What’s with wood panels and the economy?7 April 2009
Has the US economy and panel market hit bottom yet? No, according to expert economists and market analysts addressing the Forest Products Society in Corvallis, Oregon. Bill Keil was there to bring this report
A trio of experts met with some 30 industry and education experts at Oregon State University’s college of forestry in Corvallis on March 19 with a backdrop of worldwide gloom and doom.
The session was centred on the state of Oregon’s economy and industry, but that state’s situation mirrors that of the US – and much of Canada.
In the US, at least, the plunging housing market was probably the most visible factor, but mortgage lenders and questionable bank practices exacerbated that problem.
Oregon state employment economist Art Ayre declared that he thought Oregon would be hit less than the rest of the country, “but this was not so. Oregon just joined the downturn a little late”.
He reported that the state was 16th out of 50 in job losses. Employment peaked in November/December 2007, declined in 2008, and plunged during the beginning of the third quarter.
He predicted a net job loss through to the fourth quarter of 2009, then slowing to moderate growth, but with prolonged housing market instability.
Overall, he sees 1,800 wood product manufacturing job losses in the 10-year period ending in 2016.
He said Oregon outperformed during the 1990s and recovered rapidly from the earlier recession: “The fourth quarter last year was pretty bad, and it looks the same for this quarter”.
He reported that the wood products industry lost 5,000 jobs last year. This doesn’t include logging, which was “way down. Manufacturing downturn steepened in the last few months and construction has really taken a hit,he said.
In a short-term forecast, he concluded that he expects a 4.3% drop in 2009 with a “very modest gainnext year.
The federal government owns a large share of the state’s forestland and preservation policies forced on them have limited the available harvest, thus more of the cut is now on private lands.
David Ford, director, Oregon Small Woodlands Association, said the recent cut was four billion board feet, with three billion of that from private lands.
Much of these small forests are owned by older people (average age 66), handing them down to their children. Thus many are broken up into smaller units.
“We’re still growing more trees than we’re harvesting – about 80% of the growth on these private lands,he said.
He has concerns about manufacturing capacity when the markets return. Cutbacks in federal harvesting have already forced many closedowns. “We have taken off-line virtually all of the outmoded capacity that wasn’t up to par. If we don’t have the basic
infrastructure, we can’t survive,Mr Ford concluded.
Craig Adair, APA’s director of market research, warned, “I don’t think we’ve hit bottom yet, although we’re getting near the bottom. Maybe plywood has learned to live with it. Western mills have found niche
An ominous note was that large home centres halted buying in the fourth quarter of 2008. Non-residential construction was some help last year, but dropped off in 2009.
When OSB came out as a strong competitor to plywood, the latter market weakened. However plywood has held up somewhat in this terrible market. Developing niche markets has been a large factor in that development.
One such market is upholstered furniture frames where hardwood lumber held sway. There was 50% waste in cutting knots and defects but plywood, with very little waste, now has 75% of that market.
There are 77 softwood plywood plants in the US and Canada. Oregon is the largest producer, with 19 of those mills. I-joists, previously an industrial product, are heavily used in residential construction. Builders say they adapted to I-joists because they had to throw out waste.
Mr Adair tallied 77 softwood plywood plants in the US and Canada, 60 OSB plants, 37 glulam plants, 32 I-joist plants and 18 LVL plants. He emphasised that plywood is less dependent on US housing than most wood products and gave a breakdown for dependencies in 2007: I-joist 70%, LVL 70%, OSB 65%, glulam beams 60%, softwood lumber 33% and softwood plywood 21%.
“For the past two years we have predicted the bottom of this market. We do feel that we’re near the bottom in home-building,said Mr Adair.
He still sees markets capable of development. “Most of the homes in the south are still on concrete. Also the industrial market still offers growth, but we need a stimulus to dry up the surplus housing,he said.
He outlined the steps leading to the present recession: liberal housing policy, sub prime mortgages, everyone bought “ahead of schedule”, big housing inventory, credit crisis, recession.
The average of seven agency forecasts for 2009 housing starts was 500,000, compared with 905,500 in 2008. For 2010 it was 775,000. They predicted an increase of about the same percentage from 2009 to 2013.
His final predictions and advice:
• Housing begins to get better late 2009, into 2010
• Housing and wood products will suffer for another year
• Daily survival for now
• Planning doesn’t cost much. Look at markets where growth is possible and diversify your portfolio
• Concrete slab floors can be wood
• Non-residential buildings don’t have to be built with steel and concrete
• Industrial markets still offer growth by displacing plastic and metal in