Wood industry representatives from various industry associations were queried on the climate of their wood products market, including expectations for 2013 sales. Below are some additional comments by Kip Howlett, president of the Hardwood Plywood & Veneer Association.
Wood & Wood Products: Overall, what are your members’ sales/shipment expectations for 2013 and how do they compare to 2012 figures?
Kip Howlett: Even though the housing market has finally begun to move into a recovery mode, it is far from achieving a normal rate to meet demographic growth and replacement needs. Other sectors of the economy have shown a slow but steady uptick of about 3-4% improvement in the last year.
The U.S. veneer is dependent on export markets and exports to the EU are dependent on their recovery there which continues to be unstable due to problems with the euro. We can expect to see more of the same going forward into 2013.
Of course, these predictions are dependent on the political class not achieving a stalemate in their negotiations and sending the U.S. over the fiscal cliff.
W&WP: What will be the biggest challenges to your members and your industry in 2013? What are the biggest opportunities?
Howlett: The continuing flood of cheap imports from China has eroded the U.S. producer’s market share of the domestic market. U.S. producers continue to idle 60% of their production capacity which has been a steady pattern unfortunately.
Adding a double whammy is the Canadian producer’s share of the U.S. market has lost ground to these Chinese imports as well which adversely impacts the U.S. log, veneer, and platform producers who supply a dwindling Canadian market. Chinese imports are also impacting the domestic Canadian market as well.
Following on the heels of last year’s determination by the U.S. International Trade Commission that the U.S. engineered flooring industry was damaged from Chinese EWF being dumped into the US market and Chinese subsidies were also countervailable. The domestic market has slowly begun to level this playing field.
U.S. trade law was quickly settled on how to treat subsidies in government managed economies like China’s when a recent court decision raising questions about the U.S. countervailing duty statute was overturned by Congress and addressed this issue very quickly.
The U.S. Coalition for Fair Trade of Hardwood Plywood filed a similar antidumping and countervailing duty case against Chinese hardwood plywood producers. The Department of Commerce determined to proceed with the case that was filed, and the U.S. International Trade Commission voted unanimously the there was evidence of harm to the U.S. producers that was caused by these Chinese produced imports. Dumping margins of over 300% have been alleged.
In addition to company specific dumping claims and industry wide benefits from China’s subsidy program, the petition also seeks to monetize the value of illegal logs used by the Chinese industry. China is the largest consumer of illegal logs in the world and this consumption provides a competitive advantage against those who abide by the law.
W&WP: Are you still seeing a big demand for sustainable/green certified products?
Howlett: The fastest growing sector of another wise weak market continues to be the “green building” segment which engineered wood products have natural advantages to supply. In addition to the obvious carbon advantages of wood which are derived from a sustainably managed American hardwood forest which is the major sink for carbon in our ecosystem, wood continues to sequester carbon during its product life cycle use. The U.S. temperate forest, one of the world’s largest, sequesters annually the amount of carbon emitted by the entire U.S. commercial sector.
Engineered hardwood products maximize the yield from hardwood logs reducing the demand to consume more trees. We are encouraged by LEED, for example, opening their program to the use of Life Cycle Assessments which can only highlight the natural, renewable advantages of engineered hardwoods over extractive, substitute materials.
We support more rigorous requirements for the way competing materials are extracted from the environment. Those industry’s requirements do not document through 3rd parties their performance compared to the forest products industry which is a leader in these programs with FSC, SFI, PEFC, ATFS and others.
W&WP: What do you think it will take for your members’ companies to have success in 2012?
Howlett: Our two biggest challenges notwithstanding a weak overall economy are Chinese imports and laminates which aspire to be real wood but there is only one real thing.
North American quality production to insure safe products and physical performance which is another advantage of engineered wood products are the keys to success.
Real wood made the right way! HPVA has finalized and published a new, updated ANSI national consensus standard for engineered wood flooring (ANSI/HPVA EF 2012) and is shooting to publish the updated standard for hardwood plywood (ANSI/HPVA HP-1-2013) early next year.
W&WP: What recent or pending legislation do you feel will have the greatest impact on the North American hardwood plywood veneer industry and why?
Howlett: The federal formaldehyde law which is supposed to be finalized this year in regulations will impact imports and insure a more level playing field. For hardwood plywood, over 95% of the North American production meets the standard, over 50% uses non-formaldehyde adhesives, and almost 67% has achieved emissions so low as to be exempt from the CARB standards.
The EPA MACT standards particularly as it impacted the energy use of resinous production by-products in our industrial boilers recognized these materials as fuel and avoided annual costs to this industry which were the equivalent of its after tax profits for the year if they weren’t considered fuel.
Some foreign markets remain closed to the U.S. producers through non-tariff trade barriers adversely impacting the ability of U.S. produced engineered products and veneer from being exported into those markets.
There are obvious reasons why this has been labeled a jobless recovery and this sector is a casebook study on what’s wrong and what can be done to address the problem.
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