Required Report - public distribution

**Date:** 8/13/2004

**GAIN Report Number:** TH4089

TH4089

**Thailand**

**Solid Wood Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Russ Nicely, Acting Agricultural Counselor

U.S. Embassy, Bangkok

**Prepared by:**

Sakchai Preechajarn, Agricultural Specialist

**Report Highlights:**

Despite the likelihood of a slowdown in the construction sector,
Thailand's solid wood product imports are forecast to increase by 5-6
percent in 2004 and 2005, due to increased market demand for interior
design and renovation for completed houses/buildings and hotels/resorts,
and decreased domestic hardwood supplies. Thai imports of U.S. hardwoods
are also expected to rise in 2004 and 2005.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Bangkok \[TH1\]

\[TH\]

#  

[Executive Summary 3](#executive-summary)

[PRODUCTION 4](#production)

[Forest Situation/Outlook 4](#forest-situationoutlook)

[Solid Wood Products Situation/Outlook
5](#solid-wood-products-situationoutlook)

[TRADE 5](#trade)

[MARKET SEGMENT ANALYSIS 6](#market-segment-analysis)

[Construction Sector 6](#construction-sector)

[Furniture & Interior Sector 7](#furniture-interior-sector)

[Material Handling Industry 8](#material-handling-industry)

[Table 1: Thailand's Forest Product Strategic Indicator Tables
9](#table-1-thailands-forest-product-strategic-indicator-tables)

[Table 2: PS&D Table for Tropical Hardwood Logs
11](#table-2-psd-table-for-tropical-hardwood-logs)

[Table 3: PS&D Table for Temperate Hardwood Lumber
11](#table-3-psd-table-for-temperate-hardwood-lumber)

[Table 4: PS&D Table for Tropical Hardwood Lumber
11](#table-4-psd-table-for-tropical-hardwood-lumber)

[Table 5: PS&D Table for Hardwood Veneer
12](#table-5-psd-table-for-hardwood-veneer)

[Table 6: PS&D Table for Hardwood Plywood
12](#table-6-psd-table-for-hardwood-plywood)

[Table 7: Thailand's Tropical Hardwood Log Imports in 2002 and 2003
13](#table-7-thailands-tropical-hardwood-log-imports-in-2002-and-2003)

[Table 8: Thailand's Temperate Hardwood Lumber Imports in 2002 and 2003
14](#table-8-thailands-temperate-hardwood-lumber-imports-in-2002-and-2003)

[Table 9: Thailand's Tropical Hardwood Lumber Imports in 2002 and 2003
15](#table-9-thailands-tropical-hardwood-lumber-imports-in-2002-and-2003)

[Table 10: Thailand's Hardwood Veneer Imports in 2002 and 2003
16](#table-10-thailands-hardwood-veneer-imports-in-2002-and-2003)

[Table 11: Thailand's Hardwood Plywood Imports in 2002 and 2003
17](#table-11-thailands-hardwood-plywood-imports-in-2002-and-2003)

[Table 12: Thailand's Tropical Hardwood Log Exports in 2002 and 2003
18](#table-12-thailands-tropical-hardwood-log-exports-in-2002-and-2003)

[Table 13: Thailand's Tropical Hardwood Lumber Exports in 2002 and 2003
19](#table-13-thailands-tropical-hardwood-lumber-exports-in-2002-and-2003)

[Table 14: Thailand's Hardwood Veneer Exports in 2002 and 2003
20](#table-14-thailands-hardwood-veneer-exports-in-2002-and-2003)

[Table 15: Thailand's Hardwood Plywood Exports in 2002 and 2003
21](#table-15-thailands-hardwood-plywood-exports-in-2002-and-2003)

#   {#section-1 .unnumbered}

# Executive Summary

# 

#  The recent restructuring process of establishing a new ministry, the Ministry of Natural Resources and Environment (MNRE), created chaos in labor forces and budget administration of the existing government bodies having responsibility for the forestry industry and led to the suspension of some valuable reforestation projects. The Cabinet agreed in late 2003 to assign the new ministry to take full responsibilities over all forestry activities. As a result, the ministry may revive some suspended reforestation projects and initiate more efficient ways to achieve the target of increasing forest area.

