What Lies Ahead for Hardwood Lumber Domestic Markets?

By AMANDA BOUTWELL

Over the past three years, the hardwood industry has faced a multitude of challenges: the trade war with China, COVID19, labor shortages, quarantine, supply chain disruptions, and now soaring fuel prices and a possible war with Russia. We could rewrite the old Billy Joel song “We Didn’t Start the Fire” with a list of everything we’ve encountered. The famous 90s song showed that each decade has its own set of troubles, but we always persevere in facing whatever challenges lie ahead of us. And that is precisely what the hardwood industry has done. Persevere. We have been scrappy and innovative, and despite what’s happening in the world, we have remained strong.

Domestically, 2022 is expected to be a good year for most hardwood market sectors. According to the US Census Bureau, the boom in housing starts that we experienced in 2020/2021 has slowed but is keeping a healthy pace. Housing starts in January of 2022 were 0.8 percent higher than the rate in January of 2021. Kiplinger’s latest report shows that housing starts began with momentum in 2022. Builder confidence is near its all-time high, and buyers are eager to purchase new homes. Plus, according to building permits, residential construction will likely continue its upward growth in the coming months.

Home makeovers/remodeling will continue growing as well. The National Association of Home Builder’s Remodeling Market Index went up 4 points in the fourth quarter of 2021, which shows that residential remodelers have high confidence in their markets. Gains in housing starts and remodeling confidence will translate into profits for most hardwood industry sectors, including flooring, furniture, cabinetry, moulding, and millwork.

In 2022, homeowners are expected to continue using higher quality materials and products, like hardwood flooring, moulding and millwork, cabinets, and more. They want their homes to look great for decades to come. However, hardwood manufacturers will continue with the struggle of project costs because more homeowners are willing to wait for prices to stabilize before they do anything.

The hardwood flooring sector appears to be healthy in 2022. According to the National Wood Flooring Association’s (NWFA) 2022 Industry Outlook survey, manufacturers surveyed expect sales to be the same or better in 2022, with 34 percent predicting their sales to be ‘up significantly.’

Michael Martin, President & CEO of NWFA, told NHLA, “Hardwood Flooring sales rebounded by more than 20 percent in 2021, and the outlook is for an additional ten percent+ growth in 2022. That said, the current conflict between Russia and Ukraine has escalated quickly with severe economic sanctions that impact birch plywood supply for domestically produced engineered wood flooring. Alternative resources are being sought from other geographies, including some domestic species and imports from other areas of the world. The effects remain to play out in the marketplace.”

Moving from flooring to furniture, the positive outlook continues. Furniture Today Magazine reports consumer spending on furniture will continue to be robust in 2022, rising by 4.1 percent to more than $125 billion this year. The main component of this predicted growth is the country’s shift to working from home. As people spend more time at home, they want to improve their furnishings and comfort.

Cabinetry is another sector of the hardwood industry projected to do well this year, thanks to solid housing starts. The Kitchen Cabinet Manufacturers Association (KCMA) reports that the year is off to a great start, with January sales increasing 11.7 percent over the same time in 2021. Custom sales are up 19.7 percent, semi-custom sales are up 0.9 percent, and stock sales have increased 17.6 percent.

Meanwhile, in their recently released benchmark survey, the Cabinet Makers Association (CMA) predicts cabinetry revenue to go up 1.76 percent a year through 2025.

Another strong sector in the hardwood industry, the moulding and millwork market, should experience growth in the coming years, with the Freedonia Group predicting a 3.3% rise through 2024.

Turning to the railway tie sector, projections don’t look as rosy. Railway ties are projected to experience slow growth in 2022. As published in Crossties Magazine, the Railway Tie Association (RTA) has forecasted that demand for railway ties will rise 1.9 percent in 2022. And, as supply chain and labor woes ease, demand will go up another 2 percent in 2023.

Dr. Nathan E. Irby, Executive Director of RTA, told NHLA, “Hardwood crosstie production has been stunted since Q4 2020 due to high demand for solid wood flooring and pallet stock, among other commodities. Those sectors dominated sawmill production and left many crosstie purchasers wanting more – roughly 5-25% more, depending on location.”

“Hardwood Flooring sales rebounded by more than 20 percent in 2021, and the outlook is for an additional ten percent+ growth in 2022.”

— Michael Martin, President & CEO of NWFA

Irby continues, “Additionally, the pandemicrelated supply chain shortages and labor inconsistencies continue to plague many traditional crosstie-producing sawmills from running efficient and full shifts, and now they are getting hit with higher fuel costs, too. Pine demand spikes also created a shift in historically hardwood-only producers running some percentage of production in pine to capture that low-hanging fruit over the last 18 months. Thankfully, hardwood log supply is fair to good for most sawmills right now. Likewise, hardwood crosstie demand is high, and we hope throughout 2022, conditions favor a significant increase in crosstie production to help normalize supply.”

2022 should be a successful year, with increases forecasted across most hardwood sectors. The industry will continue to face challenges, and we will continue to persevere. Author Victor Hugo once said, “Perseverance is the secret of all triumphs,” and considering how much we have persevered over the years, 2022 should be a triumphant year for the hardwood industry.