Hardwood Trade and Consumption Trends for the U.S. and Ohio Matt Bumgardner U.S. Forest Service Northern Research Station Ohio Forestry Association Annual Meeting March 10th, 2016
Background themes Period of relatively low demand for many hardwood products (esp. at the higher end) Continued strong global competition Gradual improvement Scale and industry changes Small firms Customization Exports
1970.1 1971.1 1972.1 1973.1 1974.1 1975.1 1976.1 1977.1 1978.1 1979.1 1980.1 1981.1 1982.1 1983.1 1984.1 1985.1 1986.1 1987.1 1988.1 1989.1 1990.1 1991.1 1992.1 1993.1 1994.1 1995.1 1996.1 1997.1 1998.1 1999.1 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 Aggregate price index for green No. 1 Common Appalachian hardwood lumber 150 140 130 120 110 100 90 80 70 60 50 (inflation-adjusted and indexed, 1970.1 = 100) (4 th Qtr 2015) W. Luppold, U.S. Forest Service
Prices for green 1C Appalachian hardwood lumber Species July 2009 July 2014 %-change Mar 2016 %-change Cherry 625 955 + 53% 735-23% Yellow-poplar 340 545 + 60% 515-6% Soft maple 525 845 + 61% 850-1% Red oak 500 930 + 86% 640-31% Hard maple 655 1260 + 92% 915-27% Walnut 765 1550 + 103% 1270-18% White oak 450 960 + 113% 725-24% Data: Hardwood Market Report
U.S. hardwood lumber production W. Luppold, U.S. Forest Service
Major markets for hardwood lumber Appearance-based: Furniture Cabinets Flooring Millwork Exports Photo: AHMI Industrial: Pallets Railroad ties Photo: 2010 Ohio Hardwood Furniture Market Photo: USDA Forest Service Southern Research Station Archive, USDA Forest Service, SRS, Bugwood.org
Percent U.S. hardwood lumber consumption by sector 60 55 50 45 48 50 50 46 43 54 51 40 35 40 38 39 36 36 30 25 20 1991 1999 2002 2006 2009 2014 Appearance-based Industrial Percentage of Appearancebased that was Exports: 16% 16% 17% 21% 25% 37%
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 Single family starts (000) No. of employees (000) Housing market s importance to hardwood industries 2000 200 1800 180 1600 160 1400 140 1200 120 1000 100 800 80 600 60 400 40 200 20 0 0 Year Single family housing starts No. of employees - Cabinets No. of employees - Millwork
Billion $ Value of private U.S. construction, 2002-2015 450 400 350 300 250 200 150 100 50 0 (19% of SF + MF) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Single family housing Residential improvements Multi-family housing Nonresidential construction
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15p Thousand employees Employment trends furniture vs. cabinets 200 180 160 140 120 100 80 Wood Household Furniture Wood Kitchen Cabinets 60 40 20 0 Data source: Bureau of Labor Statistics
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 1991, 2002, and 2009 = 100 Employment indexes for last three economic expansion periods 150 140 130 120 110 100 90 80 70 60 50 Millwork Pallets Cabinets WHF
2000 and 2007 = 100 Employment indexes for last two economic recession periods 110 105 100 95 90 85 80 75 70 65 60 2000 2001 2002 2007 2008 2009 Millwork Pallets Cabinets WHF
Top 5 states for pallet employment Wood Containers and Pallets 2002 2007 2009 2014 Rank State Percent State Percent State Percent State Percent 1 OH 12.9 CA 8.3 CA 9.6 CA 8.9 2 CA 8.8 OH 8.2 OH 7.5 TX 7.1 3 TX 6.2 TX 7.8 TX 7.4 OH 6.3 4 PA 5.1 PA 5.8 PA 5.8 PA 5.7 5 NC 4.9 NC 5.1 NC 5.2 NC 5.3 For Ohio, about 3,600 employees in 2014
Top 5 states for cabinet employment Kitchen Cabinets 2002 2007 2009 2014 Rank State Percent State Percent State Percent State Percent 1 CA 9.8 CA 8.6 TX 8.8 IN 8.9 2 TX 8.6 TX 8.4 CA 8.2 TX 8.3 3 PA 6.8 PA 6.3 IN 6.6 CA 8.2 4 OH 6.0 IN 5.8 PA 6.3 PA 5.4 5 IN 5.4 OH 4.9 OH 5.5 OH 4.7 For Ohio, about 5,000 employees in 2014
Top 5 states for furniture employment Nonupholstered Wood Household Furniture 2002 2007 2009 2014 Rank State Percent State Percent State Percent State Percent 1 NC 20.6 NC 13.2 NC 11.4 WI 11.8 2 CA 12.5 CA 10.3 CA 9.7 OH 9.7 3 VA 10.4 VA 10.1 VA 8.9 NC 9.6 4 NY 5.8 NY 7.0 WI 8.8 CA 9.4 5 WI 4.5 WI 6.7 NY 7.2 NY 7.1 For Ohio, about 3,500 employees in 2014
Billion $ Major U.S. import sources Household & Institutional Furniture & Cabinets (NAICS 3371) 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 31% 61% 59% China Vietnam Canada Mexico Total Data source: International Trade Administration
Market share estimates of imports in the U.S. Consumption = value of shipments + imports exports Import share = imports/consumption Data sources: U.S. Census Bureau; International Trade Admin.
