The South Korean solid wood products market

Construction Review, Summer, 1993

Economic Development of South Korea

In the four decades since the end of the Korean conflict, South Korea has evolved from a war-torn, desperately poor agricultural nation into a major economic power. Under strong centralized government leadership, the country's economic base has been shifted to manufacturing, and it's gross domestic product (GDP) has grown at or near double digit rates for most of the years from 1961 to the present. While it is not anticipated that past economic growth will be matched over the next decade, expectations are that a healthy average annual growth of 6 or 7 percent will be attained. Over the years, South Korea has become increasingly trade oriented, with imports and exports increasing rapidly. At present, the nation has a small but increasingly worrisome negative trade balance.

In recent years, there has been a quickening trend toward consumerism and toward more rapid increases in wages, as South Koreans begin to enjoy the fruits of their labors. This process of economic maturing has been marked by internally generated inflation, a first for South Korea. In contrast, past inflationary periods were caused by external forces related to escalating oil prices. A result of these recent internal trends has been a loss of market share in labor intensive industries (footwear and textiles), while other sectors (electronics and autos) have grown.

The Republic of Korea (R.O.K.) Government, in response to a well-documented need for additional housing, has announced a major initiative. The goal is to add 500,000 housing units annually during 1989-2000. For the first years of the period housing starts surpassed that total. This assures a growing market for solid wood products.

Government and industry relationships are far different in South Korea than in the United States. Ambitious government-sponsored 5-year programs have generally been attained, frequently through the imposition of measures that U.S. industry might consider extreme, such as targeting certain industries for development and channeling funds in that direction, or encouraging high savings rates by establishing artificially high interest rates.

One result of these governmental actions has been the creation of enormous and very powerful multi-industrial conglomerates called chaebols that are responsible for nearly all of South Korea's trade. A recent development has been an attempt to curb somewhat the power of these conglomerates by supporting the development of small and midsized businesses. This is, in part, a reflection of the recent trend toward democratization.

South Korea's Forest Resources and

Wood Products Industries

South Korea has much of the agricultural land of the Korean peninsula, but very little of the natural resources. During the Japanese occupation and the Korean conflict, much of South Korea's forest land was destroyed. Over the last 30 years or so, a vigorous reforestation program has restored much of the landscape. While about two-thirds of the land is now tree covered, the amount of forested land per capita is relatively low, because most of the timber is young and suitable only for mining supports or wood pulp. In recent years, total harvest has accounted for only about 15 percent of total consumption.

With the growth of South Korea's concrete and steel industries, wood has become less used as a building material. A partially offsetting trend has been the development of several wood-based industries that have emerged primarily for their export potential. The first of these industries was the plywood industry.

In the 1960s, the South Korean plywood industry expanded rapidly and its products, mostly export items, were a significant part of South Korea's trade. During the 1980s, increased competition from Indonesia caused a drastic reduction in the plywood industry. Today, most wood production is geared for lumber end uses rather than for plywood. The wood export industries which are flourishing today are furniture and musical instruments, rather than plywood.

South Korea has burgeoning medium density fiberboard (MDF) and particleboard industries. At present, there is insufficient production capacity for particleboard to satisfy domestic needs. Additional capacity is being added. In recent years, U.S. exports of MDF and plywood to South Korea have increased tenfold, although they have increased from a small base. Major end markets are furniture and construction.

South Korean Markets for Wood

Although wood use has declined sharply over the past 30 years in exterior building construction, representing only about 1 percent of the materials currently used (masonry, steel, and concrete are the principal materials consumed), the overall level of South Korean wood consumption is at its highest level since before World War II.

Recent South Korean wood consumption growth has been spurred by increased use in interior construction finishing, temporary supports for public and private sector construction and civil works projects, furniture and musical instruments, packaging, and shipbuilding; as well as raw materials for the fast-growing domestic paper and allied products industry. With the current housing shortage, and recent quality problems with concrete, the government has shown an interest in increasing the amount of structural lumber used in housing construction.