems that involve interrelated functions.

Price Volatility Transmission in China’s Hardwood Lumber Imports

Hardwood lumber is the principal part of the global hardwood timber trade. China has become the largest importer of hardwood lumber in the world. However, China’s hardwood lumber imports are affected by price volatility. Thus, we investigated the price volatility transmission of China’s hardwood lumber imports. We aimed to detect the source, path, and intensity of the volatility transmission in China’s hardwood lumber imports, and reveal the intrinsic interactions between price volatilities. To date, there is little research on the price fluctuations of forest products. This paper provides an empirical analysis on the volatility transmission in China’s forest product imports. We selected four types of major hardwood lumber imports to China; that is, teak (Tectona grandis L.F.), merbau (Merbau), sapele (Entandrophragma), and casla (Terminalia spp.) (The Latin names of tree species are given in parentheses), and used their daily prices from 4 August 2010 to 15 April 2020. The Baba–Engle–Kraft–Kroner (BEKK) multivariate models and dynamic conditional correlation (DCC) models were employed. The empirical results indicate that there is an intrinsic relationship between the price fluctuations in China’s hardwood lumber imports. The volatility transmission chain originates from casla; it is transmitted along the casla→sapele→merbau→teak pathway. The direction of transmission is from lower prices to higher prices. The dynamic conditional correlation of each link in the chain does not exhibit any particular time trend. This suggests that volatility transmission is a crucial price mechanism in China’s hardwood lumber imports. Our findings have important policy implications for hedging timber price risks and designing timber trade policies.

Impacts of the FLEGT Action Plan and the EU Timber Regulation on EU Trade in Timber Product

The EU Timber Regulation (EUTR) is a key element in the efforts of the European Union to curb the trade in illegal timber products. This study helps to remedy the lack of systematic, statistical analysis of the EUTR’s potential impacts on international trade in timber products. Using cointegration intervention—or shock—models we quantify potential shifts in import prices and quantities of tropical hardwood lumber and oak lumber after the entry into effect of the EUTR. We further estimate import demand models to assess the relation between temperate and tropical hardwood products and whether there was a structural change in demand elasticities after the entry into force of the EUTR. The shock model analysis indicates, for most of the bilateral trade flows where we observe cointegration and a significant shock variable, increasing import prices and decreasing import quantities of tropical hardwood lumber following the EUTR start date, consistent with a contraction of the supply of tropical timber. The results of the import demand models do not give a clear indication as to whether oak lumber is a complementary or substitute product for tropical hardwood lumber, and there are no clear signs of structural changes in demand elasticities. Aside from the analysis, an important contribution of the paper is the procedure for building a long and homogeneous time series of tropical hardwood lumber.

Regional Analysis of U.S. Lumber Exports for Important Hardwood Species from 1990 to 2020

In 1990, Europe, North America, and the Asian democracies of Japan, Taiwan, and South Korea (JTK) were the major export markets for U.S. hardwood lumber and oak species accounted for 59 percent of total exports. In the 1990s, shipments to Europe and North America increased, while shipments to JTK declined. During the early 2000s, exports to China and Vietnam (CHV) increased. The worldwide recession of 2009 caused exports to decline in all regions, and oak species accounted for 37 percent of total shipments that year. Since 2010, CHV has become the most important export market for all species except maple. In 2020, oak species accounted for 43 percent of total export volume, and walnut ranked third in value of shipments. An examination of imputed prices found that exports tend to be composed of mid- to higher-quality hardwood lumber. Since 1997, real prices of exported lumber have declined for most species, and this decline occurred concurrently with increased U.S. sawtimber volume. In the 1990s, increased exports expanded the market for domestically produced hardwood lumber. Since the early 2000s, increased lumber exports have partially countered reduced domestic demand and have acted as a hedge against greater declines in overall demand for U.S. hardwood lumber.

Hardwood Log Grading in the United States—Part III: An Assessment of the Current Status of Log Grading in the Hardwood Industry

This article documents how the hardwood industry, in the absence of a standardized, industry-wide log grading system, has gone about grading and scaling hardwood logs by surveying mills, primarily in the Appalachian region. In total, 135 surveys were completed by respondents and returned via mail, with only 110 of those surveys considered usable for further analysis, after a thorough review of the individual surveys. Survey responses were grouped around annual production level, with three defined levels; ≤2.5 million board feet (MMBF), >2.5 and ≤8.0 MMBF, and >8.0 MMBF. Responding mills used some variation of a log grading system based on the number of clear faces on the log and the small end diameter of the log. The most common log rule used by mills in this study was the Doyle log rule, with over 75 percent using Doyle for scaling logs. Nearly 90 percent of all mills sampled graded logs without rolling the log to examine all four sides/faces. Half of all the sawmills surveyed pay the same price per thousand board feet (MBF) for butt logs and uppers. When asked if they would support the development of a standard log grading system, about two-thirds of the respondents (66%) indicated they would indeed support a standardized system for Appalachian hardwoods. These findings can help guide the development of a set of log grading standards for buyers and sellers in the Appalachian region and other parts of the world where hardwood lumber is produced.

Design of a Total Revenue Forecasting Tool to Estimate the Economic Output of Hardwood Logs

This article introduces a total revenue forecasting tool designed for calculating the economic output of visually graded hardwood lumber. The tool integrates Monte Carlo simulation from previous studies' data, providing a pseudoestimation of total board-feet based on log grades. The lumber output from different log groups is modeled using probability distributions for each lumber grade. The estimated volume output is multiplied by the respective price for each grade, leading to an expected amount of economic output for given log-grades. The tool was implemented using Microsoft Excel 2016 and Visual Basic. This work provides hardwood lumber producers with a valuable and simple tool to determine different scenarios of total income from each log, as established by the user with a statistical perspective. This total revenue forecasting tool provides the industry with a way to reduce waste and estimate their potential revenue by maximizing the interaction between the log yield's variables and providing the economic output of log, leading to an improvement of the economy of the hardwood market.

Asymmetric Price Transmission of Hardwood Lumber Imported by China after Imposition of the Comprehensive Commercial Logging Ban in All Natural Forests

The Comprehensive Commercial Logging Ban in All Natural Forests (CCLB) policy, introduced in April 2015, aims to protect all natural forests in China. It has impacted both China’s domestic timber supply and imports. We investigated price transmission in China’s hardwood lumber imports resulting from the implementation of this policy. We selected three hardwood lumber species, i.e., Sapelli (Entandrophragma), Mandshurica (Fraxinus), and Laurel (Terminalia), and used their daily prices from 30 April 2015 to 30 November 2017. Threshold co-integration and threshold error correction models are employed for this analysis. We identified a structural breakpoint on 30 November 2016, and consequently partitioned the data series into two parts for the two subperiods separated by the breakpoint. The empirical results indicated that there was asymmetric price transmission (APT) for both subperiods. Adjustment of positive price deviations to the long-term equilibrium levels was slower than that of negative price deviations. In the short term, the price of high-quality lumber evolved independently, whereas the price of lower-quality lumber tended to return to the equilibrium. The APT reflects a redistribution of welfare, benefiting the exporters more than the importers. We find that positive discrepancies in each price pair were inclined to be more persistent in the first subperiod than in the second subperiod. This could attribute to the fact that the degree of CCLB intervention in the former one was higher than in the latter one.