building - western hardwood• resource studies / market research ... hardwood lumber supply...

Building With Wood: Housing, the Economy and Western Hardwoods

Western Hardwood Association2nd Annual Western Hardwood

International Convention & ExpositionMay 20, 2014

Portland, Oregon

Forest2MarketData – Experience – Expertise• Neutral‐third party (independent in ownership and structure)• Capture of transaction level data is the only way to achieve a true measure

of market price. Transaction data is the foundation of all our products and services

Client relationships• Timberland owners and log marketers, forest products manufacturing

companies, pulp and paper, bio‐energy industriesMarket Intelligence• Resource studies / Market research• Timber price forecasts and economic analysis• Proprietary transaction level sales and cost data• PublicationsHeadquartered in Charlotte, NC; offices in Eugene, OR,

Appleton, WI and Curitiba, Brazil

©2013 Forest2Market®, Inc. 3

Today’s agenda

• Western hardwoods market share• Western hardwood timber supply• Building construction trends• Economic outlook

©2013, Forest2Market, Inc. Slide 4

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

Bill

ion

Boa

rd F

eet

Hardwood Lumber Supply Available to the US Market from All Sources

ImportsWestern ProductionEastern Production

Sources: US Census and Hardwood Market Report

Graph: Hardwood Market Report*projected

Western hardwood timber supply


Hardwoods in conifer forests• Mixed species stands in

forests west of Cascade mountains; alder, big leaf maple and others

• Private and state owned forests

• OR+WA = 200 MMBF~ annually; +/‐5% of total timber harvest

• Harvest restrictions on federal forests and private lands regulation

• Furniture, cabinets, millwork and pallets


Irrigated Poplar plantation forests east of the Cascade Mountains

• Hybrid row crop plantations

• 12 year harvest rotation

• Irrigated desert lands• 2/3 plywood and

lumber, remainder for pulp chips and biomass

• 35,000 acres +/‐


Western valley hybrid plantations

• Hybrid row crop Poplar plantations

• Agricultural low‐lands

• Short rotation• Mostly pulpwood,

few saw‐logs• Several thousand

acres sponsored by paper industry


Conifer values drive harvest levels


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1500

2000

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3000

3500

$0.00

$100.00

$200.00

$300.00

$400.00

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$700.00

2008 2009 2010 2011 2012 2013

DF average WA harvest

Washington Red Alder harvest


20

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60

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120

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200

‐

500

1,000

1,500

2,000

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2008 2009 2010 2011 2012

alder other hardwoods total harvest

Value comparison: Alder and Douglas fir sawmill logs

©2013 Forest2Market®, Inc. 12Source: F2M Benchmarks

$0

$100

$200

$300

$400

$500

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DF West Domestic Red Alder saw Poly. (DF West Domestic) Poly. (Red Alder saw)

Hardwood applications: Beauty


Hardwood applications: Functionality


2013 distribution for hardwood lumber

Western hardwoods:

