Panels & Furniture Asia Jan/Feb 2019

PANELS & FURNITURE ASIA • Issue 1 • January / February 2019 MARKET REPORT 13 September, inclusive, last year. The number of successive monthly reductions is unprecedented in recent history. Shipments into China increased in October to bolster buyers’ contracted inventories and avoid impending tariff increases (scheduled at that time for January 1, 2019). Even then, the volume of hardwood lumber exported from the U.S. to China in October 2018 was 12.5 per cent lower than volume exported in October 2017 (Figure 1). Prices fell quickly and in direct response to decreased demand. From the midpoint to the end of 2018, prices published by Hardwood Market Report dropped 15 per cent and 24 per cent, respectively, for Appalachian kiln dried 4/4 Fas and #1 Common red oak. These published prices are comprehensive of global trade; prices for some China business decreased more. Expectedly, lower demand and prices are forcing decreases in U.S. hardwood lumber production. Disruptions to logging, sawmill output, and green lumber supply flow can easily bemasked by available kiln dried inventories. As a matter of caution, having adequate supplies now does not mean enough green lumber is being produced to replace ongoing needs for kiln dried lumber. Eastern U.S. hardwood sawmill production decreased in December 2018 to its lowest level since April 2013 (Figure 2). The industry was climbing out of the Great Recession at that time. December’s volume was also the lowest amount of green lumber e v e r p r o d u c e d i n t h e mo n t h o f De c emb e r ( p r i o r t o 1960 ) , except during the Great Recession era (2009-2012). From August to the end of December this past year, eastern U.S. hardwood sawmill production fell 37 per cent (Figure 3). Newton’s Third Law applies to this U.S. hardwood lumber situation. For every action (decreased demand and pricing), there is an equal and opposite reaction (decreased supply). Rather than a question of supply change, attention should be given to the timing, duration, and severity of U.S. hardwood sawmill contraction. A prolonged and extreme downturn can damage the production network and limit supplies buyers will need to participate in the next market upswing. And, therewill be anothermarket upswing. For those who might not know or recall, look back at your business in 2013-2014 when such supply constraints existed. Understand, supply correction is well underway. ℗ From top - Figure 2: Eastern U.S. hardwood sawmill production decreased in December 2018 to its lowest level since April 2013; Figure 3: From August to the end of December this past year, eastern U.S. hardwood sawmill production fell 37 per cent

RkJQdWJsaXNoZXIy NjQxMzk=