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Wood Products Prices in The U.S. 

01-15th June 2013

Report from North America

 Suppressed government spending holding back economic growth
Real GDP increased at an annual rate of 2.5% in the first quarter of 2013, according to the first estimate by the US Department of Commerce.


Higher personal consumption, private investment, exports and a stronger construction market contributed to the higher GDP growth rate. Lower government spending had a negative effect on GDP growth.


GDP growth could reach 4% in 2013 if public spending would recover, according to the International Monetary Fund.


The unemployment is slowly edging down. It declined from 7.7% in February to 7.5% in March, according to the US Bureau of Labor Statistics. Home builders report that they are not able to hire enough qualified workers.


Many workers have left home construction when the housing market collapsed and they work in other industries now. Higher wages in other industries are also attracting workers away from construction.


Consumers worry that economic recovery may waver
Consumer confidence in the US economy declined from March to April, according to the Thomson Reuters/University of Michigan consumer sentiment index.

Consumer spending increased because of rising home prices and stock prices, but consumers worry that the economy will not continue to expand.


Upper income households in particular have increased spending. The majority of consumers do not expect the employment situation to improve this year.


Lack of qualified workers affects builders confidence
Builder confidence in newly built single-family homes declined again in April, according to the National Association of Home Builders.


Home builder confidence has been falling since January, despite improving demand for new houses.

Finding qualified workers remains a problem in the areas where demand for new homes is strongest (Arizona, California, Texas, Colorado and Florida). Many Hispanic immigrants have left the US, especially to Mexico where the economy is doing very well.

The National Association of Home Builders reported in March that half of the builders questioned had to delay construction work because of a lack of labour.


Housing starts exceeded one million in March but fall back in April
US housing starts passed the one-million mark in March for the first time since 2008. The increase was mainly due to high demand for rental apartments.


The number of total starts rose to 1.036 million homes in March (seasonally adjusted annual rate), up by 7% from February.


Multi-family starts increased by 31%, while single-family starts fell by 5%. The share of single-family homes in total starts declined to just 60%.


However, the growth in starts was not sustained in April as starts fell back to 870,000 units. Analysts did not read too much into this decline as applications for building permits rose 14.3 percent in April to a rate of 1.02 million, the highest since June 2008.

The number of building permits issued was 902,000 in March (seasonally adjusted annual rate), down 4% from February. The number of permits issued is usually an indicator of future building activity.


Sales of existing homes fell again in March, mainly because of an insufficient supply of homes on the market. The supply of homes for sale was at 4.7 months in March (i.e. they would sell out in 4.7 months at the current sales pace). A 6-month supply is considered a balanced market between sellers and buyers.


Higher home prices would encourage more home owners to sell, but price increases remain modest. Home prices increased by 1.9% from February. The strongest recovery in home prices was in the West (Nevada, California, Arizona, Idaho and Oregon).


Little change in Canadian housing market
Canadas housing starts remained stable in March. The Canada Housing and Mortgage Corporation forecasts lower housing starts in 2013 compared to the previous year.

The exception is British Columbia where home construction will rise moderately. A slower housing market is expected to slightly reduce economic growth in Canada this year.


US non-residential construction market still slow
Spending on non-residential building construction in the US declined by 1.9% in March compared to the previous month (at a seasonally adjusted rate). Private construction decreased by 1.5% in March, while public construction fell by 3% due to reduced government spending.

Architecture firms with a commercial/industrial specialization reported better business conditions in March, according to the Architecture Billings Index. However, business in the non-residential sector continues to lag residential construction.


Significantly lower plywood imports from China in March
Plywood imports from China have dropped significantly since the US Department of Commerce announced in February the preliminary countervailing duties on Chinese plywood. Imports of other wood products were largely stable in March, except for a decline in furniture imports.


Hardwood plywood imports fell in March due to significantly lower imports from China. Total hardwood plywood imports were 198,294 cu.m in March, down 28% from February. Imports remain higher than in 2012 (+28% year-to-date).

