Panels & Furniture Asia Mar/Apr 2019

March / April 2019 • Issue 2 • PANELS & FURNITURE ASIA 18 MARKET REPORT WHAT IS NEXT FOR U.S. HARDWOODS? By: Judd Johnson Managing Editor, HMR M any things can influence business for U.S. hardwoods. Fashion is one that plays a large role for hardwoods used in appearance applications for interior fittings and furnishings. U.S. hardwoods are also used for decorative accessories and novelty items that may be tied to fashion. In fact, technological advances in finishes and treating are taking U.S. hardwoods outdoors for fashionable exterior uses. Minimising environmental impacts and using sustainable materials are now core values to designers and consumers worldwide. Not only are interior fittings and furnishings affected by this mindset, building structures are scrutinised for favourable environmental effects. Cross laminated timber (CLT) building construction is emerging and is a great use of wood to meet these objectives. U.S. hardwoods will have an increasing role in that sector. Market cycles are a reality and can disrupt business flows for U.S. hardwoods. Fashion swings are cyclical in nature, as is residential and commercial construction activity. Business shifts, such as these, and weather can alter the supply/demand balance for U.S. hardwood lumber. Acute supply imbalances stimulate price movement, but price movement incentivises supply correction. As with many market trends, the supply realignment process also follows a cyclical pattern. Among the factors that truly drive business for U.S. hardwoods, none is more important than the economy. Taken a step further, demand for U.S. hardwood lumber is strongly affected by the desire and ability of consumers to purchase goods. After all, consumer spending is the engine that propels growth for developing and advanced economies worldwide. Consumer spending directly influences demand for furniture, flooring, and cabinets – items manufactured from hardwoods that HMR classifies in the “grade lumber” group. Furthermore, consumer spending affects demand for materials used in infrastructure development, transportation, and packaging materials – sawn hardwood products grouped as “industrial lumber.” Notably, industrial product markets make up 53 per cent of the total marketplace for hardwood lumber produced in U.S.. The remaining 47 per cent of U.S. hardwood lumber, or the “grade lumber” group, is divided among the U.S. domestic market and exports. ( 1 The stated percentages of U.S. hardwood lumber consumption are based on 2018 data from HMR.) The U.S. domestic market consumes 55 per cent of the grade lumber volume. Of the hardwood grade lumber exported from the U.S., China accounts for 51 per cent of the volume. Stated differently, China consumes 24 per cent of all U.S. grade hardwood lumber; consumption by the remaining U.S. export markets, combined, equals 21 per cent. Understanding the market distribution of U.S. hardwood lumber and that consumer spending is affected by economic health, the following is insightful information taken from the January 2019 World Economic Outlook from the International Monetary Fund (IMF): The issue demonstrated in this chart and experienced in the marketplace is global economic expansion has weakened. Economic deceleration by major markets has disrupted the