| 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.
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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 |
.gif) 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. |
