Insights
How This Lumber Company Stayed Nimble During the Trade War
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Oak Valley Hardwoods stayed ahead by changing tactics and focusing on the domestic market.
Jimmy Lee got started in the lumber business simply as a way to earn a living. “When we (Lee and his wife) were in China, we sold lumber for commission to survive,” he shares. However, Lee realized that most of the lumber coming into China was from the United States and decided to head directly to the source.
Lee moved to the U.S. in the end of 2003, and his wife followed suit in early 2004. “We saw the opportunity here: We could buy lumber and ship to China.” They honed their expertise in the lumber trading business for several years. Then in the fall of 2009, they decided to take the next step: purchasing their first sawmill and founding Oak Valley Hardwoods in North Carolina. Now, 10 years later, Lee owns a total of 10 lumber mills in North Carolina, Virginia and Tennessee.
Shifting from overseas markets to domestic
Initially, Oak Valley’s focus was entirely on the Chinese market. From 2010 to 2012, Lee states that 100 percent of their lumber was shipped to China. But as the business grew, Lee started looking into other markets, such as Vietnam and the States. Today, he says 50 percent of their business is with the U.S., 20 percent is with Vietnam, and only about 15 percent is with China.
One reason for the dramatic shift in target markets was because he sensed that U.S.-China trade relations were getting tense. “I knew the trade war was going to happen,” Lee says. “We thought about this a couple years ago.” He says that producers had to lower their prices in order to counteract the tariffs, which would make a severe dent in their profits.
Because of his foresight, Lee was able to shift tactics fairly early on and avoided the worst of the tariffs. He started looking into what aspects of his business model he could easily change; anything that he couldn’t change, he decided to move into new markets.
[Also Read: Now What? Strategies for Navigating US-China Tariffs for Businesses]
“If it’s something we can change, we change immediately. If it’s something we can’t change, then we accept this. We think of a way to handle it,” he says simply. “We have other markets.”
Instead, Lee decided to grow his domestic business. Rhonda Lee, senior vice president of commercial and industrial banking at East West Bank, says she was surprised by how quickly Lee managed to shift gears.
“Starting from last year, he started selling more of his products to the domestic market,” she says. She attributes his success to Lee’s extensive experience and connections in the lumber industry. “He’s been in the business for a very long time, and he’s very locally involved,” she adds.
Lee firmly believes that, despite news reports, the U.S.-China trade war will take years to resolve. In order to combat the loss in business, he is focusing on diversifying his product lines to better cater to the domestic market. Recently, his focus has been on manufacturing plywood, which Lee says there is high demand for in the States. To make sure Oak Valley was able to support the demand and grow the business, he used a revolving line of credit from East West Bank, combined with his own funds, to purchase the necessary equipment and put together a plywood mill.
“Jimmy knows how to be flexible,” Rhonda Lee says.
How did Lee manage to pivot so quickly? Simply by finding new salespeople, he says. “If we need domestic sales, then I go to someone who is good at that and say, ‘Can you work for me?’” Lee states matter-of-factly. “If they ask for $100,000—that’s fine. If you can bring me $200,000 profit, then I’ll share with you.”
Lifting up depressed areas
Lee’s business model is part economics and part humanitarian. He buys struggling sawmills in depressed areas and turns them around, often bringing valuable jobs to areas that need them the most.
“I’ve gotten so much help from families, neighbors, communities, schools, friends, so I could pave my way to success. Now I want to give the favor back to the people I meet, to the societies I am in.”
“He takes it over, updates the equipment, and has different shifts of labor to increase production,” says Rhonda Lee. “His biggest sawmill, when he purchased that, there was only one shift. He actually changed it to two shifts, so that there’s a daytime shift and a nighttime shift, so he actually needed more labor from the area.”
For Jimmy Lee, he believes it is his duty to provide job opportunities to people he feels have been neglected. “I was brought up in a poor family, so I know how hard it is to rise up from poverty, hunger, poor education, insufficient resources,” he shares. “I’ve gotten so much help from families, neighbors, communities, schools, friends, so I could pave my way to success. Now I want to give the favor back to the people I meet, to the societies I am in. I feel good when I help—and they’re helping the company to grow, by turn.”
Rhonda Lee adds that he makes it a point to treat his workers well. “He pays them above the market rate because he wants to make sure the turnover rate won’t be too high,” she says. “He has really good workers comp, too. He pays the employees on time, and the insurance—like medical insurance—is well covered.”
Lee adds, “If we take care of those people, then the world will take care of us. The rich people will have a good life—but to make the poor people survive, have opportunity, is equally important.”