Demand for U.S.-made flooring in Q2 will be limited by lackluster residential construction and pressure from imports. New tariffs on Chinese engineered flooring will shift some sourcing to other Asian producers and may slow import receipts in Q2.

Long-term, tariffs would only enable U.S. firms to recover a small percentage of domestic market share—47% of which now belongs to Chinese products.

Some contacts sense that flooring lumber prices are at bottom. We don’t…for several reasons.

• First, average green Oak lumber prices for flooring plants are still over $100/MBF higher than the 2009 average. Export growth will prevent a return to 2009 levels, but won’t sustain current prices if domestic demand falls further.

• Second, tie and pallet cant supplies will continue to grow.

• Third, average prices for a typical grade mix for unfinished strip flooring producers have fallen 21-24% since Sept 2010, while lumber input prices have fallen just 13-15%.

With Sel/Btr and #1 Com strip flooring prices still sliding and inventories building, plants will have to reduce lumber prices. The few plants that have loosened lumber receipt quotas will tighten back down by April. Flooring sales will not improve in Q2, but operating margins may look a little better. -

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