# 

# Timber production from forest areas in the next 3-5 years is forecast to stagnate at 30,000-50,000 cubic meters. The use of hardwoods depends almost totally on local supplies of rubber wood from rubber plantation and imported hardwoods. Following an anticipated growing demand, Thailand's solid wood imports are forecast to increase by 5-6 percent in 2004 and 2005.

# 

Thai imports of U.S. hardwoods are also expected to rise in 2004 and
2005 because: 1) Thai exports of furniture and frames are anticipated to
grow steadily due to the United States' recent imposition of
anti-dumping duties on Chinese furniture and improved economic
conditions of the U.S. and Japan; 2) high growth in the tourism industry
will lead to increased demand for hardwoods as hotels and resorts
renovate their facilities; 3) U.S. hardwoods are becoming more
competitive against European suppliers as the U.S. dollar depreciates
against the Euro currency.

#  

# PRODUCTION

## Forest Situation/Outlook

The recent restructuring process of establishing the Ministry of Natural
Resources and Environment (MNRE) in 2003 apparently created some chaos
in the labor forces and budget administration of the relevant agencies,
particularly the Royal Forest Department (RFO) and Department of
National Parks, Wildlife, and Plant Conservation. As a result, some
valuable reforestation projects have been suspended in 2003 and 2004,
including the Private Reforestation Extension Project (PREP), the
Fast-Growing Tree Reforestation Extension (FGTRE), and the Community
Forest Project. The only surviving project is the Reforestation Campaign
in Commemoration of the Royal Golden Jubilee for the King in 1996. At
the same time, the government, including the state enterprise of Forest
Industry Organization (FIO), was able to reforest an area of 12,007
hectares in 2003, about a half of the 25,845 hectares reforested in
2002.

As a result of the new ministry's establishment, conflicting roles arose
between it and the Ministry of Agriculture and Cooperatives. The
responsibilities of forest protection and conservation were transferred
to the MNRE, while those of reforestation and utilization still belong
to the RFD.

Realizing that the restructuring of the governmental administration will
adversely impact upon the efforts to reduce a deforestation crisis, the
Cabinet agreed in late 2003 that the Ministry of Natural Resources and
Environment (MNRE) would acquire the whole office of the Royal Forest
Department from the Ministry of Agriculture and Cooperatives. As a
result, the MNRE is currently responsible for all forestry activities
including forest harvesting, conservation, watershed management,
protection, and reforestation. Most of academic foresters agreed that
the new structure would better counter the problem of the deteriorating
environment and better manage natural resource utilization. They foresee
that the Ministry will revive some suspended reforestation projects and
initiate more efficient ways to achieve the target of increased forest
area.

Most Thai academic foresters are suspicious about a report by the Royal
Forest Department (RFD) that states that the total forest area in
Thailand in 2000 accounted for 33.09 percent of total land area, as
opposed to 25.28 percent of total area as officially reported in 1998.
Although the RFD's figures are based on the new methodology of the
forest mapping through remote sensing and use of Geographic Information
Systems (GIS) technology, there is a large discrepancy between the old
and new figures and a lack of supportive information from on-ground
surveys.

According to the RFD, the existing forest area in 2000 was 170,110
square kilometers, of which about 96 percent was natural forest (163,797
square kilometers). Of the total natural forest area, tropical evergreen
forest accounted for 32 percent, followed by mixed deciduous forest (53
percent), dry dipterocarp forest (11 percent), and others (4 percent),
respectively. However, the reported forest area does not include rubber
plantations of about 15,930 square kilometers in 2002.

In the Agricultural Development Plan, a component of the Ninth National
Economic and Social Development Plan (2002-2006), a goal of the national
forest policy was set for the conservation and rehabilitation of 30
percent of the total area of the country, including areas for
biodiversity conservation, national parks, wildlife sanctuaries, and
watersheds. An additional 10 percent of the total country area (5.1
million hectares) will be promoted for public forest plantations,
private forest plantations, and community forest plantations. In
addition, a target area of 1.25 million rai (200,000 hectares) of
mangrove forest to be conserved or rehabilitated has been proposed.