Why makes the Holmes County furniture cluster a viable model? Customer driven... Customers select style, stain, and species, making each order unique - - customization Like the U.S. cabinet industry! Extremely fluid production process... Production of specific products (e.g., tables, chairs). A dining room group could be constructed by multiple producers - - specialization Supply chains... Finishers receive pieces from multiple shops Many operations use the same set of 15+ stains Outsourcing components locally = aggregate productivity
Market changes for hardwood lumber distributors, 2003-2007 80 75 70 60 Customer size Order size % 50 40 47 40 30 20 10 0 12 12 13 1 0 Smaller Larger About the same Not sure Orders sizes and customer sizes were decreasing The distribution function thus becoming important in the hardwood industry
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 # of employees Employees per establishment 30 25 20 15 10 5 Wood kitchen cabinets Wood household furniture 0 Data source: U.S. Bureau of Labor Statistics
Percent Percent Sources of hardwood lumber (by volume) - Large firms 50 40 30 20 10 0 45 Direct from sawmills 39 Distributors & concentration yards 16 Brokers / Other Sources of hardwood lumber (by volume) - Small firms 70 60 50 40 30 20 10 0 28 Direct from sawmills 59 Distributors & concentration yards 13 Brokers / Other
Services requested from hardwood lumber suppliers Double-end trim Certified products Color sorting Just-in-time orders Special grading Imported species S4S Break bundles Width sorting S2S S S S Large firms Small firms 0 20 40 60 80 Percent
Percent 70 60 50 40 30 20 Year-over year changes in sales volume: Secondary manufacturers 81% lost volume in 2009 50% lost volume in 2010 38% lost volume in 2011 31% lost volume in 2012 25% lost volume in 2013 21% lost volume in 2014 10 0 Much worse (off by 20% or more) Somewhat worse (off by 10%) Slightly worse (off by 5%) Slightly better (up by 5%) Somewhat better (up by 10%) Much better (up by 20% or more) Unchanged 2008 to 2009 2009 to 2010 2010 to 2011 2011 to 2012 2012 to 2013 2013 to 2014
Number of establishments Cabinets (NAICS 33711) Millwork (NAICS 32191) Year-over-Year Cabinets Millwork 08-09 -6.3% -5.8% 09-10 -6.0% -6.4% 10-11 -6.7% -5.5% 11-12 -5.1% -3.1% 12-13 -3.3% -2.4% 13-14 -1.6% -1.5% 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2008 2009 2010 2011 2012 2013 2014 Data source: Bureau of Labor Statistics
Million $ U.S. hardwood lumber exports (Top 5 destinations) 2500-12% 2000 1500 ~ 74% of total Canada China Mexico 1000 Italy Vietnam 500 Total to World 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Japan and the UK were slightly higher than Italy starting in 2012, dropping Italy to 7 th 106 other trading partners account for the remaining 26% Data: USDA Foreign Agricultural Service
Relative export scores* for hardwood lumber (NAICS 321113) for 2009-2013 -12.5 +19.2-6.7 (OH = +3.6) (TN = +0.7) * Score = Percentage of export volume Percentage of employment
Relative export scores* for furniture and cabinets (NAICS 3371) for 2009-2013 -5.9 +6.9-1.1 (OH = +3.4) * Score = Percentage of export volume Percentage of employment
Importance of coastal locations to hardwood lumber exporting Port Regions (incl. all port types water, land, air) % of U.S. Hardwood Lumber Exports East Coast* 63 West Coast 20 Great Lakes 12 Gulf of Mexico 5 * 70% of hardwood lumber leaving East Coast ports was destined for East Asia and Southeast Asia USDA Foreign Agricultural Service 2015
