Forest Products: A Cluster That's Working

Maureen Taylor

The forest products industry is South Carolina's third-largest manufacturing sector. Now that sector is working on competing worldwide as well as at home.

Maureen Taylor is Coordinator of Education and Communications for the S.C. Export Consortium. She can be reached at 803-356-8964.

The good news is that South Carolina's forest products are growing at a pace that far exceeds the national average.

For decades, forest products have been a bedrock of South Carolina’s manufacturing economy and, like many manufacturing sectors, the industry is looking for new ways to compete in today’s global economy.

To find ways to increase the competitiveness of the state’s third- largest manufacturing sector, the South Carolina Forestry Commission turned to the South Carolina Export Consortium to produce a benchmark study on exports. And what the research found is that the state is not only bucking U.S. trends, it is also exceeding positive growth in many markets. Although compared nationally South Carolina is a relatively small exporter of forest products, its exports have been growing steadily and in many areas significantly.

Based at the University of South Carolina’s Moore School of Business, the South Carolina Export Consortium examined primary and secondary forest product exports (excluding pulp and paper) for the period 1999-2003. The resulting report, South Carolina Forest Products: An Export Overview, included an assessment of every forest product industrial code, using resources provided by Global Trade Information Service’s World Trade Atlas. Forest products were identified as one of South Carolina’s important economic clusters in a 2003 study by the Monitor Group led by Harvard professor Michael Porter. So the Export Consortium’s report is timely and provides the state with a road map on developing export opportunities as it proceeds with its S.C. Competitiveness Initiative, an effort to further develop economic clusters in the state.

“It is definitely a world economy and companies can’t rule out overseas markets,” said Randy Hunt of Cameron Lumber, whose request for updated export statistics fueled the report. Cameron Lumber is one of the largest exporters of yellow pine in the state and currently sells to North Africa, Spain, England, Italy, Greece, and the Canary Islands.

The detailed research revealed some surprising facts that bolster South Carolina’s position as a forest products leader. The information is also particularly useful for small to medium-sized companies that are looking for new opportunities to compete.

Courtesy South Carolina Forestry Commission

Foreign Markets

The concept of clustering is not new to our industry because we have long practiced it.

One of the most significant areas of growth for the state has been China. Prior to 1999, China was not even on the radar for South Carolina forest product exports. However, from 1999 to 2003 export sales grew from just over $200,000 to almost $7 million—a 3,000 percent increase—making China the state’s third-largest market. South Carolina is now the ninth-largest supplier of U.S. lumber to the region, with sales of $5.6 million in 2003.

Almost half of South Carolina’s top 15 markets are in Asia, Japan among them. Overall, U.S. forest product exports to Japan dropped 52 percent for the report period, but South Carolina saw an increase of 180 percent. Builders’ carpentry products went from virtually zero in 1999 to more than $5 million in 2003. And packing materials followed the trend, growing more than 4,000 percent for the period. Dominating this area were boxes, crates, and cases.

The United States’ NAFTA partners also saw an increase in exports from South Carolina. The state’s lumber exports to Canada grew by 126 percent during the report period as compared to 10 percent for the United States. Veneer sheets were another top seller. In Mexico, the Palmetto State ranks third in fiberboard sales.

“The good news is that South Carolina’s forest products exports are growing at a pace that far exceeds the national average,” said Greg Hilton, projects coordinator for the Export Consortium. Hilton, along with Tim Adams, resource development forester with the S.C. Forestry Commission, presented the consortium’s report at the Governor’s Forestry Summit late last year. Lower production costs, higher international visibility, and the Port of Charleston have all contributed to this trend, according to Hilton.

Going Forward

This is the kind of meaty information that industry officials can use going forward as part of the state’s focus on developing clusters and being competitive in the global economy. The forestry industry is trying to define its role in the South Carolina Competitiveness Initiative. The initiative is looking at ways to raise the state’s per capita income, and a principal economic development strategy is to focus on business and industry clusters where the state can excel.

“We believe the state must create a competitive environment that enables timber companies and forest owners to compete domestically as well as in the global market,” said Bob Scott, president of the South Carolina Forestry Association (SCFA). The association is using the cluster model to identify problems and opportunities within the forest products industry, he said.

“The concept of clustering is not new to our industry because we have long practiced it,” Scott said. “For example, tree farmers grow timber and loggers harvest and transport it to mills that produce primary and secondary products.

“This supply chain is supported by a variety of equipment and service organizations, including Clemson University and the state Forestry Commission,” he said.

The industry must concentrate on raising awareness of the importance of forest products to the state’s economy, and the export overview will help, said Adams. “The report really can help smaller companies capitalize on a declining dollar by increasing exports. This is just the tip of the iceberg.”

A copy of the Export Consortium’s report can be found on the South Carolina Forestry Commission’s Web site at http://www.state.sc.us/forest/fprodex.pdf. o