This week the US Department of Agriculture, via the US Forest Service Southern Research Station, released it’s report, “The Global Position of the US Forest Products Industry”.
The Key Findings for the solid wood manufacturing sector in this latest US Forest Service report are:
• the US share of global wood products output peaked in 1998 at about 28 per cent, declined to about 24 per cent in 2006, and then fell with the 2007–2009 recession to an unprecedented low of about 17 per cent, where it remained through 2013;
• a combination of cyclical and long-term trend factors largely drove the decline in share observed since the late 1990s;
Technology has influenced solid wood product composition, with particleboard and other engineered wood products (e.g., glulam beams and I-joists), allowing a shift toward utilization of smaller trees, particularly those grown in plantations; and,
• while domestic economic activity dominates US forest products output, global markets are increasing in importance. Most notably, growth in manufacturing output in China has shifted paper and paperboard production toward Asia.
In contrast, the Key Unknowns are:
• wood products market futures over the next 10 years will depend not only on the level of housing demands but also on the composition of new housing (single-family versus multi-unit). Potential effects of altered income distribution on housing demand are unclear;
• tightening resource supplies outside of the United States and especially in Asia might increase the US’ comparative advantage in the long run, based on its sustainable plantation production model; and,
• unknown effects of inventory/supply shocks (related to the mountain pine beetle epidemic) in Canada, a dominant source of US imports, could potentially increase demand for US production.
USDA Report March 2015
The report goes on to say that the United States exhibited a steady expansion in the consumption of industrial roundwood from 1965 to 2005, with only slight dips in output associated with economic downturns. This growth aligned with an increase in production of manufactured goods in the United States, which consumes paper, especially for packaging. But this growth ceased in 1999 and has since dropped along with the decline of the US manufacturing sector.
Imports of industrial roundwood averaged 34 million cubic metres from 1965 to 1997. The housing market expansion from 1998 through 2007 required import quantities that were more than triple that number, up to 118 million cubic metres. Since 2007, imports have declined to near parity with exports. The housing market contraction in the United States from 2006 to 2009 corresponded with an import contraction, particularly in wood products from Canada, the largest foreign supplier.
As of 2013, coniferous sawnwood production had increased by 10 million cubic metres, or 25 per cent, from its 2009 nadir.
The housing market expansion up to 2006 induced a decline in exports and a rise in the rate of domestic wood consumption. However, as the housing market contracted, exports increased. Between 2007 and 2013, the quantity of exports of coniferous sawnwood increased by 193 per cent, from 1.47 to 4.31 million cubic metres. Imports, especially from Canada, play a strong role in US markets for coniferous sawnwood.
In summary, the report says US forest products consumption and production are heavily correlated with US economic activity. Solid wood products output correlates most strongly with housing construction. Paper and paperboard production correlates very strongly with total manufacturing output. Product mix, raw material (timber) harvest, and labour demand have all been strongly affected by technological changes through this time period. We observe a change in the relationship for softwood lumber between US consumption and production levels in 1992, when the United States substantially reduced timber harvesting from its Federal lands, thereby reducing available timber supply. The decline in Federal timber production led to increased domestic prices and increased demand for imports, largely from Canada, as well as greater reliance on private Southern US timber to meet domestic demands
The United States’ dominance in production has narrowed since the late 1990s. The decline from the late 1990s, when global production share was over 22 per cent, can be attributed not just to declining domestic production but also to increased production in Russia, China, and other countries with significant coniferous resources.
The most recent recovery in US share from the 2010 low of 15.6 per cent to the 2013 share of 17.2 per cent is consistent with the partial construction market recovery; a continuing construction recovery is likely to bring this share closer to its 1961–2012 average of 18.5 per cent.
Full report available here: http://www.srs.fs.usda.gov/pubs/47916