News Release
Record
high U.S. clearwood pine prices to erode in 2005 as surging imports create a more balanced
moulding market
Release of the 3 rd
Edition of the Global Clearwood (Pine) Lumber, Moulding & Millwork Sector: Outlook
to 2008 Report profiles the pine market dynamics and projected impacts on both U.S. producers and offshore importers
﹛
For Immediate Release
September 21, 2004
Vancouver, BC 〞 The release of a five-year outlook report profiling
the global pine moulding and millwork industry suggests that the party in the U.S. market
will be over soon and it will be back to more competitive prices and normal margins. The
rapid run-up in U.S. moulding prices in 2004 broke all records 每 a result of
exceptionally strong demand but also horrendous ocean transportation problems in getting
Southern Hemisphere lumber and mouldings to the U.S. market. Soaring shipping rates and
shortages of ships came at a time when U.S. housing and repair/remodeling activity was
hitting all-time highs, causing prices to spike by 50% to 100%, depending on the product.
The third
edition of the Global Clearwood
(Pine) Lumber, Moulding & Millwork Sector: Outlook to 2008 report
by R.E. Taylor & Associates Ltd. / WOOD Markets profiles the expanding offshore
plantation pine supplies, the U.S. industry and market demand trends, the new threat of
MDF substitutes to solid pine products, as well as emerging offshore pine suppliers that
could potential displace U.S. producers.
※The past year has seen
truly exceptional prices for an industry sector that is technically flush with excess raw
material supplies and industry capacity,§ said Russell Taylor, co-author of the 200-page
Clearwood Report, President of wood products consulting firm R. E. Taylor & Associates
Ltd., and Publisher of WOOD Markets Monthly newsletter
. ※But when offshore supplies were delayed, a mad
scramble started to try and find available products and that caused the prices to soar.§
With about 75% of all U.S.
moulding and millwork consumption tied to either imported raw material inputs used at U.S.
processing plants or as imported finished products, the Southern Hemisphere timber
harvest, wood processing and exports have become very close coupled to the U.S. market. ※The plantation
pine harvests in the Southern Hemisphere could easily over-supply existing markets
(especially in the case of New Zealand)§, added Taylor, ※But recent timberland ownership changes, currency
exchange rate differentials and shipping issues helped to create U.S. market shortages in
2004.§
According to the report, the
outlook to 2008 will be spotty and not nearly so rosy for the pine clearwood lumber and
moulding sector as it was in 2004. A slower rate of growth in U.S. consumption coupled
with an expanding industry in the Southern Hemisphere is setting the stage for an
over-supplied market situation at some points over the next five years. ※The capacity of
sawmills, moulding plants, door factories, furniture plants and other facilities in the
plantation pine growing regions of Chile, Brazil, Argentina, New Zealand and South Africa
are expanding dramatically,§ said Peter Butzelaar, co-author of the report and a
consultant with R.E. Taylor & Associates Ltd. ※Imported finished pine products are
forecast to expand across the board into the U.S. market putting domestic U.S. producers
at risk in a number of sectors. Our forecasts also recognize the potential impact of two
other new suppliers 每 Siberia (high quality red pine lumber) and China (currently the
fastest growing exporter of mouldings to the U.S. market).§
The report profiles how truly
global the supply of U.S. mouldings has become, as over 25 countries now supply the
market. ※ Chile and Brazil are the dominant moulding suppliers - together they account
for 75% of imported U.S. mouldings in 2003,§ commented Taylor . ※ Brazil is expected
to overtake Chile as the largest U.S. pine moulding supplier in 2005, but other countries
appear to the have the U.S. market in their sights in other pine products, including
edge-glued pine panels and furniture, stile and rail doors and even window components.§
In the U.S. paint-grade moulding
sector, finger-joint mouldings have the largest market volume. But things are also
changing here, explains Butzelaar. ※The fastest rate of U.S. market growth has been (and
will continue to be) MDF mouldings 每 a lower priced alternative to solid pine mouldings.
The technical aspects and consistency of primed MDF mouldings have created the biggest
change in the moulding industry in the last five years. From nowhere, MDF now has a
one-third share of the U.S. moulding market and should continue to grow each year to 2008.§
?
The impacts on supplying countries to the U.S. market as well as five-year supply, demand
and price forecasts on clear pine lumber and mouldings are featured in the report.
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(Note: See following for more highlights from the Global Clearwood (Pine) Lumber,
Moulding & Millwork Sector Outlook to 2008 report.
For more content or
subscription information, please contact:
Russell
Taylor retaylor@woodmarkets.com
or Peter Butzelaar peterb@woodmarkets.com
R.E. Taylor
& Associates Ltd. / International Wood Markets Research Inc.
