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Market Reports on the American Hardwood

2003.01.02


The State of the American Hardwood Market

Supply

Hardwood production in the USA is currently below the levels of the past months. During the fall hunting season logging was scaled back and - typically - logging during the Christmas holiday is also reduced. With the onset of wet and snowy winter weather logging will be hampered even more and this will further acerbating the log shortage. Currently a number of mills reportedly have difficulties maintaining an adequate log inventory and no relief is anticipated soon. This shortage has resulted in rising prices for logs and green lumber. The high log prices make it almost more profitable to sell unprocessed logs rather than sawing them into lumber. Similarly, with the narrowing gap between prices of green and kiln-dried lumber, drying plants experience increasing difficulties to sell lumber at a profit and some of them may have to close their business temporarily.

In contrast to the situation for green lumber, the inventory of unsold KD lumber is said to be uncomfortably high and sales are very slow. Several sawmills have large amounts of capital tied up in expensive stocks - mainly Hard Maple and Cherry - which, in turn, is depressing their profitability. It is to be hoped that the current shortage of green lumber will ultimately be reflected in a slower supply of KD lumber and thereby reduce the excessive stock. The KD-stock may also shrink a bit due to the upcoming slower "drying season".

Demand

The American economy is apparently on the mend. Profits from publicly held companies are slowly improving. Even though consumer confidence is sagging, the house construction and remodelling markets continue to exhibit strength. New home sales in September reached a record of 1.02 million units and new housing starts stood at a 16-year peak. Sales of existing homes are also robust. Analysts at AKTRIN do not anticipate interest rates to rise so the good fortunes in the residential building industry are likely to continue. On the other hand commercial building activity is slow but it is anticipated that there will be a revival of this sector next year, in line with improving corporate earnings.

Furniture retailers' inventories are also quite large and few are in the mood to buy in more items before their stock has been reduced to more manageable levels. It is to be hoped that the good housing market translates into more furniture sales early next year and that retailers will start to place orders with manufacturers again. It seems that furniture of Soft Maple is gaining some popularity.

The kitchen cabinet market is also a great beneficiary of the strong home building and remodeling activity. Furthermore, good customer service by manufacturers, such as fast delivery and a wide selection of products, is stimulating sales. The demand for Hard Maple cabinets is reported to have declined a bit in favor of other species.

Due to sluggish commercial construction, the architectural millwork business is quite slow but noticeable improvements are expected in 2003.

The demand for strip flooring is - and is likely to continue to be - vibrant. Nevertheless, keen competition in the industry will keep prices in check. Flooring plants that do not already have an adequate lumber inventory in place may encounter difficulties to cover their raw-material needs. The supply shortage has led to some upward price pressure for lumber. This is difficult to absorb for many strip flooring plants - notably the smaller ones - in the face of flat prices for finished products.

The wood-component business is closely tied to the furniture business. Demand for wooden components and parts is currently "lukewarm" and competition is severe in this sector. To survive, suppliers must offer excellent customer service, such as selling in small volumes, fast shipments in spite of short lead times, or holding inventories for end-users. Analysts do nit expect much improvement is anticipated before the spring of 2003.

Export volumes are improving. Much of the increase is due to substantially higher Alder shipments to the Far East. In contrast to demand from Asia, European buyers are using less US lumber, particularly of the upper grades. Only a modest economic improvement is forecast for Europe next year so there is little chance of a swing in demand soon.

Demand, supply and price movements vary significantly between different species, quality grades, drying levels, and growing regions. Generally, sales for most sawmills are fair. The common grades moved better than the upper grades.

Below, are listed the price changes during the past month of several widely used species. (Note that the following comments and data refer to 1000 Board Feet (MBF) of top-quality lumber, 1" thick. Imported lumber is quoted at dockside West Coast port of entry. Approximately $ 50.00 to $ 55.00 will have to be added for East Coast ports).

Red Oak Oct 2002 Nov 2002
North, KD US$1625 US$1640
Green US$1320 US$1325
South, KD US$1320 US$1335
Green US$1025 US$1020
Appalachian KD US$1495 US$1493
Green US$1175 US$1203


White Oak Oct 2002 Nov 2002
North, KD US$1195 US$1195
Green US$775 US$ 785
South, KD US$1055 US$1055
Green US$760 US$ 770
Appalachian
KD
US$1240 US$1240
Green US$902 US$ 920


Cherry Oct 2002 Nov 2002
Appalachian
KD
US$3105 US$3130
Green US$2563 US$2558


Hard Maple Oct 2002 Nov 2002
North, KD US$2090 US$2018
Green US$1710 US$1695
Appalachian
KD
US$1910 US$1890
Green US$1585 US$1575


Soft Maple Oct 2002 Nov 2002
North, KD US$1405 US$1395
Green US$1045 US$1075
Appalachian
KD
US$1430 US$1450
Green US$1125 US$1160


Walnut Oct 2002 Nov 2002
Appalachian
KD
US$2280 US$2310
Green US$1715 US$1765


S. American
Mahogany
Oct 2002 Nov 2002
KD
$3570 $3500
Green $3065 $2980


African
Mahogany
Oct 2002 Nov 2002
KD $2080 $2025

Imported Woods

The demand for South American Mahogany has slacked off lately. This, along with the ongoing competition from African Mahogany could negatively impact prices of the South American variety. North American imports of this wood have also declined, but inventory levels should be adequate to meet the demand over the next few months.

