Bamboo the business

What are the key reasons behind the sharp increase in demand in the last few years?

For bamboo trees, the low cost, strength and beauty of bamboo in combination with consumer preferences for renewable resources have led to the increased use of bamboo, particularly as a hardwood substitute. Key areas of growth include flooring, panels and non-traditional furniture. We believe these products, together with pulp and paper and textiles, represent the largest growth opportunities for bamboo. In addition, the increasingly restricted supply of certified hardwood supply creates a positive market outlook for bamboo.

For bamboo shoots, the wealth effect in combination with China’s improved infrastructure have led to broader and deeper distribution and increased consumption of bamboo shoots, particularly in areas where they have traditionally not been available.

What are the key areas of use for bamboo and which are the key distribution channels?

For bamboo trees, the key areas of use are construction, furniture, pulp, paper, flooring, textile and charcoal. We either sell the trees directly to the end-users or through middle-men. Fresh bamboo shoots (winter shoots, spring shoots and dried shoots) are mainly sold through agriculture wholesale markets and processed bamboo shoots are sold to industrial buyers and supermarkets in China or exported to Japan.

How are prices set, and what are the payment terms?

Prices for bamboo products have been relatively stable with an upward bias. Particularly bamboo trees have, over the last 10 years, seen a signficiant price increase. Generally, prices fluctuate within a 10% range year-on-year. As a result of local demand and supply dynamics and the quality of the locally grown bamboo shoots and trees, prices can vary from region to region. Other factors influencing the price are quantity, customer relationships, payment terms and the potential of the market segment the customer represents.

Most of our transactions are relatively small spot transactions. However, for some of our larger customers, such as Shaowu Zhongzhu Pulp and Paper and our Japanese export customers, we have entered longer supply contracts with credit terms.

How vulnerable are your margins to increased competition?

We have created significant intangible barriers of entry which makes it more difficult for any competitor to seriously challenge our position. The key entry barriers are in the areas of fund raising, economies of scale, distribution network and relationships, industry knowledge and reputation. Therefore, we believe that our high margins can be sustained by continuing to grow our company and execute our integrated business strategy.

Legals | © 2015 Asian Bamboo AG

- deal6 - brand4