• 70% KD lumber for doors, millwork, cabinets and furniture

• 20‐30% pallet stock


43%

5%17%

5%

5%

9%

13%4%

US National Hardwood Consumption

pallets furniture exports millwork

cabinets flooring RR ties mats

PalletsMillwork, flooring and cabinets 19%

Source: Hardwood Market Report

exports

Estimates of Consumption of US Hardwoods

2005 2006 2007 2008 2009 2010 2011 2012 2013

% Change

2012

% Change

2005

Pallets 3.8 3.7 3.6 3.5 3.0 3.2 3.26 3.27 3.643 11.4% -4.1%

Furniture 1.2 1.1 1.0 0.7 0.3 0.35 0.29 0.30 0.427 42.3% -64.4%

Exports 1.3 1.3 1.2 0.9 0.8 1.07 1.2 1.32 1.462 10.8% 12.5%

Millwork 1.3 1.2 1.0 0.7 0.4 0.43 0.24 0.26 0.387 48.9% -70.2%

Cabinets 1.6 1.5 1.3 1.2 0.7 0.4 0.34 0.36 0.392 8.9% -75.5%

Flooring 1.5 1.4 1.3 0.8 0.5 0.59 0.51 0.55 0.753 36.9% -49.8%

Railway Ties 0.85 0.96 0.92 0.94 0.89 0.89 0.98 1.04 1.114 7.1% 31.1%

Board Road/Mat Timbers N/A N/A N/A 0.2 0.05 0.075 0.12 0.16 0.369 130.6% N/A

Total Estimated Consumption 11.55 11.16 10.32 8.94 6.64 7.01 6.94 7.26 8.55 17.7% -37.1%

© 2014 Hardwood Market Report

Building with wood


Residential construction value MM $ in place


50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

New single family New multi‐family Residential Improvements

Changing demographics of housing


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1959

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1989

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1997

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2011

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Total starts Single family Poly. (Single family)

Single family=66 % in 2013

1993 87%

Percent of new homes 4 bedrooms +


25

27

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31

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35

37

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43

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hardwood applications: Style


Trends in multi‐family housing


10

15

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25

30

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40

45

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

<1000 ft² >1400 ft²

Hardwood applications: Efficiency


Commercial construction MM $ in place


100,000

200,000

300,000

400,000

500,000

600,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Hardwood applications: Utility


Economic Outlook – 2014‐2015

Slide: 26

How does this recovery stack up?


0

500

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1,500

2,000

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‐5.0

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2013

GDP percent change % unused industrial capy % average annual unemployment Total housing starts

Dwindling labor participation


‐6

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12

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% annual unemployment rate % labor participation rate change

College graduates in minimum wage jobs


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2005 2006 2007 2008 2009 2010 2011 2012 2013

260,000

Sluggish employment and salaries; the new reality?


General Economy: Gross Domestic Product

• OK general economy• Sluggish growth in

2014 and 2015• Post WW2 expansions

=58 months avg. • 78 months at the start

of 2016• Downturn in 2016• Drivers:

– End of expansion cycle– Fed’s scaling back of

QE

Slide: 31

General Economy: Industrial Production

• Forecast increased production in 2014– Less increase than 2013

• Anemic growth likely for 2015

Slide: 32

General Economy:Manufacturing/Non‐Manufacturing

Slide: 33

3035

4045

5055

6065

2008 2009 2010 2011 2012 2013 2014

Inde

x

Manufacturing

Non-Manufacturing

Breakeven Line

Source: Institute for Supply Management

General Economy: Non‐Manufacturing

Slide: 34

3035

4045

5055

6065

2008 2009 2010 2011 2012 2013 2014

Inde

x

Non-Manufacturing

Breakeven LineAfter steady increase, the service sectoris declining

General Economy: Jobs and Income

• >50% of new jobs added = low wage jobs

• Average weekly earnings down:– Shorter work week– Part‐time/Temporary

• 25‐ to 54‐year olds ‐ 25% of net jobs gained

Slide: 35

Housing: Prices and Mortgage Rates

Slide: 36

• Home prices are up

• Mortgage rates are up

• Affordability is down0

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100

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Mortgage Ra

te

Hom

e Price Inde

x

Case Shiller30‐yr mortgage

Housing: Annual Starts

Slide: 37

0

200

400

600

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1,000

1,200

Thou

sand

Units

HistoricForecast

• 2014 = 1,045

• 2015 = 1,143

• 2016 = 1,032

Housing: Annual Starts

Slide: 38

800

850

900

950

1,000

1,050

1,100

1,150

1,200

1,250

1,300Th

ousand

Units

HistoricForecast

Enjoy the ride; but be wary of what’s around the bend!


Forest2Market: The highest quality wood raw material analysis available

Gordon CulbertsonPNW Region Manager

(541) 302‐[email protected]

Forest2Market®1200 Executive Parkway, Suite 255Eugene, Oregon 97401

www.forest2market.com


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