1. Opportunities and Pitfalls in International Trade: The View from 4,000 Feet Dan Meyer Northern Regional Editor

2. Opportunities and Pitfalls in Trade with CHINA: The View from 4,000 Feet Dan Meyer Northern Regional Editor

3. Overview Observations about U.S. Log and Lumber Trade with China Pitfalls Opportunities to Avoid Pitfalls Tracking Alder Pricing

4. Observation: Trends in U.S. Log and Lumber Exports to China

5. Alder LUMBER Exports to China Up

7. Alder LOG Exports Down

8. Observation: Chinese Lumber Purchases Cyclical in Nature

9. Chinese Buying Cyclical

10. Chinese Buying Highly Cyclical

14. Observation: Chinese Buying Strongly Influenced by Price

15. China’s Lumber Price-Sensitivity

17. Less Price-Sensitive to Logs?

18. Perhaps More So This Year?

19. Observation: Chinese Appear to React to “Threshold” Prices

20. Threshold Prices

22. Observation: Log Exports Generally Growing Faster Than Lumber

23. Log & Lumber Exports Converging

26. Observation: Rising Export Volumes ≠ Rising Export Values

27. Log vs. Lumber Export Values

32. Alder LOG Export prices track inflation

33. Alder LUMBER Export prices not keeping up with inflation

34. Pitfalls in Trade with China

35. Chinese are price-driven Chinese are less loyal to N.A. species than other world buyers. Difficult to remain low-cost leader. There will always be a new supplier on the block with a cheaper alternative

36. Substitution Alder remains a relatively small player in most markets. A small volume of a substitute could have large impacts in domestic and international Alder markets. The higher Alder prices become, the more vulnerable Alder is to substitution

37. Cyclical buying patterns Can you seasonally adjust your production? Will your domestic and other export customers accept seasonal supply interruptions?

38. Watch for shift to logs No reason to believe Chinese won’t continue to work back down the supply chain, eventually owning U.S. sawmills or importing logs for sawing in China. Gives them more control over supply & pricing

39. Opportunities to Avoid Pitfalls in Trade with China

40. Control log costs Don’t get caught driving log prices so high you cannot absorb a little depression in lumber prices Lumber prices will inevitably fall faster than log prices.

41. Resist raising lumber prices The higher Alder prices become, the more quickly will come substitutes. Higher prices benefit you in the short- term but hurt down the road Rarely have we seen a species maintain high prices for as long as Hard Maple

42. Diversify If you cannot diversify your species mix, diversify your markets Consider limiting your allocation to China, even if it means forgoing short- term profits

43. Diversify (cont.) Do not put more into China than you could quickly redirect if China were to shut off tomorrow.

44. Pay attention to domestic customers If supply issues alienate domestic consumers, they’ll turn to other species Healthy domestic user-base critical to stabilize volatile export markets

45. Standard grades? Does it make long-term sense to be the only North American hardwood graded so differently from all the rest? Does it make Alder more difficult for buyers around the world to work with, adding costs?

46. Act, don’t be forced to react Stay out of reactionary, defensive position Extremely difficult to get back on offense when warehouses are full and cash reserves are tied up in logs that are too expensive to saw. Pay attention to market signals

47. Should We Track Alder Prices in the Weekly Hardwood Review?

48. Benefits of a Pricing Guide Easier to spot market changes Historic pricing—trend analysis Weekly benchmark of industry prices Can help you justify sales prices to customers

49. Which Grades? Whose Prices? Two markets? Do we track one or both? Hurdles to Alder Tracking

50. NHLAProprietaryProprietary Sel&BtrSuperiorsSuperior No. 1 ShopCust. Jacket BoardCabinet No. 2 ShopCabinetCust. Shop No. 3 ShopCust. ShopA-Strip Frame Grade Jacket BoardB-Strip Com/#2C-Strip Premium FrameRip Standard FrameSkip (x3) Econo/#3Stain #3 Shop Which Grades?

51. Whose Prices? 70% of production from one company How many companies make up balance? How many will participate? Do we ignore or include Northwest Hardwoods? Will they participate?

52. Recommended Actions Core group of supporters contact me. We’ll work with you to iron out details. IF we determine we can work out grading and production issues, AND there are enough companies willing to share info (prices and comments), we’ll proceed.

53. Alder Comments With or without Alder price tracking, we will still welcome your comments about Alder markets for inclusion in our Weekly Hardwood Review and Hardwood Review Global publications.

54. THANK YOU Dan Meyer Northern Regional Editor