HARDWOOD MARKETS MATTER

Hardwood Markets Matter and it is important for NHLA to share market details of the entire Hardwood Industry. We appreciate the support of allied associations and publishers in gathering and sharing this important market information that can help you understand the complete hardwood industry picture. www.hardwoodreview.com

U.S. hardwood lumber exports rose 1% in 2022, but only because first-half shipments were so strong. Second-half shipments fell sharply to Canada and every major market region except the Middle East & North Africa, clearly contributing to the sharp declines in lumber prices after July. Q4 shipments to China were 62% lower than the record Q2 2018 volumes, and the second-lowest since the onset of the U.S.-China trade war. From the 1980s through the 2000s, second-half shipments to Europe were consistently lower than first-half shipments, as they were in 8 of the 13 years since, so second-half slowing is rather typical. However, the 31% drop in second-half shipments in 2022 was the largest in 33 years. Likewise, the 30% drop in second-half shipments to Canada in 2022 was 50% larger than any second-half decline in three decades. Despite a 15% year-over-year gain for the year, secondhalf shipments to Latin America fell 13%; the result of record-setting shipments to Mexico in January, March and May, followed by slower July, November and December shipments.

On a species basis, exports of Red Oak, Ash, Birch and Cherry held up the best in the second half of 2022, dropping “only” 4%, 9%, 13% and 15% from first-half volumes, respectively. By comparison, White Oak, Poplar

Quarterly Hardwood Lumber Exports

and Walnut exports fell 28-29% in the second half; Hard Maple and Alder slowed by one-third; and Soft Maple shipments dropped 43%. That said, December shipments of Red Oak, White Oak, Poplar, Walnut, Ash, Cherry and Hard Maple held steady or rose from November lows— as did December shipments to China, Mexico, Vietnam, the UK, Japan and Spain. Contacts indicate Chinese buyers have come back somewhat aggressively since the first of the year, and, with December volumes turning up slightly to a number of major markets, Q1 2023 shipments should easily reverse the two-quarter decline, even if they fall well short of Q1 2022 volumes.

“Nearshoring” Markets for US Hardwoods

• SE Asia and India for Asian Manufacturing

• Mexico for N. America

• Turkey, Estonia, Morocco for Europe

2022: Highest Export Values Ever www.ahec.org

"NEARSHORING" HAVING STRONG EFFECT ON HARDWOOD EXPORT DESTINATIONS

By Tripp Pryor, AHEC International Program Manager

“Nearshoring” is pretty simple in theory: make stuff close to where the consumers are. But in practice, how can we actually move so much production out of China and diversify across the rest of the world? In response to a global focus on “nearshoring” we’ve seen a steady rise in our exports of hardwoods across Asia, Europe, and Latin America.

As we learned with China, political tensions can lead to real economic costs. More than just “nearshoring”, or shortening the supply chain, it’s important to consider the impact of trade policies. This is where we see the rise of “friendshoring”, or outsourcing manufacturing to countries with favorable political and trade relationships to the destination country. An example of this has been Apple manufacturing more of their iPhones in India and Vietnam to diversify their supply chain.

We’ve seen the impact of these global trends in our hardwood exports as well. In 2022, we saw record export values across “nearshoring” and “friendshoring” markets like Vietnam, Thailand, and India for Asian manufacturing, Mexico for North American demand, and Turkey, Estonia, and Morocco for European demand.

These countries are all attractive manufacturing centers with a combination of low labor rates, friendly political ties with the EU and US, and free trade agreements.

Southeast Asia remains a re-export market for the US, Europe, and even China, and while India is also a major exporter it is beginning to see a rise in domestic demand among the world’s largest population.

US hardwood lumber exports to Mexico have grown 68% since 2020, and the market is poised to grow even more in the next few years as more manufacturing from foreign investment comes online. Thanks to proximity to the US and the USMCA trade agreement, getting hardwoods into Mexico is easy and inexpensive. Labor in Mexico is also cheaper than in China, and with a relatively young median population age of 28 (median age in the US and China are both 38), the labor force in Mexico is expected to continue to grow.

Turkey, Estonia, and Morocco all imported record totals of US hardwood lumber in 2022, and the vast majority of their production went elsewhere in the EU. Estonia joined the European Union in 2004, and Turkey and Morocco both have free trade agreements with the EU, meaning they can provide goods across Europe without additional costs. In fact, Morocco is one of the few countries that has free trade agreements with both the EU and USA, allowing them to import hardwoods and export furniture at competitive prices. Turkey and Estonia have had strong thermal modification industries for years but are beginning to develop more in the furniture and flooring sectors for European markets.

All of these markets had record years in 2022 and are poised to continue this growth in the future. AHEC’s goal is to be an advocate for American hardwood products throughout the world and to connect you to interested buyers. For more information on international markets and AHEC events, please contact me at tpryor@ahec.org