More on Cedar Balls

Remember that about two months ago I put up a post entitled Cedar Balls–”Grown in USA, Made in China”?. It created a fair bit of discussion (see, for example, “Wood to China: Cedar balls and rum” ).

I recently had an extended phone conversation with  Howard Goldman, who owned and ran Cedar Fresh from 2003 until recently, when he sold it (yes, he’s looking for a new business opportunity). Goldman confirmed that the company does ship cedar logs to china in containers where they are made into cedar balls, cedar hangers, and the like. “We used to do all our production in the U.S.”, says Goldman, “but we couldn’t be competitive.” It’s much less expensive to manufacture in China, he says, even with shipping both ways.

I asked Goldman to estimate the difference between producing in China and the U.S. He replied that it varied significantly between items, but cedar hangers tended to be 20-30% less expensive when made in China, including shipping and customs duty.

Goldman pointed out that Cedar Fresh is one of the few (“if not the only”) cedar storage accessories companies that still does manufacturing here in the U.S., with his primary remaining U.S. facility being an adult handicapped day care center in rural Arkansas.

Finally I asked if he could reduce the cost of producing in the U.S. by using machinery to do the most labor intensive parts of the production process (such as packaging). Goldman noted that a lot of the machines he would buy are actually made in China, and a lot cheaper there. So China may be cheaper than the U.S. both for labor and for capital investment.

Comments

  1. spencerengland says:

    So what would be his cost if he bought the cheaper machinery in China and used it to manufacture in the US.

    Presumably, even using the latest and cheapest machinery it would still be cheaper to manufacture in china?

    • Mike Mandel says:

      He was saying that it was cheaper to buy the machinery for use in China, than to buy similar machinery for use in the U.S.

  2. It might be interesting to know who bought the company and what plans they have. Apparently someone sees some value in the enterprise. Is it just shipping raw materials to China or do they have an alternative take on how one might add value via domestic manufacturing?

  3. Automation equipment is bound to be high in labor content, and it also often has a high amount of those raw materials which the WTO recently showed to be overpriced due to certain element price manipulation by China, not to mention punitive rates for shipping heavy equipment in competition with vast amounts of consumer goods coming from China — that’s 3 strikes against the U.S. as an equipment source or destination. There could also easily be differences in the factory real estate stories.

    The shipping of logs from the U.S. to China could very well be at a deep discount, because those containers otherwise typically travel empty. Anyway, wood is not heavy relative to many materials, which means that shipping it in either direction would not be particularly punitive.

    It seems that there’s little chance of any U.S. domestic winner in this case, even if the WTO action corrects some raw material price differentials.

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