As expected, on April 30, 2013, the Department of Commerce announced its decision to continue to artificially raise the prices of Chinese plywood, essentially leveling the playing field between the higher quality domestic plywood and the imported plywood from China. With the U.S. manufacturers’ track record of raising their own prices (as discussed in Part 1), the situation seemed impossible.
Why Domestic Plywood Manufacturers Didn’t Have To Raise Their Prices
Those in the know within the lumber industry realize that even if Chinese hardwood plywood is priced lower than its domestic counterpart, its lower quality makes it less desirable to many consumers. When the Chinese plywood was lower priced, though, it still held some attraction. When due to the imposed duty, the Chinese plywood pricing rose closer to U.S. plywood prices, the domestic stuff stood to sell even better than it usually had. (After all, who wants to pay almost the same price for a lower quality product?) By raising the prices on U.S. plywood, the domestic manufacturers essentially returned to the same situation they were in before the countervailing duty was imposed.
What Domestic Plywood Manufacturers Feared
Domestic plywood manufacturers no doubt felt strain from the increased demand on domestic plywood, making keeping up with production difficult. If the anti-dumping margin further affected import sales, the danger of domestic shortages would be very real. Because of that potential scenario, there may have been a legitimate reason for domestic manufacturers’ raising their prices. Even still, the supposed rise in raw material costs would not stand up. Either way, the situation was bound to lead to more significant plywood price increases. With the already confusing plywood grading and pricing out there, such a scenario would be disastrous for some of our customers.
How J. Gibson McIlvain Responded
As we watched the situation describe above unfold, we responded by increasing our plywood inventory, stockpiling as much as possible before the prices rose again. We knew that prices would increase one way or the other, and we hoped to help our customers weather that storm. In such situations, we encourage you to take similar steps, adding to each regular order in order to compile a reserve before price increases occur. While we understand that your extra purchases mean more business for us, the strategy still makes sense and will save you money in the long run.
One of the many ways we serve our customers is through education. We truly want our customers to understand lumber pricing, grading, and other issues. We truly have nothing to hide, and we believe that the more informed you are, the more likely you will be to keep coming back to us for all your lumber needs.