Keeping positive12 May 2008
Luxurious Palm Springs, California, and its Hyatt Grand Champions resort at Indian Wells, was the venue where nearly 400 members and suppliers assembled for APA's 70th annual meeting. During his chairman's address, Jonathan Martin, Roy O Martin Lumber Co, Alexandria, Louisiana, spoke frankly: "It's been a difficult year for residential construction with both demand and markets down. But our association is financially strong. We have excellent staff and an excellent strategic plan. We are prepared for contingencies and we have a strong leadership. I like our chances going forward." Richard Huff, vice president and general manager of Tolko Industries Ltd, Vernon, British Columbia is new chairman and Jim Enright, president, Standard Structures, Inc, Windsor, California, is new vice-chairman. Mr Martin announced Thomas Maloney as recipient of the Bronson J Lewis award. Dr Maloney is director emeritus of the Wood Materials and Engineering Laboratory at Washington State University, Pullman, Washington. He also founded the International Wood Composites Symposium, now held in Seattle, Washington. The panel industry's problems are rather longer term, a result of the economy getting out of kilter, a consequent dearth of credit, a surplus of unsold homes, a weak US Dollar. All these have magnified other problems resulting in weakening panel markets and consequent lower profit margins. David Lereah, executive vice president of Move, Inc, Westlake Village, California, forecast it all during his 2005 APA meeting appearance citing danger signs of a tiring market including stretching credit, rising mortgage rates, dropping home affordability, rising inventories, lengthening days on market and more speculation. He returned last November and outlined the present problems, explaining the geography. "All real estate is local. Real estate expansion started in 1991. Immigrants started buying homes in a big way. The industry had a mortgage product for whatever anyone wanted. Real estate expanded. Everyone turned to real estate, which was a safe haven. It didn't work that way. So many loans were made with nothing. So we have a real mess today. This is the worst. Home sales are down 35% now. It's the 'Dot com' of real estate." In the last few years of the boom, customers were purchasing for short term. "If you want short-term, you should be in the stock market, not the real estate market," he advised. Mr Lereah said 40% of all home sales in 2005 and 2006 were second homes. "Risky," he declared. He said real estate is a good, but cyclical, investment. He tempered his dire report by adding the fact that home prices increased tenfold over 38 years. He predicted a 10% drop, compared with a 33% climb during the boom. And it all affects the wood products market. "If we know how we got here, maybe we can get some sense of how we're going to get out of this thing," he said. "The inventory must come down," he said of the present excess housing supply. He said the speculators are out of the market. "That's good news, but they're coming back in to bottom-fish." He observed that construction jobs fell, but seemed to be turning around recently. He said the economics are improving, but consumers lack confidence. "The level is way down, off the charts. Every consumer has the expectation that prices will continue to drop." Mr Lereah ranked the state of California as leading in mortgage foreclosures and said that state will take the longest to correct the market (into 2009), with Florida next. The real estate recession in 2008 will be worst in California, Florida, District of Columbia, Las Vegas and Phoenix in Arizona and some metropolitan areas in the East and Midwest. He predicted an upswing in most parts of the country in the first quarter of this year. "When the market does come back, I expect it to jump a level in activity," he added. APA president Dennis Hardman agreed with the market description. "It's been a bad year," he said frankly. "You, through your association, have laid a strong foundation for better times to come." He reported that industry non-residential construction and Gulf Coast rebuilding programmes are moving forward under the auspices of the Wood Products Council and he praised the Engineered Wood Technology Association (EWTA), APA's related supplier organisation, as "a valuable asset for industry networking and information transfer". Earl Phillips, phenolic resins technology manager, Hexion Specialty Chemicals, Inc, said the main focus in air quality in resins has been on public buildings, with the next targets to be private homes and structural products. He warned: "A freight train is coming your way. Every living thing gives off formaldehyde. The pressure coming is based on emotion, not fact". He said resin prices have increased 215%, but the increase is less than that of wood raw material. He said consistency might be an