National Hardwood Magazine - January 2021

HARDWOOD MARKET UPDATE Continued
Moulding, Millwork, Cabinetry Trends
From 1997 through 2003, the moulding/millwork industry
consumed 1.3BBF of Hardwood lumber. During the current
trend to painted mouldings and millwork, non-wood products,
softwoods, and imported species have taken market
share from U.S. Hardwoods. Through the first half of 2020,
Hardwood lumber consumption by the moulding and millwork
industry was 386MMBF, much of which was Poplar.
That is a loss of almost 1BBF of domestic Hardwood consumption
from the peak. It seems to me that if we were promoting
Hardwood show woods, we could increase higher
value Hardwood species usage significantly.
Consumption by the cabinet industry peaked in 2005 at
1.6BBF. Granted that was at the height of the U.S. housing
market. The 2020 annual estimate is 270MMBF. The sharp
drop in Hardwood lumber usage by the cabinet industry in
2020 is heavily tied to COVID-19 shutdowns.
But, the longer-term trend has more to do with style shift
and cabinet imports.
Over the past few years, there has been a shift to painted
cabinets – light colored cabinets, light walls, and dark
floors. This consumer preference shift is problematic for
the Hardwood industry. You can put almost anything under
paint. There is more plywood, MDF, and HDF being used in
cabinet manufacturing. And, the painted cabinet trend has
opened the door for more imported species and imported
cabinets.
In the late 1990s, cabinet imports were low, with Oak cabinets
favored over other species. Even during the U.S. housing
boom in the early 2000s, imports were not extremely
high. But, as show woods became less popular and painted
cabinets more popular, cabinet imports spiked from 2014
through 2019. In 2018, imports were over 1.8 billion dollars.
But wood kitchen cabinet imports declined in 2020. Data
through July shows total imports were off 21.9% from 2019
to just shy of 1.1 billion dollars.
Obviously weaker demand the first half of the year was
part of the reason for the decrease in imported cabinets in
2020, but the U.S. Dept. of Commerce imposed duties on
Chinese cabinets, which stalled imports from China.
In 2018, China accounted for over 70% of cabinet imports.
Through July of 2020, China shipped only 4.7% of
cabinet imports.
Opportunity?
Is this an opportunity for U.S. manufacturers to regain lost
market share from imported cabinets? I think so. But, the
window of opportunity is narrow. Other countries, such as
Vietnam, Malaysia, Indonesia, and Mexico are producing
more cabinets to fill the void left by the decline in Chinese
cabinet imports.
And, those countries are not necessarily using U.S. produced
Hardwood lumber.
What about Solid Hardwood Flooring?
HMR’s flooring consumption numbers include residential
solid wood flooring, truck trailer flooring, and sports flooring.
The truck trailer flooring industry uses about 22.4% of Hardwood
lumber consumed by all flooring manufacturers. This
industry experienced a sharp downturn in business the second
half of 2019 compared to the first half and is beginning
to see some improvement in business. In fact, this industry
is looking for a decent upturn in 2021.
The sports flooring industry is the smallest segment at
about 3.2% of total Hardwood lumber consumption, and
business for sports flooring manufacturers has held up better
than the other two sectors. This sector is wrapping up
projects that were planned a year or longer ago. New orders
are slower.
The residential solid wood flooring sector is the largest
consuming flooring market at about 74.4%.
Flooring shipments followed a similar trajectory to housing
until after the housing bust. From 2012 until now, housing
starts rose 73.8%, while solid wood flooring shipments
fell 4.4%.
Why aren’t Flooring Shipments Keeping Pace with
Housing?
A number of competing flooring products are designed
to look like wood, and manufacturers have become really
good at imitating the wood look. Even worse, their promotional
campaigns tell consumers non-wood products are
better and more environmentally friendly than the real thing.
These products are taking market share from solid wood
flooring.
To a lesser extent, so have solid flooring imports. But,
solid wood flooring imports declined during the pandemic to
the tune of almost 45% in 2020 from 2019.
Imports comprised just 6.1% of total U.S. solid wood flooring
consumption in 2020 compared to 35.7% in 2005. Most
troubling is that even with imports down, U.S. shipments
to U.S. markets have declined over 185MMSF since 2005.
That equals about 300MMBF of lost lumber consumption.
The good news is flooring shipments are improving. After
extremely low shipments in April and May 2020, they
rebounded, rising each month after May. September 2020s
flooring numbers surpassed September 2019 by 7.2%.
Pallet, Railroad Ties and Board Road/Mat Timber
Trends
The wooden pallet and container industry consumes, by
far, more Hardwood material than any other sector. This industry
consumed 69.4% of all industrial material and almost
41% of all Hardwood production in the first half of 2020.
From 1991 to 2019, Hardwood pallet cant and lumber
consumption by the pallet industry declined 23.3% or
1.1BBF. I did not include 2020 numbers because those are
expected to increase before the end of the year.
The Hardwood consumption numbers are not going down
because fewer pallets are being made.
So why has Hardwood consumption declined over time?
Pine and other softwoods have taken market share as well
as plastic and other non-wood materials.
Estimates show the global market for pallets should increase
to $88.69 billion by 2026, with a compounded annual
growth rate of 5.1%.
Wood pallets are expected to account for the largest
share of the global market, but plastic pallets are expected
to grow the fastest.
The railway tie industry is the only Hardwood consuming
market that has grown since 1991. Hardwood usage has increased
over 31% since 1991. From 2012 through 2017 the
railroad industry consumed over 1BBF of Hardwood material
per year. There is a very easy explanation as to why we
have seen this level of growth. The Railway Tie Association
began the 2 cent per tie program in the early 1980s that
provides funding for research and development, as well as
promotional campaigns for wood railroad ties. These efforts
have proven wood is the best option for ties.
Longer term, rail shipments are expected to increase
even more. The U.S. Department of Transportation projects
1999 Hardwood
Consumption
Grade
Lumber
Pallet
Lumber,
Cants,
and Ties
59.6% 40.4%
Industrial Products: 5.21B bd. ft.
Grade Lumber: 7.7B bd. ft.
rail traffic to rise 24% over the next 30 years. With higher rail
traffic comes more tie installations.
Even with green 4/4 No. 2A Red Oak prices increasing,
there is certainly incentive for sawmill operators to saw railroad
ties. Not even taking into account the yield and production
advantages of cutting ties, prices for ties are substantially
higher than for green 4/4 No. 2A Red Oak.
Railway Tie Association Data shows a 4.9% decrease in
purchases this year from 2019. But purchases are expected
to regain some of those losses in 2021, up 2.8% to over 18
million ties.
What about the Board Road/Crane Mat industry?
These are some of the demand drivers for board road
and mat timbers.
• Transmission Lines
• Pipelines
• Drilling
• Roads and Bridges
• General Construction
• Board road and mat timber consumption is down. Estimates
for the first half of 2020 show usage is off 18.0% from
2019 to an annual rate of 346MMBF. With high inventories
and weak demand, it is likely this industry will not see much
improvement in 2021. •••
41.1%
2020 Hardwood
Consumption
Grade
Lumber
Pallet
Lumber,
Cants,
Ties,
Board
Please turn to page 38
58.9%
Industrial Products: 3.709BBF
Grade Lumber: 2.588BBF
Total: 6.297BBF
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