Of course capacity trends such as we have given in our MDF survey (p14-21) are important but many readers will be deeply concerned about demand, operating rates, competition, prices and costs. Right now many of these issues are coincident and collectively conspiring to create, as one recent article in the trade media described rather aptly ‘the perfect storm’. The problem is that no one can be at all sure when the ‘green shoots of recovery’ might emerge; an overworked phrase already but also something of a misnomer. The economy is not botany where green shoots become buds and transform into flowers in a matter of months. For the wood industry it might take 12, 18 or 24 months from green shoots to somewhere near past industry norms.

Another article, originating in North America, made a plea for less pessimism because all the underlying dynamics were still positive; long-term population growth, huge public investment programmes, increasing per capita incomes, increasing household formations, the need for new housing. If memory serves, the prediction was that these trends will come back on track by 2014/15. It is a reasonable set of assumptions and any part of the panel industry still around by then will surely benefit!

This author offers no new predictions of green shoots, recovery or normalisation of prior industry conditions other than to state the obvious (always a safe bet!) – things will change.

Those companies still surviving since early 2008 and, for North American companies, since the beginning of 2007, do so for two reasons. Firstly, they were already well-run, possessing financial reserves. Secondly, they instigated change in how they operate. These are all types of companies and include some in the wood products sector. The conditions of the past year or so quickly exposed and attacked any corporate weakness. Survival of the fittest was never a truer philosophy.

There might be some value in looking at the current crisis in a slightly different way, especially for Europe and North America.

The severity and all-embracing nature of these economic conditions – unprecedented in the experience of all those living today – is creating change as a matter of course. Casual observation suggests some trends evident before the crisis are accelerating; others might disappear and new trends might emerge which were pretty much unheard-of previously.

Instead of trying to predict when recovery will be upon us, perhaps we should consider the nature of that recovery and its impact upon social structures, public and private attitudes. What will our world look like when we eventually come out the other side? For the sake of relevance, these thoughts are slanted towards the wood industry in general, but where to begin?

All our email inboxes are inundated with new sales pitches; the increase in traffic was concurrent with the start of the crisis. Online activity will explode, particularly outside North America where digital usage is perhaps not so extensive. This will be a global phenomenon. Suppliers of goods and services need to promote themselves quickly to large potential audiences, offering special deals to drum up business. Typically, this is via email but it is also leading to new and revamped company websites offering more scope, more information and more interaction.

Retailers and other service suppliers are particularly looking to cut established costs such as bricks and mortar, staff, stock, utility bills, local taxes and go for online selling. Their customers are less keen to go to the expense of visiting shopping streets across town or in other towns. If on-line activity was important before the crisis/crunch/recession, it will emerge as the dominant force in many consumer sectors.

As a side issue in these energy conscious times, it was estimated that internet/email accounts for over 2.5% of electricity demand in some countries and is set to increase significantly.

Something very new is the prospect of virtual reality shopping. Many internet users are indulging in virtual living (a recent high-profile case saw a woman divorce her husband because she found he had created a virtual wife for his virtual life and presumably had committed virtual adultery!). Today, players can buy designer T-shirts for US$5 to wear in their virtual lives. One leading designer brand is using the virtual shop to test new designs. Who is to say players will not want to design and build their dream house, fit it out and furnish it without any of the
hassles and trauma of real building?

The trends we speak of are not homogeneous across society – they never are. Different sectors of society will behave differently because of the variations in age, attitudes, ambitions and aspirations. There are four generations alive today which will be affected by the crisis. Their incomes and lifestyles will be modified by the conditions.

Firstly, the very young and those still in school who will probably take their lead from the generation above.

Secondly, there are their parents who are often first-time and early salary earners.

Thirdly, there are the mature salary earners with older families of their own.

Fourthly, those approaching or in retirement.

In a practical sense, housing will be a key issue for the second, third and even fourth group. Housing is where this crisis began and it cannot be expected to carry on as before.

Every home owner benefited from the housing price boom. It is in temporary recession because population growth, household formations and the limited availability of land (that is, land where most people want to live) will ensure prices will rise again. But attitudes to homes and housebuilding are changing.

