hardwood industry
DESCRIPTION
Hardwood Industry. Three Topics. Current Reality Check Many Reasons for Optimism Opportunities for Success. Current Market Reality Check: It’s Been a Rough 5 Years. Current Markets. Lumber Price Recession. Current Markets. Hardwood Lumber Production. Current Markets. - PowerPoint PPT PresentationTRANSCRIPT
Hardwood IndustryHardwood IndustryHardwood IndustryHardwood Industry
Three Topics
• Current Reality Check
• Many Reasons for Optimism
• Opportunities for Success
Current Market Reality Check: Current Market Reality Check: It’s Been a Rough 5 YearsIt’s Been a Rough 5 Years
Current Market Reality Check: Current Market Reality Check: It’s Been a Rough 5 YearsIt’s Been a Rough 5 Years
Current Markets
• Lumber Price Recession
$600
$800
$1,000
$1,200
$1,400
2006 2007 2008 2009 2010 2011 2012
Kiln-Dried
Green
Current Markets
• Hardwood Lumber Production
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ion
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ard
Fee
t -53.0%
Current Markets
• Wood Manufacturing Employment
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1.0
1.1
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2011
-583,000 Jobs
NAICS 321 - Wood ProductsNAICS 327 - Furniture & Related Products
Current Markets
• Until job markets and economic uncertainty improve…housing will remain depressed.
• Until housing markets improve… hardwood industry will remain depressed.
Many Reasons for OptimismMany Reasons for OptimismMany Reasons for OptimismMany Reasons for Optimism
U.S. Still the Leader
• 34% of funds spent on R&D.
• 47% of engineering degrees 25-39 by women.
• 30 Nobel prizes in science and economic in last 20 years. China – just one.
• 72% of oil needs up from 50% 10 years ago.
• 8 of top 10 universities, China-0
Reasons for Optimism
• Housing starts low but stable
• New home sales low but stable
• Sept existing home sales 34% higher than the low point of July 2010
Reasons for Optimism
• Single-Family Permits Trending Up– 6 consecutive months of growth without
any type of stimulus
300
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600
Aug
09
Nov
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Feb
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May
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Aug
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Nov
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Homebuyer Tax Incentives
Reasons for Optimism
• Housing Shortage Coming– We’ve been building at a pace below
the “static demand” for nearly 5 years
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0.4
0.8
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1.6
2.0
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Reasons for Optimism
• Outlook for Growth in Remodeling– Harvard JCHS: “volatile and weak”
remodeling activity through Q1 2012– Remodeling expenditures to increase at an
inflation-adjusted 3.5% annual rate in coming years
– NAHB Q2 2011 RMI was the second highest since Q3 2007
– Remodeling expenditures will reach $131 billion by 2012 – a 13% improvement from 2010, and just 10% shy of 2006 levels.
Reasons for Optimism
• Flooring Market Improving– Mfrs. currently only replacement buying
– But, moving lots of flooring, “satisfied”
– Quick, big bang for remodeling buck
$1.50
$1.60
$1.70
$1.80
$1.90
$2.00
$2.10
1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1
Sel/Btr
#1 Com
RED OAK
$1.40
$1.50
$1.60
$1.70
$1.80
$1.90
$2.00
1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1
Sel/Btr
#1 Com
WHITE OAK
Reasons for Optimism
• Railroad Tie Demand Strong– RTA: Crosstie shipments:
+5.1% in 2011-0.7% in 2012+4.0% in 2013+4.1% in 2014
– American Assoc. of Railroads:Carload volume up 1.7% ytdContainer volume up 5.5% ytd
Reasons for Optimism
• Low KD Inventories
• Barriers to Production Increases– Loggers and log supply
– Credit availability
– Workers
– ~ 50% sawmill capacity reduction (?)
• 1 to 2% demand bump will drive up lumber prices and demand for logs
Reasons for Optimism
• Global Supply Decreasing– ITTO: Hardwood log production down
5%, lumber down 4% since 2006
– China log deficit will reach 180 mil. M3 by 2015
– Indian plants running below capacity
– Widespread sawmill closures in Africa
– Legality movement will reduce wood supplies from some SE Asian countries
Reasons for Optimism
• Exports– China Will Come Back in Spring
– Lumber inventories will be thinned out
– Government announced plans to increase furniture exports 12% annually during next 5 years
– Building furniture manufacturing centers in the North and West China
– Building 10 million low-priced units
Reasons for Optimism
• Mexican Market Strong– 36% of imported American hardwoods
in Red Oak and Poplar
– Manufacturers winning back production from China
– Easy to ship relative to other markets (no phyto certificate required)
Reasons for Optimism
• Some Manufacturing Coming Back to U.S.
