Panels & Furniture Asia Jul/Aug 2020

July / August 2020, Issue 4 | Panels & Furniture Asia 18 | MARKET REPORT By: Judd Johnson Managing Editor, Hardwood Market Report US HARDWOODS MARKET OBSERVATIONS AND POST-PANDEMIC OUTLOOK B usiness for US hardwoods has contracted. After experiencing a downturn that lasted more than 18 months due to the US-China trade war, demand for US hardwoods suffered further from the COVID-19 pandemic that derailed trade worldwide. Each of these factors, independently, forced contraction in US hardwood production and inventories. But, importantly, the rapid deceleration in business caused by the trade war followed immediately by the COVID-19 pandemic has profound and, most likely, lasting negative effects on US hardwood production capabilities. It is well understood that supply follows demand, therefore decreases in sawmill and lumber yard output are no surprise. Yet, the supply decreases are not necessarily aligned with demand for specific species or grades of lumber. Oddly, the estimated volume of lumber being produced by US hardwood sawmills is less than the total consumption, but the availability of certain industrial products and grade lumber items is more than ample at present. The best example of this circumstance (at the time of this writing) is material sawn for the domestic US wooden pallet industry. Sawmills have had difficulty selling pallet material and many have accumulated inventory. Yet, the annual rate of Eastern US hardwood sawmill Chart 1 production through May dropped to 15.5 million cubic metres and production decreased precipitously in the second quarter. The three-month moving average of production (annual rate) at the end of May was 13.6 million cubic metres; the combined average annual rate for April and May (available data for the second quarter) was 12.2 million cubic metres; and the annual rate of sawmill output for the month of May was 10.2 million cubic metres, which is the lowest volume for any month in Hardwood Market Report’s (HMR) sawmill production data series. Throughout these declines, earlier setbacks in business caused by COVID-19 created an inventory backlog of sawn pallet material. Only after commerce began reopening in the US following the peak of the pandemic did pallet lumber inventory surpluses begin to work down. It is a fluid situation. As business ramps back up for the pallet industry, the trajectory of raw material demand from this market sector is well above