Top ten U.S. Customs Districts for exports of all temperate hardwood species, oak, and maple, 2013 Total hardwood lumber exports (value) Total hardwood lumber exports (rank) Oak lumber Maple lumber Customs District exports (rank) exports (rank) Norfolk, VA 325,574 1 1 8 New York, NY 282,086 2 2 1 Savannah, GA 184,469 3 3 -- b Charleston, SC 151,874 4 4 -- Los Angeles, CA 139,178 5 6 -- Seattle, WA 137,522 6 -- 2 Baltimore, MD 103,298 7 5 -- Buffalo, NY 70,138 8 8 5 Charlotte, NC 62,305 9 -- -- San Diego, CA 61,241 10 10 3 Mobile, AL 45,254 -- 7 -- Ogdensburg, NY 45,100 -- -- 6 Duluth, MN 43,187 -- 9 9 Detroit, MI 40,480 -- -- 10 Pembina, ND 30,797 -- -- 4 Laredo, TX 27,069 -- -- -- El Paso, TX 15,279 -- -- -- Portland, ME 14,573 -- -- 7 USDA Foreign Agricultural Service 2015
Top five hardwood lumber-exporting countries* 1990 % 2000 % 2011 % United States 34.3 United States 23.6 United States 22.8 France 12.1 China 13.0 Belgium 8.9 Yugoslavia 11.8 Canada 11.5 Russia 7.2 Canada 7.8 France 5.3 Romania 7.1 Germany 5.8 Romania 5.2 Germany 5.9 Top 5 71.8 Top 5 58.5 Top 5 51.9 * Temperate Region
Market share (by value) of specific hardwood products exported by the United States Product 1990 1995 2000 2006 2009 2013 --- Percent --- Lumber 52.9 53.0 52.0 53.8 45.4 59.4 Logs 16.6 12.5 14.3 20.6 25.6 18.3 Veneer 12.9 13.7 14.6 14.2 12.2 8.9 Cooperage 2.2 1.1 3.8 2.7 6.5 4.5 Flooring 2.4 1.3 2.8 3.3 3.1 3.2 Plywood 2.2 2.9 2.2 2.6 3.7 3.0 Chips 9.9 14.8 9.3 1.8 2.0 1.0 Other 0.9 0.7 1.0 1.0 1.4 1.8
U.S. hardwood product* exports and imports, 1990-2013 * Includes hardwood logs, lumber, veneer, cooperage, molding, siding, plywood, and flooring
thousand cubic meters 1000 900 U.S. hardwood lumber exports by species 800 700 600 500 400 300 200 100 0 Red oak White oak Y-poplar Maple Ash Walnut Cherry 2000 2003 2006 2009 2012 2015 Yellow-poplar = +112% (from 2000 to 2015) Ash = +150% Walnut = +299% Data source: USDA Foreign Agricultural Service
Top five hardwood lumber-producing countries* 1990 % 2000 % 2011 % United States 33.2 United States 50.8 China 41.5 USSR 17.1 China 5.4 United States 24.9 China 11.2 France 5.0 Russia 4.0 France 5.1 Russia 4.3 Turkey 3.5 Japan 4.4 Turkey 4.1 Romania 2.4 Top 5 71.1 Top 5 69.6 Top 5 76.3 * Temperate Region
Million cubic meters Worldwide hardwood lumber production, 1995 to 2013 125 120 115 110 105 100 95 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 UN FAO 2014
Global hardwood lumber consumption Year % change Country 1995 2002 2013 Cubic meters consumed per 1,000 people U.S. 103.6 92.3 49.2-52% India 15.2 3.3 4.1-73% Brazil 75.0 71.9 28.0-63% China 8.5 5.7 31.8 274% Indonesia 31.7 16.5 12.3-61% Malaysia 213.3 117.7 71.9-66% Russia 23.9 13.1 11.0-54% Japan 22.8 10.0 2.8-88% France 46.4 36.7 19.3-58% Germany 19.1 15.1 10.9-43% Italy 48.2 46.8 18.0-63% Vietnam 21.9 34.2 109.0 398%
Summary Industrial markets fared better than appearance-based markets through the recession/housing downturn Improvement in appearance-based markets since 2012 Surviving companies have seen steady improvements in sales volume since 2009
Summary Per capita hardwood lumber consumption declining in many major markets (incl. the U.S.) Secondary wood manufacturing employment has started to improve, but the overall number of firms is still declining (but at a much slower rate)
Thank you