Sawmill closures and rising demand are likely to push lumber prices higher.
The past several years have been very rough on the lumber industry, writes Gene Wengert, the Wood Dr. Hardwood lumber production volume in 2008 was 25 percent down from the 1999 volume and indications are that volumes in 2009 will be another 10 percent or more lower. The reason for such a drop is that perhaps three-quarters of the hardwood furniture manufacturing has moved out of the U.S. to China and other offshore locations.
Further, we have seen kitchen cabinet sales drop 12 percent in 2007, 19 percent in 2008, and then 30 percent in 2009. Housing starts have dropped by about half from 2006 to 2009. Housing starts are a good predictor of furniture sales, cabinet sales and flooring sales, and there are a number of long-term factors that will boost housing.
In addition to large drops in lumber production and sales, the prices of the higher grades of hardwood lumber have, for most species, dropped by 40 percent from 2005 to 2009.
With decreased markets and decreased values, at least a third of the commercial hardwood sawmills in the U.S. have gone out of business in the last two years. What this means is, as a rough estimate, the hardwood sawmill industry now can produce only about two-thirds of past volume.
The future: Higher prices
Nobody has the perfect crystal ball to predict the future. But it does seem, based on a lot of indicators, including everything from the number of trucks on the road to housing trends moving positive, that the economy is improving. Certainly, the number of persons reaching the age of 20 and forming new households is just short of two million a year. So, there is a backlog of people that want or need housing ... and furniture, cabinets and flooring. This sounds good and means more wood products manufacturing for most of us.
It seems to make sense that if there is an increasing demand for hardwood lumber, and with the decreased production capacity of the sawmill industry, the outlook for lumber prices is going to be upward. In fact, it is likely that prices will rise quite rapidly for those highly desired species such as cherry, oak, hard maple and hickory/pecan. It is likely that supplies of kiln-dried lumber will be very tight, with delivery times being many months and quality possibly being questionable in some cases.
With this outlook, it might be prudent to have discussions and make plans for lumber producers and suppliers to assure future lumber supplies. The so-called "Good Ol’ Boy Network" will be active and can be effective if you are on the inside. In some cases it would be prudent to build up substantial supplies of kiln-dried lumber in anticipation of price increases and short-term shortages. If a wood products manufacturer has access to credit, it might be time now to consider investing in dry kilns to be able to purchase green lumber and then dry it yourself, saving money indeed.
Q: We are having a problem with shrinkage. We make furniture, but someone else sells and delivers it. This person claims he did everything correctly, including opening the furniture wrapping (we wrapped the furniture with shrink-wrap and it was fairly well sealed) and letting it acclimate to the house climate. When the customer moved in, they said the furniture looked really wonderful, but within a week, it started to warp, open joints and crack in a few places. We are so careful to keep our plant at 40 percent RH and check the MC of the lumber. This is frustrating! Can you help?
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Your economic analysis is probably dead on, however, I am amazed at how the consuming public, in a price rising market, will opt for composite based products versus real wood just because the price is less. All the composite manufacturer has to do is change the wording of his ad and they believe it. Translated, walnut surfaced doors are substrates rub with a walnut stain.
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