Structural Changes in Lumber Distribution System and Lumber Price : A Case Study of the Price Decline in the mid-90's

Abstract

This paper outlines the recent lumber price decline, using data from governmental statistics and business data of a lumber auction market in Aichi Prefecture. Major causes of the price decline are analyzed, based on literatures and interviews with precut mills, sawmills and a laminated wood factory. Lumber prices, especially those of Hinoki pillars, Hinoki sills, Sugi pillars, and Douglas fir beams, have declined since the end of 1996. This was caused not only by decreasing demand of lumber for wooden house construction, but also by changes in wood demand for house construction and lumber distribution system. As for the changes in wood demand, increasing demand for laminated wood and decreasing demand for appearance lumber decreased the demand for Hinoki and Sugi pillars and Hinoki sills. Concerning the change in lumber distribution system, simplified distribution channel through precut mills has newly developed and caused different lumber prices from those determined at lumber auction markets. Many large-scale precut mills purchase structural timbers, such as Hinoki and Sugi pillars, Hinoki sills, Douglas fir beams, directly from sawmills at higher prices than those from lumber auction markets or wholesalers, because direct stocking requires no commission fee. These new and higher prices have influenced log prices in general, which are too high, in comparison with structural lumber prices at lumber auction markets or wholesalers that are reflected in governmental statistics. It results in too high log prices, which even efficient domestic sawmills with high productivity cannot bear without direct distribution channel to precut mills.