National Hardwood Magazine - January 2021

If History is an Indicator, the Hardwood
Market Will Rise to Meet the Demand
By Sue Putnam
Hardwood Market Report Editor David Caldwell recently
presented the Hardwood Market Update during a complimentary
webinar hosted by the Hardwood Manufacturers
Association. To follow are excerpts of Caldwell’s presentation.
How 2020 Began...
2020 started out with such great promise. On January
15th, China rolled back tariffs on U.S. produced Hardwood
lumber. Hardwood lumber sales to China increased in January
to the highest monthly level since May of 2019.
Domestic business was clipping along at a nice pace too,
led by the longest housing boom since the U.S. Census began
tracking housing data.
And, industrial markets were performing well.
In January, Eastern U.S. sawmill production recorded the
highest level of output since October of 2019 and remains
the monthly highest rate this year.
COVID-19 changed all of that. As we know, the virus
started in China, and that country’s economy was hit first
and hit hard.
In February and March
of 2020, exports to China
fell to the lowest pace
since December of 2011.
In fact, all countries have
experienced a downturn
in economic activity from
the pandemic.
The result of 2020’s
turbulence has been dramatic.
GDP hit an all-time
low in the second quarter
of 2020 at -31.4%.
The Hardwood industry
has not been spared.
David Caldwell
Through the first half of the year, industrial markets fell
1.1BBF; exports were off 159MMBF, and domestic grade
lumber usage tumbled 723MMBF. Total consumption is
down almost 2.0BBF in 2020 from 2019.
The main takeaway here is that industrial product consumption
grew as a percentage of the total in 2020: 57.6%
in 2019 to 58.9% in 2020, which means grade lumber consumption
declined as a percentage of total consumption
from 42.4% in 2019 to 41.1% in 2020.
Production follows demand. In the first quarter of 2020,
Billion Board Feet
3.5
3.0
2.5
2.0
1.5
Hardwood Lumber Consumption by the US Furniture Industry
© 2020 HMR
sawmill output held up well, but as demand for lumber fell,
so did production, to the tune of 35%. We are on pace to
produce 1.8BBF less Hardwood material in 2020 than the
previous year. That is 2020 in a nutshell.
But, even more concerning is the Hardwood industry is
experiencing a longer-term trend in contracting demand
and production. •••
In this time series, consumption peaked
in 1997 at 3.0 billion board feet (BBF).
The 2020 annualized mid-year estimate
is .331 BBF. That is a loss of 2.669 BBF
of domestic grade lumber usage.
1.0
2019 Hardwood Consumption
2020 Hardwood Consumption
0.5
*Mid-year estimate
57.6%
0.0
1991 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *2020
42.4%
© 2020 HMR
Grade
Pallet
Lumber,
Cants,
Ties,
Board
Industrial Products: 4.786BBF
Grade Lumber: 3.518BBF
Total: 8.304BBF
41.1%
Grade
Lumber
Pallet
Lumber,
Cants,
Ties,
Board
Road/Mat
58.9%
Industrial Products: 3.709BBF
Grade Lumber: 2.588BBF
Total: 6.297BBF
Long -Term Adjustments to the U.S. Furniture Industry
The U.S. furniture industry is the most notable example of
the longer-term contraction of grade Hardwood lumber usage.
It is estimated that 70% of furniture manufacturing has
moved out of the U.S.
In 1999, the U.S. furniture industry used 3.0BBF of Hardwood
lumber. In 2020, consumption was 331MMBF. That is
a loss of almost 2.7BBF of grade lumber consumption.
Lumber prices have been affected from offshoring fur-
niture manufacturing. Green 4/4 No. 1 Common Red Oak
prices were fairly steady between 1992 and 2001, following
U.S. housing market trends. As demand from the U.S. furniture
industry decreased, lumber manufacturers were more
reliant on foreign business or non-traditional markets, such
as the solid wood flooring industry as outlets for 4/4 No. 1
Common Red Oak. The rapid rate of price change makes
it difficult for primary and secondary manufacturers, as well
as yards to plan for the future.
Please turn the page
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