## 

## 

## Solid Wood Products Situation/Outlook

Supplies of domestic hardwood timber are currently obtained from the
Forest Industry Organization (FIO)'s logging and thinning activities in
their reforested area, and that timber which is confiscated from illegal
logging. Production of timber (legally licensed timber and confiscated
timber) declined in recent years, reflecting a lack of mature reforested
trees and the RFD's sophisticated regulation on logging approval. Total
timber production (excluding rubber wood timber production) in 2003
slightly declined from 33,600 cubic meters in 2002 to 32,000 cubic
meters. Despite an anticipated increase in private reforested area in
the future, domestic timber production from forest areas in the next 3-5
years will be stable at 30,000-50,000 cubic meters.

Supplies of rubber wood from rubber plantations have become the
substitute for the typical timber from forest areas. Production of
rubber wood lumber may decline to 1.5-1.6 million cubic meters in 2004,
as compared to 1.7-1.8 million cubic meters in 2003, due to the
prevailing high prices for natural rubber products and the political
unrest situation in the four Southern provinces of Thailand. While
record high rubber prices discourage the practice of cutting down mature
rubber trees for replanting with newer trees, the growing unrest
situation in these provinces, where many rubber plantations are located,
has almost stopped the processing of rubber wood from early 2004. As a
result, wholesale prices for rubber wood at factory reportedly increased
from 190-200 baht/cubic feet in early 2004 to currently 240-250
baht/cubic feet.

A rapid increase in rubber wood prices may catalyze a group of furniture
manufacturers to convince the government again to impose a ban on
exports of rubber wood. In recent years, the wood furniture industry and
a Deputy Minister of Agriculture agreed that Thailand, which is the
world's second largest rubber producer and the major exporter of rubber
wood furniture products, should prohibit or limit exports of rubber wood
in order to protect local rubber wood manufacturers from the threat of
highly competitive Chinese furniture producers. China has no local
supplies of rubber wood, but because of its very low labor costs,
Thailand has lost its comparative advantage over China in exporting
rubber wood furniture in the world market. However, the Thai government
has not implemented such a ban thus far as a group of rubber wood
producers and rubber farmers have voiced serious opposition to the idea.

# TRADE

Despite the likelihood of a slowdown in the construction sector,
Thailand's solid wood product imports are forecast to increase by 5-6
percent in 2004 and 2005, due to increased market demand for interior
design and renovation of completed houses/buildings and hotels/resorts,
and decreased domestic hardwood supplies.

Thai imports of U.S. hardwoods are also expected to rise in 2004 and
2005 because: 1) Thai exports of furniture and frames are anticipated to
grow steadily due to the United States' recent imposition of
anti-dumping duties on Chinese furniture and improved economic
conditions of the U.S. and Japan; 2) high growth in the tourism industry
will lead to increased demand for hardwoods as hotels and resorts
renovate their facilities; 3) U.S. hardwoods are becoming more
competitive against European suppliers as the U.S. dollar depreciates
against the Euro currency.

Thailand's neighboring countries (i.e., Malaysia, Burma, Cambodia, Laos,
and Indonesia) remain major suppliers of hardwoods to Thailand.
Hardwoods imported from Malaysia and Indonesia are mainly used for
construction purposes. Meanwhile, high-value tropical hardwoods (such as
teak, rose wood and Ma-ka) are normally imported from Burma, Laos, and
Cambodia and used in the furniture and interior design industries. The
U.S. supplies solid wood products, mainly hardwood lumber, to Thailand.
Most of the imported U.S. hardwoods are oak, maple, poplar, and ash.
U.S. hardwoods are used for flooring materials, furniture, wooden
frames, picture frames, and interior design materials.

Export-oriented manufacturers now utilize about 70 percent of the
imported U.S. hardwoods, while the balance belongs to domestic-oriented
manufacturers. The export-oriented manufacturers import U.S. hardwoods
and other temperate hardwoods to make wooden furniture and picture
frames. As U.S. woods are mostly competitive in both quality and price
against other temperate hardwoods, the demand for imported U.S.
hardwoods seems to be a function of the production of wooden products
for export. Contrarily, the utilization of U.S. hardwoods by
domestic-oriented manufacturers is still limited by a lack of
understanding of U.S. woods, in the areas of the U.S. grading system,
physical properties, applications, and the color variations of the U.S.
species of hardwood. For example, demand for U.S. hardwoods (mainly oak
and ash woods) for making flooring materials dropped sharply in recent
years, as many local users were disappointed with the appearance and
endurance of finished flooring made from these woods. In reality,
according to trade sources, this problem can be avoided if the user is
better informed of the physical properties and appropriate application
of U.S. woods.