Suite 501
每 543 Granville Street , Vancouver , B.C. Canada
Ph:
604-801-5996 Fx: 604-801-5997
Highlights
:
3 rd edition, Global
Clearwood (Pine) Lumber, Moulding & Millwork Sector: Outlook to 2008 report
by R.E. Taylor & Associates Ltd. / WOOD Markets
1. Plantation Pine Timber Ha
rvest Highlights:
“
The
plantation timber harvests for the seven major Southern Hemisphere countries (Brazil,
Chile, Argentina, Uruguay, South Africa, New Zealand and Australia) are projected to
increase slowly, growing by another one-third by 2020 from the levels in 2003. Similarly, plantation pine sawlogs from these same regions are expected to rise by over
25% by 2020.
“
The
development of significant areas of ※pruned§ pine plantations has increased the harvesting capacity and clearwood output
throughout the Southern Hemisphere especially in New Zealand, Chile and South Africa, as
these countries dominate clearwood production from pruned forests. The pruned pine timber
harvests from the U.S. South plantations have been delayed but are expected to start
increasing significantly by around 2008.
“
The
potential spoiler for plantation pine producers may be New Zealand, as its domestic
capacity is only processing two-thirds of its current log harvest with one-third (7.5
million m3 in 2003) being exported offshore (in most cases to lower cost manufacturers).
2. Clearwood Pine Product
Trends:
“
Globally,
there remains no other market willing to pay a greater premium for clear pine fibre and in
large volumes as the U.S., and this should help America to retain its position as the
preferred destination of countries exporting clear pine. The current pace of growth in
available offshore clear fiber is projected to more than make up for anticipated future
reductions in domestic supply and projected growth in U.S. demand.
“
While
periodic shortages and surpluses are systemic in the U.S. millwork sector, our five-year
forecast assumes that, over the next five years, the market will more often than not be in
a balanced to oversupplied situation (the second half of 2004 and early 2005 will continue
to remain very robust and exceptions to the general rule). However, steady demand growth
and logistical issues will keep the U.S. moulding market more finely balanced.
“
Exporters
of imported clearwood pine have benefited from the declining availability of U.S. pine
lumber over the last ten years. The three largest lumber producers today, Brazil, Chile
and New Zealand, are all expected to increase their lumber output. However, the annual
growth rate of imports is expected to slow down in the next decade but should still be
favorable.
“
Our
projections are that the potential volume of shop/clearwood pine lumber available for
exports and/or as finished products (mainly solid lineal mouldings and boards) could
generally exceed the projected size of existing markets, even when growth rates are
factored in. Managing the plantation pine timber and lumber supply relative to overall
U.S. and global demand and expanding product and/or markets will be key objectives to
prevent soft prices from becoming the trend as a result of over-production of commodity
items in established markets.
“
One
more supply factor that should be recognized relative to clear pine lumber is that of
Siberia. Extensive field work conducted by R.E. Taylor & Associates Ltd. since 2001 in
Siberia coupled with discussions with U.S. importers and remanufacturers indicate that
high quality, fine grain red pine from Siberia is slowly becoming an increasing source of
clear pine lumber for the U.S. market, including red pine mouldings produced in China from
Russian wood. Siberian red pine is considered to be the closest substitute to the prized
(and expensive) ponderosa pine.
“
All
clearwood pine lumber prices (moulding & better and shop grades) will move off of
their record high prices by the end of 2004 or early 2005 to move back into step with more
historic price levels. However, prices are expected to decline slowly over 12 to 18 months
before they reach these lower levels.
“
Stronger
currency exchange rates to the U.S. dollar have become problematic for many Southern
Hemisphere exporters. These currency disadvantages are expected to significantly raise the
※floor price§ for some pine
exporting countries where they have a sizable market share. For example, since New Zealand
is the largest supplier of moulding & better lumber and solid lineal mouldings to the
U.S., our forecasts are calling for firmer lumber prices (or, at least, a higher ※floor price§) for these products.
“
Between
2003 and 2008, domestic consumption forecasts of moulding and millwork products are
expected to rise steadily. Domestic conversion of clearwood lumber into finished product,
however, is expected to decline marginally. In contrast, imported moulding products
produced from clearwood should rise at favorable rates. And, even more significantly,
products made from MDF and other substitute materials are expected to make even greater
inroads over the next five years.
“
Our
analysis indicates that U.S. consumption trends in the next five to ten years may not
likely be quite as robust as they were in the last ten years. However, this is becoming a
tougher call given the strong demand in 2004 and some of the longer term consumption
outlooks that seem to indicate a decade of almost sustained demand levels. In our
analysis, however, we have indicated that increases in U.S. consumption are not expected
to ※save§ Southern Hemisphere
plantation pine exporters with excess volumes as occurred in the last ten years.
“
As
a result, the clearwood pine industry will be facing some challenges. While we recognize
that some of more progressive companies are already addressing these over-supply issues,
most of the smaller and mainstream offshore players are still taking a followers＊
role and these companies will be facing the greatest problems when
price cycles hit their lows.
“
Over
the next ten years, the U.S. moulding and millwork market for clearwood products should
still expand, but at about half the rate as compared to the previous decade＊s average growth rate. Moulding and millwork producers in the U.S. are
expected to increase their consumption for clear pine lumber over the next ten years,
bucking the decreases that plagued the industry over the previous decade (mainly as a
result from declining supplies of ponderosa pine from National Forests).
