The next time you are looking for a woodchip, look no further than the lumberyard.
A new report from the Center for Economic and Policy Research suggests that over time, the cost of woodchip manufacturing has dropped by as much as 30 percent, but not before the company has lost its ability to supply its competitors with the components needed to make them.
“The problem with woodchip makers is that they can’t sell to a wide variety of buyers,” said Andrew McAfee, director of the center.
“The only way to compete is to find new markets, and they’re losing money on that.
And that’s a real problem.”
The report, titled “What’s Behind the Loss of Woodchip Manufacturing?” says that while the company may have lost as much or more than 30 percent of its market share, it has been losing that market to competitors that are already on the market.
“The competition is coming from China,” said McAfee.
“If you look at the demand for wood chips, there are very few woodchip manufacturers that are able to sell to the same kind of customers as those in China.”
While the report acknowledges that competition is a big factor, it also finds that the lack of competition has been a problem for some companies.
The report notes that the reason woodchip producers have struggled in the past is that the company simply isn’t able to compete with the likes of Amazon, Apple, and other companies that have built a strong market for their products.
“They don’t have the resources, the technology, the capital,” said Matthew Koehler, a senior vice president at the Woodchip Manufacturers Association.
“They can’t compete.”
“It’s a big problem for them,” said Koehl, “because they have a lot of competitors that can make better products.”
McAfee said that the real culprit is the way that Woodchippers are protected.
“Woodchips are made from wood chips,” he said.
“That means the chips are covered with a protective coating, and if you get a chip on a board, that chip is protected.”
The issue is not only a problem in the woodchip business, it is a problem on the global scale, too.
The Woodchipped Industries Association estimates that China’s woodchip industry lost about 2 percent of the value of its output in the last five years.
The United States lost about 3 percent.
“It means we have less than half of what we used to,” said Steve Mancuso, president of the United States Woodchippers Association.
The Woodchipping Manufacturers Union estimates that there are over 4,000 woodchip mills worldwide, and that the United Kingdom has about 15,000.
“I don’t think it’s a very good picture,” said Mancso.
“There are a lot more woodchip companies that are not in China, and it’s not just China.
It’s the rest of the world.
If we can’t make a dent in the China market, we’re not going to have any success in the rest.”
According to McAfee’s report, over the past decade, the price of a single woodchip has dropped from $7.50 to $3.
The average price has fallen from $2.15 to $2, according to the report.
That has had an impact on the company’s bottom line.
“When we started, we made one product, but the market was not ready for it,” said Brian Jorgensen, the vice president of marketing and sales for Woodchipes.
“It was very expensive.
We made one board, and we sold it for $30.”
Now, Jorgens said, the company can make more boards, but costs have skyrocketed.
“We need to lower the cost, because the board we make today costs less than it used to.”