Affordability is a key issue and will be more so once the politicians introduce stricter regulation of the mortgage market. Lending restricted to three times salary will peg back the cost of new homes.

However, there is a desire for more quality (and not just in housing but also furniture, fittings, electrical goods and a host of other consumer items). Buying goods to last will be the attitude of groups two and three. They will only want to buy some items once and this may apply to their house.

There may be fewer house moves and more renovation and modernisation. Another big benefit of longer lasting products might be to take the edge off using low-cost producer countries and justify buying from domestic suppliers.

Green issues, like the internet, are booming. Homes will need, by consumer choice or political regulation, even more built-in environmental features such as energy saving/generation, water conservation, lower maintenance. Within better affordability, home buyers will still want the environmental features, as well as better quality and many more facilities built-in. For some this might be mini gyms, home entertainment, play rooms. For others, indoor pools or underground parking. One radical design in England allows the main living spaces to slide out from under the roof in the summer and retract to be more cosy and insulated in the winter.

We have no comment about second homes and holiday homes but in today’s low-interest conditions, property will remain the investment of choice and principal aspiration for most households.

All of this bodes well for wood. There will be more interest in wooden homes as being able to best incorporate and combine the desire for green, quality, extra facilities and flexibility at affordable cost.

Wood can be used in pre-fabricated, panelised floors, walls and roofs which are fast to erect and the long term environmental benefits are plain for all to see – except the many politicians in Europe who are doing their best to limit the widest use of the only raw material which can be guaranteed to be available and affordable for the foreseeable future. They have become overly fixated with illegal logging and ways to regulate the trade. If their time and resources were used to actually promote wood, they may find that they reach their long-term goals more quickly.

Interestingly, during recent research carried out by the author in the wood trade in general, it was noted that an increasing number of existing wood users among architects and manufacturers were thinking about ‘carbon footprints’. They did not want to stop using wood because they recognised its renewability, but felt that they should use wood from closer to home. If this becomes a widespread trend, then it could restrict the international trade in some species.

Commonplace in the United States but very much less so elsewhere is the use of wood-framed small apartment blocks, or condominiums. There is already more terracing and town housing. Such standardisation will give rise to more emphasis on fitting out to add aesthetics and comfort and bespoke interiors to offset the commonality of the exteriors. Wood is the obvious material to achieve this.

Are we to see, if not the end, then the beginning of the end of low-cost air carriers? A plan by one to charge for the use of the lavatories on its aeroplanes may earn more approbation than revenue. Perhaps the long-term plan is to remove all lavatories and claim an environmental weight-saving move to save fuel!

The rate of growth of mass, long-haul flying may drop sharply. The actual cost and the perceived negative environmental impact among potential passengers is producing much more interest in ‘holidays at home’. For many countries this will mean a need for much-improved facilities by vacation and hospitality providers. Again this could be good for wood.

A similar theme, but a different effect, of more costly business air travel might conceivably be the development of virtual trade shows, currently used in the real world extensively by all sectors of the wood industry. If virtual shopping is being developed, why not a virtual trade show? It would have a longer shelf-life than a real one and last a month, six months or a year. It could well be more economical for the exhibitor and visitor alike. How about InterzumNet or VirtualZow?

Changes have been ongoing in the wood distribution system for several years. Rationalisation in the importing/wholesaling sector and the merging and blurring of functions are commonplace. The problems facing the distributors are exacerbated under the current conditions. The cost of space to hold stock, the cost of finance, the cost of transport, staff wages and overheads and even the cost (if it is available) of credit insurance have been issues – even in periods of rising demand.

The de-skilling of the building trades, abetted by the other sectors of the wood industry with trusses and prefabrication, has reduced the role of the traditional lumber and panel stockist. Many have adapted and this adaptation will accelerate. There will be more finished and semi-finished products, ready-to-fit, such as windows and window frames, pre-hung doors, engineered flooring, staircases, panelling, fascias, cladding, decking and pre-fabricated structural elements. Where does this leave the sawmill and the panel mill? Do they add value themselves or will the trade fabricator rise again?

There are many more trends than space available to discuss them. These thoughts are offered as a means to stimulate consideration of the options open to wood producers. If nothing else, it is hoped readers will recognise that there is a future beyond the crisis and that future will
be wood.