Imports from China fell from 179,529 cu.m in February to 61,058 cu.m in March (-66%). Imports from Indonesia surpassed imports from China in March. Indonesian shipments increased to 63,891 cu.m (+104% year-to-date).


Imports from Malaysia were 13,577 cu.m in March (+67% year-to-date). Shipments from Ecuador were 20,563 cu.m (+470% year-to-date). Ecuador has been the third-largest supplier of hardwood plywood so far in 2013, after China and Indonesia.


Hardwood moulding imports decline
Hardwood moulding imports declined further in March to $12.1 million (-15% year-to-date). Imports from Brazil remained stable from February at $2.8 million, (-19% year-to-date).


Hardwood moulding imports from China were worth $3.8 million (-23% year-to-date). Imports from all other major suppliers also declined in March.

Imports of hardwood flooring from China nose dive
Hardwood flooring imports declined further to $2.1 million in March. Indonesias shipments more than doubled to $1.2 million in March (+326% year-to-date).


Malaysian hardwood flooring exports were worth $0.3 million in March (-40% year-to-date). Imports from China decreased to $0.1 million in March (+59% year-to-date), but it remains the second-largest supplier to the US market in 2013 after Indonesia.

US imports of assembled flooring panels declined to $7.3 million in March, and they are only 3% above year-to-date imports in 2012. Imports from China fell to $3.3 million (-5% year-to-date).

Canadas shipments grew to $2.3 million (+15% year-to-date).

Wooden furniture imports growing despite March declines
US imports of wooden furniture fell below $1 billion for the first time in the last 12 months. March imports were worth $813.9 billion, down 21% from the previous month. Year-to-date imports are still 6% higher than in 2012.


Chinas furniture shipments to the US fell to $316.6 million (+8% year-to-date). Imports from Vietnam declined to $121.0 million in March (+11% year-to-date).

Many US SMEs exit kitchen and bathroom cabinet manufacturing sector
Sales of cabinets for kitchens and bathrooms were severely affected by the economic recession in the US. The low demand from new construction and remodeling of existing homes continues to have an effect on the industry today.


In the last five years industry concentration has increased because many smaller companies had to close their business, according to a recently released report by IBISWorld (Cabinet and Vanity Manufacturing in the US).


However, the majority of US cabinet manufacturers remain small companies. The four largest US manufacturers account for less than 25% of sales.


Cabinet sales started to recover in 2011. Freedonia predicts cabinet demand to grow by an average 8.2% per year to $15.3 billion in 2016 (Cabinets: US Industry Study with Forecasts for 2016 & 2021).


New housing is expected to be the strongest driver of demand, but the renovation of kitchens and bathrooms remains an important market.


The trend to larger kitchens and larger cabinets will support demand, according to Freedonia. The bathroom cabinet market is forecast to grow 6.5% per year to reach US$1.8 billion in 2016. More homes have multiple bathrooms, which has a positive effect on cabinet sales.


Cabinet demand in non-residential applications is expected to grow 6.5% per year to $2.8 billion in 2016. Growth in the construction of offices, retail stores and hotels will support demand for cabinets.


Preliminary anti-dumping duties for plywood imports from China
The US Department of Commerce announced on April 30 the preliminary anti-dumping duties on decorative plywood imports from China.


These duties were to come into effect on July 17 but, because two of the affected companies requested the postponement of the deadline the entry into force was delayed to allow for further investigation.


Those investigations have been concluded and the duties will come into effect in July. The new duties will be added to the existing preliminary countervailing duties, which range from 0.22% to 27.16%.


Two companies will not pay any anti-dumping duties (Linyi San Fortune Wood Co. and Jiangyang Group).


Over 100 companies were assigned a preliminary anti-dumping duty of 22.14%. All other producers will pay the China-wide duty of 63.96%.


Plywood from China has an estimated 30% market share in the US. All hardwood and decorative plywood is subject to the investigation and duties, including plywood with face and back veneer made from softwoods or bamboo.


Structural plywood and shaped plywood are excluded from the investigation.


Abbreviations

LM       Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS        Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR           French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF        Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report

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