– Georgia Chopsticks, Americus, GA
– Lincolnton Furniture, Lincolnton, NC
– Ebonite International, Hopkinsville, KY
– Jasper Home, High Point, NC
– Folio 21, High Point, NC (new)
– Conover Chair, Conover, NC (revived)
Reasons for Optimism
• U.S. Has Largest Supply of Sustainable Temperate Hardwoods in World
– Growing importance of “legal sourcing”
– EU Timber Regulation looks like it will accept U.S. hardwoods as “low risk”
– LCA studies will favor American hardwoods
Opportunities for Success:Opportunities for Success:For SCFAFor SCFA
For LandownersFor LandownersFor ProducersFor Producers
Opportunities for Success:Opportunities for Success:For SCFAFor SCFA
For LandownersFor LandownersFor ProducersFor Producers
Strategies for SCFA
• Pressure Administration to Sell More Timber
– 80% reduction in harvests since late 1980s
– For the health of the industry and the forest
– 16 National Forests in AL,GA,SC,FL, NC.
– 49.8 billion board feet of hardwood saw-timber in 12 surrounding states
Strategies for TFA
• Encourage USFS to Proactively Sell the Hardwood “Sustainability Story”
– Failure to do so was identified as a key barrier to industry success at the 2010 Hardwood Leaders Forum
– Southern FIA in Knoxville
– Director Bill Burkman has indicated some support for doing so
– USDA may be coming around
Strategies for TFA
• USDA’s “National Report on Sustainable Forests—2010”
– Relationship between harvesting and sustainability is positive
– Markets and management keep forests in forests
– Healthy forest industry tied with sustained production of environmental, economic and social benefits
Strategies for TFA
• Push for National Certification (?) – By USDA?
– Markets will increasingly be closed to non-certified wood products
– Australia is currently working on most restrictive illegal logging bill
• Will require verified legal certification• 80% of imported hardwood is White Oak
Strategies for TFA
• Partner with Other Organizations– Key recommendation of HLF
– Find a supporting role
– Focus on doing one thing better than all other organizations
– Be willing to work outside the state on issues that ultimately benefit state’s forests and industry
Strategies for TFA
• Possible Partnerships…..– Hardwood Federation
– NEW Federal Forest Resource Coalition
– United Hardwood Promotion
– Hardwood Check-off
Strategies for Landowners
• Sell Timber– Even at below-desired prices
– Timber prices should fluctuate with markets for wood products
– Holding timber off the market• artificially inflates log prices• drives out of business the companies
you eventually want as buyers• limits long-term market options
Strategies for Landowners
• Certification– Group or individual
– Will give market access advantage at some point
– May give payback in higher timber prices now or down the road
Strategies for Landowners
• Tap into new markets– Bio-fuels/pellets
– Need to replace lost pulp/paper demand
– Offers potential to pay for thinning, intermediate management
– Potential to increase total timber sale revenue
Strategies for Companies
• Expand exports– 50% of #1/Btr lumber produced sold into
foreign markets
– Only grade lumber growth market for next few years
– Getting easier for small companies to directly export
– Assistance available through AHEC and US Dept of Commerce (Trade.gov)
Strategies for Companies
• Give export customers what they want– Fixed widths
– Fixed lengths
– Metric thicknesses
• Half of the world’s consumers of hardwood grade lumber want a product most U.S. companies are unable or unwilling to make!
Strategies for Companies
• Diversify markets– Export markets are fickle
– Forego short-term gains to build broader customer base
– Look to emerging markets• India• Turkey
Strategies for Companies
• Consider Certification– Even if timber supplies and ROI are
lacking
– Noah built the ark when it was still sunny
– Difficult process to navigate under pressure
– LEED is flirting with opening up credits for SFI, PEFC
Strategies for Companies
• Grow online marketing– Reach foreign buyers 24/7
– Increase reach, reduce costs
• Hardwood Review.com– WoodLogics™ buyer/seller tool
– Prospecting database
– Market intelligence, trade data
– Price histories/forecasts
Issues to WatchIssues to WatchIssues to WatchIssues to Watch
Issues to Watch
• Hardwood Check-off– Currently in review by USDA
– Will publish sometime this fall
– 60-day comment period
– Additional USDA revisions
– Industry vote expected in March/April
Issues to Watch
• Lacey Act– Supporting by many in hardwood
industry for jobs and price protection
– Gibson incident has divided industry into two camps:
• Re-open Lacey Act for revisions• Don’t re-open…at least not yet
SummarySummarySummarySummary
Summary
• Markets will remain tough for 1-2 more years, but likely get no worse
• Production is stable, somewhat restricted…good for prices in a supply driven market
• Small demand increases = big impacts
• Long-term demand outlook good, especially export demand
Summary
• Industry is smaller, smarter, more nimble
• Industry is more willing to produce to demand
• Sustainability and size of hardwood resource positions U.S. very well for global growth in years ahead
• Best time to get ready is now!