There is a high potential for U.S. hardwood imports to grow in the Thai
market, due to their competitive prices and quality. Although domestic
consumption of high-value wooden products (such as flooring materials,
furniture, and interior design) are dominated by teak/rose wood, the
expensive and rising prices of these tropical hardwoods should encourage
users to seek new types of hardwoods.

Market strategies to promote U.S. hardwoods in Thailand need to be
directed toward overcoming importers' lack of technical awareness as
mentioned above. Education should be a key component of market promotion
plans. The American Hardwood Export Council (AHEC) should focus on
conducting direct discussion/workshops with such target group as wood
importers, architects, interior designers, etc. Workshops should be
directed to the proper application of specific U.S. hardwoods and their
value. AHEC may introduce a new approach to show how to add "Thai" wood
style items to new construction using U.S. wood, through design
contests, workshop, and other similar activities. AHEC could advertise
U.S. hardwood applications in decoration and interior design in local
magazines to increase consumer awareness. In addition, AHEC may need to
focus on selected species of U.S. hardwoods, rather than all of them.
For example, U.S. oak wood has the highest strength for market promotion
due to its competitiveness in price and quality, and consistent
supplies.

# MARKET SEGMENT ANALYSIS

## Construction Sector

After rapid growth the past couple of years, the real estate industry in
Thailand may grow slightly slower in 2004 and 2005 in response to
discontinued governmental measures for stimulating housing demand,
increasing construction material prices, and likely higher interest
rates. The Thai economy in expected to grow 5.5-6.0 percent in 2004 and
2005, compared to 6.7 percent in 2003

Despite the likelihood of continued growth in the Thai economy, the
government is now concerned with an overheating real estate sector that
could lead back to another "bubble economy" as in late 1990's. A recent
survey indicated that the construction area permitted in the municipal
zones in Thailand increased by 34 percent from 13,891 thousand square
meters in 2002 to 18,571 thousand square meters in 2003. The
construction area permitted in the first 5 months of 2004 (Jan-May)
amounted 8,707 thousand square meters. In addition, the new housing in
Bangkok and vicinity was 50,594 units in 2003, up 49 percent from 34,035
units in 2002. This new housing in 2003 includes 30,088 units for
housing project, 1,908 units for apartment and condominium, and 18,598
units for self-built housing, respectively. The new housing within
Bangkok and its vicinity may reach 40-45,000 units in 2004.

As a result, the government has introduced the following measures: 1)
The Bank of Thailand (BOT) regulated in December 2003 that, for any
housing loan of more than 10 million baht (US\$ 250,000), all financial
institutions must limit their lending for each transaction to no more
than 70 percent of the actual house transaction price; 2) The BOT also
regulated that all financial institutions must report an approval of
project loan of 100 million baht (US\$ 2.5 million) or more to the BOT;
3) The government increased the tax on registration for housing
ownership, from 0.01 percent to 2 percent of assessed value.

Rising world prices for petroleum products and high demand for
construction materials also cause the construction costs to increase by
10-15 percent in 2004, so house prices increased. Meanwhile, many
economists believe that the domestic interest rate will increase in late
2004 in line with the global trend. Increased interest rates will
stimulate more savings and discourage credit use for buying houses.

Thai developers and consumers prefer masonry and other non-wood
materials in building house structures. While old-style wood-frame
houses (mostly seen in rural areas and constructed of tropical wood
products) are less popular, the new-look-style houses (such as log homes
or country houses) are a potential market for temperate hardwood imports
although the home types are still limited by their high construction
costs.

Flooring materials and architectural interiors are the best market
prospect for U.S. hardwoods in the construction segment due to an
expansion in new house starts, the popularity of the back-to-nature
concept, increasing numbers of expensive houses, the growing
house-contractor business, and relatively inexpensive materials from
U.S. hardwoods. However, a lack of regular education/training of Thai
contractors or architects on proper applications of U.S. hardwoods
limits this potential.