issue with bio-based adhesives. Ward Hubbell, executive director of Green Building Initiative, outlined activities of his association: promoting credible building practices; wood promotion network; expanding National Association of Home Builders partnership; education; and third party research. Mary Jo Nyblad, Boise Cascade LLC, further explained the importance of the state of California to the US wood products market. She said the state has a US$1.5 trillion economy which would rank 8th in the world's country rankings. One in eight Americans lives there. She said California's home price now exceeds median income by ten times, while the rest of the country is 4.5. The average housing demand is 240,000 units. She said that the California Building Standards Commission is to adopt the green building programme. Ed Elias, APA, reported that the significantly weakened US dollar makes a better market for importers of US goods. APA's Tom Williamson posed some problems in wood design, saying: "Steel is easy. Wood is complicated". He said software for wood design is fragmented and component-based and designers make more from designing with steel than with wood. Continuing in that vein, Mark Halvorsen, APA, told members: "Process designers and product engineers, take note: engineered wood panels deliver increased value, better durability and long-term performance". He stressed some other pluses: strength and stiffness; dimensional stability and flatness; surface texture; workability; relative lightness in weight; lower formaldehyde emissions; environmental friendliness; durability; unique features; and surface durability. Marilyn LeMoine, APA, reported that the organisation has published 402 titles and distributed 475,000 in the first nine months of last year. Building professionals downloaded 60%. "If only 1,000 of the projects were built, it would result in using one million ft2, 3'8in basis, of plywood," she conjectured. Craig Adair, APA, said reducing home inventory is the key to market recovery. His five-year forecast calls for a small improvement in 2008 and 2009 and a return to the 3% improvement range in 2010. He said demand for housing should be greater in the 2006-2015 decade. He described the recent housing boom as "too much, too fast". He predicted that plywood imports to the US will increase and total OSB exports from Canada and the US will increase substantially throughout 2008. He forecast structural panel growth with further opportunities. Mr Adair said converting concrete floors to wood would be a 2.6 billion board foot opportunity for lumber and a three billion ft2 opportunity for structural panels. "The stakes are high," he declared. He noted that the total share of wood based construction hasn't changed much since 2000, adding that plywood production is expected to decline from 2007 to 2012. An OSB forecast taking advantage of a predicted housing resurgence would be expected to increase from 2007's 24 billion ft2 to 28.6 billion ft2 by 2012. He had hopes for a glulam rebound after it suffered from the housing drop. LVL was also a victim, but he thought LVL would increase after 2008. Mr Adair concluded on a medium-sized high note: "We don't see a recession". Jim Bowyer, Bowyer and Associates, Inc, Minneapolis, Minnesota and professor emeritus, University of Minnesota, reported that global energy consumption is rising and US energy use per capita continues to rise. He said China exported petroleum in 1993, but is now a major importer. India is perhaps seven to 10 years behind in energy consumption. He sees a peak in world petroleum consumption in 2010-2020. The US Department of Energy predicts 2037. Dr Bowyer declared: "The US is not prepared for what is coming". Coal still provides 21% of today's energy needs. Gasoline uses more energy to produce than we get out of it, he said. He explained that less than half of a barrel of oil goes into making gasoline. Other products, such as resins, use the rest. "It's possible to make all of these materials from biomass. Interest in biomass energy is higher than it has ever been. Potential suppliers of biomass are large," he concluded. A record of 70 exhibitors showed and discussed their machinery and supplies with members during several periods set aside for the activities. The Engineered Wood Technology Association sponsors the Info Fair. Raute, Willamette Valley Company, and Coe Newnes McGehee shared awards for seniority. Each has exhibited at 15 annual meetings. Eighteen awards in the all-important safety category were handed out during a special banquet, with LP taking home six; Weyerhaeuser Company five; Georgia-Pacific Wood Products three; PlyVeneer Products two; and Norbord, Inc, and Boise Cascade, one each. Eleven of the 16 winning mills had zero accident incidence rates. APA's 2008 annual meeting is scheduled for September 21-23 at the Ritz-Carlton, Lake Las Vegas, Henderson, Nevada.