The supply of common Red Oak is abundant. It is not likely to shrink much unless there is a significant decline in production. Both, the domestic demand and the foreign demand from China are only lukewarm. On the other hand, markets for green Red Oak are vibrant, a situation that should continue throughout this winter. With green Red Oak prices strong, many sawmills and kiln operators are not drying the species. This may ultimately alleviate the supply surplus of KD lumber.
There is a resurgence in the demand for White Oak. Due to still relatively low prices flooring plants are buying more and more common White Oak rather than the much more expensive Red Oak. The export demand from Europe is also improving. A number of suppliers may not have enough wood in stock to meet the expected requirements early next year. As White Oak production is not likely to increase much, prices of this species may start to rise soon.

The demand for Cherry wood remains healthy, above all for the common grades and green lumber. Usually, harvesting of Cherry trees is stepped up in the fall and winter, however the current high log prices stand in the way more production. Furthermore, inventories of Cherry lumber are sufficient to meet the demand and prices are expected to remain stable.

Sales of Hard Maple lumber have been sluggish lately. As more Hard Maple will be produced during the next few months, the species will probably remain oversupplied for a while, above all the upper quality grades. For the common quality grades, the demand from the cabinet and flooring industries should absorb a good portion of the production.

In addition to steady sales of Soft Maple to domestic buyers, there is a growing demand for this species emanating from the Far East.

The strong overseas demand for Walnut lumber and logs continues and there are no indications of a letup in the near future. Prices of this wood will remain firm.

The demand for Yellow Birch from flooring, moulding and kitchen cabinet manufacturers remains healthy.

Orders for Hickory/Pecan by cabinet and flooring manufacturers remain quite good. As Hickory is difficult to saw in cold weather, production is usually low in winter. On the backdrop of these fact, price will remain firm.

Ash demand continues to improve, thanks to some heightened activity in furniture and export markets. Low prices may spur even more interest in Ash. The supply of the wood is still adequate, except for a few thick items and green stock. It is not likely that green production will increase unless prices go up.

There is some increased interest for Aspen in Far Eastern markets.

Cypress wood is suffering under the competitive pressure of several substitute species. Production of this wood this year has been well below the level of 2001and if production will further decline - as is expected - the supply of the most popular grades and sizes may become tight enough to trigger some modest price advances.

The domestic demand for Poplar from millwork and furniture plants and other end-users is not strong. The export demand - mainly from China - is also weak. As the supply of Poplar is abundant and inventories may further increase in the months to come, prices are on a downward trend. The Poplar market is very volatile. Market conditions were much more favorable a few months ago and it is very well possible that we will see again an upswing early in 2003.

Regional Differences

The US National Weather Service's long-range forecast for this winter is for wetter than average conditions across the Southern United States, and warmer than normal conditions across the North. Neither is good for logging.

In the Northern United States, log shortages in the upper Midwest, Tennessee and the Northeast led to noticeable curtailments in lumber production. However, the reduced supply had only minor effects on the availability, as the demand for lumber was also weak, both from domestic and foreign buyers. An exception is provided by some Soft Maple items - above all - green lumber. Canadian cabinet and furniture manufacturers continued to buy Yellow Birch, and flooring plants are looking for common Red Oak and White Oak.

Like elsewhere, the log shortage causes problems in the Southern region. Many mills in Alabama and Georgia are losing business due to the lack of logs. The demand for lumber sales is fair, but prices are depressed. Some furniture manufacturers introduced new lines in Ash, which boosted the demand for this species modestly. On the negative side, common Ash sales to the Far East are slow. Red Oak purchases by flooring plants and millwork manufacturers picked up and prices firmed a bit. Most southern low-grade items - above all pallet lumber - are again in good demand. Export sales are satisfactory. The most required products include top-graded White Oak, and Cottonwood for China and Italy. The supply of White Oak is barely sufficient to meet the heightened demand.

Log decks are low throughout the Appalachian region. The shortage is most critical in Tennessee. With the exception of green stock and low-grade lumber for crossties and pallets the domestic demand for lumber is not strong. Overseas sales of White Oak and common Poplar (to China) are also sagging. Items most in demand include common Cherry, Hickory, Soft Maple, Red Oak, and Walnut. Due to the short Walnut supply prices for this species are firming.


Source:ITTO News

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