## Furniture & Interior Sector

Due to the high competition in overseas markets and decreased domestic
supplies of traditional hardwoods, the Thai furniture industry has
changed dramatically by sourcing raw material use to imported hardwoods,
rubber wood, medium density fiberboard (MDF), metal, rattan, etc.
Regarding wood furniture, rubber wood furniture currently accounts for
about 70 percent of total production, followed by hardwood furniture (15
percent) and panel furniture (15 percent). Thailand has also diversified
its furniture industry toward export-oriented manufacturing. About 70
percent of total wood furniture production is now for export, with the
balance going to domestic consumption.

The outlook of furniture exports in 2004 and 2005 remains bright in
response to: 1) the United States' recent imposition of anti-dumping
duties on Chinese furniture will result in its increased furniture
imports from other supplying countries, including Thailand; 2) improving
economic conditions of the U.S. and Japan; 3) an improvement in design
and quality of Thai furniture products. A higher number of completed
housing projects and an anticipated healthy growth in Thai tourism
industry will also benefit domestic sales of wooden furniture in 2004
and 2005.

Exports of wood products, including furniture, are expected to register
a 10-15 percent growth (in US dollar terms) in 2004. Exports of wood
furniture and parts in the first half of 2004 (Jan-Jun) increased by 13
percent from the same period in 2003, to US\$ 322.2 million. Meanwhile,
exports of other wood products (i.e., wood construction materials,
picture frames, tableware and kitchenware, carvings and ornaments) rose
16 percent to US\$ 407.5 million. The largest importers of Thai wood
products are the U.S. (about 38 percent), followed by Japan (29
percent), and EU countries (15 percent).

## Material Handling Industry

Wood pallets are normally used for packaging heavy or fragile products,
especially in the shipping industry for export. As most exported
products in Thailand are light-industry products and the use of
alternative plastic or foam material has increased in popularity, the
use of wood in the material handling industry has suffered. Due to
relatively high transportation costs, U.S. solid woods are not
competitive against domestic woods and those from Thailand's neighboring
countries in the material handling industry. Reflecting an estimated
increase in Thai exports of electronic and computer equipments, the
utilization of solid woods in packing materials should increase from an
estimated 110,000-120,000 cubic meters annually in 2004 and 2005, most
of which are rubber wood and plywood.

# ![](media/image2.wmf){width="5.632638888888889in" height="8.991666666666667in"} Table 1: Thailand's Forest Product Strategic Indicator Tables

#  ![](media/image3.wmf){width="5.989583333333333in" height="5.304166666666666in"} 

# Table 2: PS&D Table for Tropical Hardwood Logs

![](media/image4.wmf){width="5.997916666666667in"
height="2.1590277777777778in"}

# Table 3: PS&D Table for Temperate Hardwood Lumber

![](media/image5.wmf){width="5.997916666666667in" height="2.0125in"}

# Table 4: PS&D Table for Tropical Hardwood Lumber

![](media/image6.wmf){width="5.997916666666667in" height="2.0125in"}

# Table 5: PS&D Table for Hardwood Veneer

![](media/image7.wmf){width="5.997916666666667in" height="2.0125in"}

# Table 6: PS&D Table for Hardwood Plywood

![](media/image8.wmf){width="5.997916666666667in"
height="2.1590277777777778in"}

# Table 7: Thailand's Tropical Hardwood Log Imports in 2002 and 2003

![](media/image9.wmf){width="3.3666666666666667in"
height="3.7868055555555555in"}

# Table 8: Thailand's Temperate Hardwood Lumber Imports in 2002 and 2003

![](media/image10.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 9: Thailand's Tropical Hardwood Lumber Imports in 2002 and 2003

![](media/image11.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 10: Thailand's Hardwood Veneer Imports in 2002 and 2003

![](media/image12.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 11: Thailand's Hardwood Plywood Imports in 2002 and 2003

![](media/image13.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 12: Thailand's Tropical Hardwood Log Exports in 2002 and 2003

![](media/image14.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 13: Thailand's Tropical Hardwood Lumber Exports in 2002 and 2003

![](media/image15.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 14: Thailand's Hardwood Veneer Exports in 2002 and 2003

![](media/image16.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}

# Table 15: Thailand's Hardwood Plywood Exports in 2002 and 2003

![](media/image17.wmf){width="3.3666666666666667in"
height="3.9583333333333335in"}End of Report