Panels & Furniture Asia September/October 2020

20 | MARKET REPORT
September / October 2020, Issue 5 | Panels & Furniture Asia
US HARDWOOD SUPPLIES:
ADAPTING TO A NEW NORM
By: Judd Johnson Managing Editor, Hardwood Market Report
If it is agreed that change is persistent, then it is agreed there
is always a new norm. On rare occasions, change can be lifealtering
and even historic. COVID-19 created such change.
US hardwood sawmill production dropped to record low levels
in the second quarter of 2020 as a direct result of market
impacts from COVID-19. Unlike effects from the China/US trade
war or cyclical events that disrupt business within individual
market sectors, government regulations aimed at mitigating
the spread of COVID-19 affected the entire marketplace for US
hardwood lumber.
The impacts were as abrupt and comprehensive as those from
a severe economic downturn. At only five months into the
pandemic, contraction in US hardwood sawmill production was
comparable to that during the early part of the Great Recession.
Figure 1 shows the volume of annual production from 2006
through year to date 2020 (July) and tracks the percentage
change in volume output from the preceding year. The effects
from this pandemic on US hardwood lumber production and
supplies are undeniable (Figure 2).
Figure 2
2) US domestic markets for grade lumber, including furniture,
cabinets, moulding, millwork and flooring
3) Exports of grade lumber, with China having a major impact
both directly as an importer and indirectly by outsourcing
wood product manufacturing throughout South East Asia
The supply situation is a matter of fact, but the real point of
concern is what the next new norm will be. The answer hinges
on the market’s performance, meaning if there is near term
recovery in:
1) US domestic markets for industrial lumber and timber, which
account for approximately 60% of the entire US hardwood
marketplace
There must be an adequate blend of demand contribution
from the industrial lumber and grade lumber sectors to
stimulate a broad increase in sawmill production. If this occurs,
US hardwood sawmill production should respond quickly.
Even though some sawmills and lumber yards have closed,
substantial production and processing capacity remain in place.
Otherwise, a significant imbalance in demand between industrial
lumber and grade lumber would cause sawmill output to stall
at a low level.
Figure 1
In reality, the marketplace is already making progress toward
recovery. The US industrial lumber market sectors are strongly
influenced by economic activity. The economy began rebounding
in May after COVID-19 mitigation restrictions moved into Phase
2 protocol. Additionally, record high US softwood prices have
helped propel more hardwood volume into the industrial sectors.
The US housing industry is energised. By the end of July, yearto-date
construction of new single-family housing units had
recovered from the March through May deficits; it is on par
with the same period last year. Furthermore, projections on
new single-family housing construction for 2020 are set above
2019 and anticipate additional growth next year. Together with
residential refurbishing construction, the domestic US housing