3. Pine Moulding Trends:
“
In
terms of U.S. moulding consumption, we project a significant market share decline for
domestic clearwood products (solid pine) while imported mouldings also decline slightly as
well. The big winner is MDF (and other substitute products) where their market share is
expected to double up to 30% of the total moulding market. In all cases, however, volumes
will be higher in all product categories but the battle for market share will see MDF as
the big winner.
“
The
U.S. moulding market has enjoyed more than a decade of steady (and sometimes spectacular)
growth, with each year exceeding the previous year＊s record
high. Riding on the coat tails of a strong economy in 2004, U.S. moulding consumption is
projected to reach a new high in 2005. This mark should be surpassed in every year to 2008
as steady increases in U.S. consumption are forecast (but tied to forecast economic
drivers).
“
U.S.
production of mouldings (finger-joint and solid combined) has been flat since 1999.
Diminishing supplies of domestic clearwood pines has forced them to increase their
dependency on offshore supplies (now accounting for approximately 60% of their raw
material requirements). At the same time they are being challenged by increasing supplies
of imported pine and MDF mouldings where the bulk of increased volumes is coming from the
countries already supplying their domestic producers with their raw material 每 Chile and Brazil most notably.
“
Continued
volume growth in the U.S. paint-grade moulding sector is led by finger-joint mouldings.
However, the fastest rate of growth has been (and will continue to be) MDF mouldings.
Taking advantage of its stable pricing and smooth finishing properties, MDF has
progressively taken a greater share of the paint grade market forcing some timber and
processing operations to reconsider their focus on wood moulding exports to the U.S.
market.
“
Throughout
the five-year forecast period, North American production is expected to remain the largest
source of MDF mouldings. However, despite increasing output in North America, its share of
the U.S. MDF moulding market is expected to erode sharply as greater volumes of imported
MDF mouldings soar.
“
In
addition to clear pine-producing countries exporting product to the U.S., shipments of
softwood mouldings from China have increased dramatically. U.S. import data shows that
between 2000 and 2003, China＊s softwood moulding imports
increased over eight-fold (1.27 million lineal meters to 12.3 million lineal meters)
making it the eighth largest moulding importer in 2003. Following the example set by China＊s wooden furniture sector, a growing number of fledgling businesses are
diversifying into moulding and millwork products. By taking advantage of their
comparatively low manufacturing costs, Chinese producers are importing raw material from
Russia, New Zealand and Chile, and then exporting finished product to the U.S. and
elsewhere. At present the volumes are considered minor, but our forecast model assumes
that this trend will begin to have a more measurable affect in the later years of the
five-year outlook.
“
As
much as the industry is reported to have greater discipline through the consolidation of
players, we expect that once the market turns downward sometime in the second half of 2005
or in early 2006 from the current record high moulding prices, the momentum will
steam-roll prices towards the cost levels of the highest cost producers. This will create
another shake-out in the industry to eliminate some of the excess industry capacity that
has been building since 2001.
4. Pine Door & Window
Trends:
“
Brazil,
South Africa and Chile collectively increased capacity and exports of solid stile and rail
pine doors to the U.S. by a whopping 50% between 2002 and 2004. The only other region that
appears poised for significant volumes of pine door exports to the U.S. is China (the 12
th largest supplier in 2003), which is also considered to be the lowest cost
supplier of pine stile and rail doors to the U.S.
“
Our
overall view of imported plantation pine＊s product potential
in the U.S. residential window industry is favorable, but it will still require
perseverance and patience by exporters since volumes are currently low. As producers of
radiata lumber and cut stock work to build their market share, it is expected that radiata
and other plantation pine species will likely continue to sell at significant discounts to
ponderosa shop lumber and cut stock in the window sector.
5. U.S. Distribution Trends:
“
New
trucking regulations, fuel costs, ocean shipping rates and the availability of ships are
all major trends impacting the balance between supply, demand and prices. Caught in the
middle is distribution, as this segment is becoming more critical to meet the needs of JIT
deliveries as well as to prevent stock-outs. Shippers and distributors will need to adjust
their business models to accommodate these new and emerging constraints/opportunities.
“
This
third edition of our report features original research on the distribution strategies of
various offshore and domestic producers of mouldings and millwork products. A detailed
survey of many of the largest companies was conducted that addressed U.S. regional
consumption trends by product, distribution channel trends by moulding producer, and
expected strategic initiatives and plans by the major channel players.
For more content or subscription information,
please contact: Russell Taylor or Peter Butzelaar or visit our website at www.woodmarkets.com
Russell E.
Taylor, RPF, MBA
President
- R. E. Taylor & Associates Ltd. - Forest Industry Strategic
Services &
Managing
Director/Publisher - International WOOD Markets Research Inc.
#501 - 543
Granville Street
Vancouver
, BC, Canada V6C 1X8
PH: +1
604-801-5996 (&-5998)
FX: +1
604-801-5997
E-mail: retaylor@woodmarkets.com
WEB: http://www.woodmarkets.com |
