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.

Prevailing KD 4/4 Upper-Grade White Oak Prices

Prevailing KD 4/4 upper-grade White Oak prices have risen $385 in Appalachia, $295 in the North and $195 in the South since early March, largely the result of low production. The availability of high-quality White Oak logs remains thin across all regions, with sawmillers competing with—and often losing out to—higher-paying stave manufacturers. Sawmills are accordingly receiving lower-quality White Oak logs that yield a relatively small percentage of uppergrade lumber.

In addition, White Oak prices are supported by global demand that is more decentralized than demand for Red Oak. Year-to-date through April 2023, for example, nine global markets had purchased at least 1.3 MMBF of White Oak, compared with only six that had purchased at least that much Red Oak—even though total Red Oak export volumes were 37% higher than White Oak. While that broader global appeal may shield White Oak from individual largemarket fluctuations, it doesn’t have much impact when demand from most of those large markets is down. Exports to each of the five largest global White Oak markets were, in fact, down 6%-51% year-over-year through April. At least some of those declines, how- ever, can be attributed to limited availability, as monthly volume increases to four of those five markets (China, Vietnam, Canada, UK) since late-2022 suggest demand is higher than shipment volumes, even with prices rising. Spain is the sole exception among the Top 5 markets. While shipments to Spain spiked in March, they have generally been declining since last October, and April volumes fell to the lowest level for any April in nine years. www.hmr.com

White Oak demand won’t be anywhere near as frenzied this summer as it was during the last two summers, but heavy log competition and slowly rising demand will keep upper-grade prices steady-to-stronger.

The HMR Demand Index (HDI) is a feature in HMR Executive® that illustrates monthly trends in reported demand from 10 major domestic markets for hardwood lumber. Components of the index are color coded with various shades of blue when demand is slow, they transition to gray when demand is fair, and then to light red and deep red when demand moves from good to strong.

Index for June which is published the first week of July.

Cabinets

Residential Flrg.

Truck Trailer Flrg.

Upholst. Furniture

Wood Furniture

Moulding/Millwork

Wood Components

Board Road

Pallets

Railroad

WOOD TIE GRADING MINISERIES: HEARTWOOD ORIENTATION

By Nate Irby, Railway Tie Association (RTA)

The wood ties and timbers used on our nation’s railroad infrastructure support freight and passenger trains and help us thrive as a country. There are over 136,000 miles of track in North America to maintain. This requires a large effort; annually, wood tie and timber producers bring 18-20 million ties to the marketplace. These ties and timbers are not simply “industrial” products but integral pieces of architecture, with strength and structural integrity at the forefront of the procurement process. Railway Tie Association is the membership group representing tie-producing entities and endusers running railroads on them, and more. It helps to keep wood tie markets strong and sustainable - and has been doing so since 1919. One of our annual tenants is to provide education in our premiere event, the Tie Grading Seminar. This article is a representative snapshot highlighting that prestigious educational offering focusing on heartwood orientation in wood ties and timbers.

Mainline railroad crossties today are generally 7”x9”x8’6” grade 5, predominately oak and hickory, “sleepers” or pieces of wood utilized to hold up rail, anchor in ballast, and have locomotives and railcars roll over the top of them. When it comes to wood tie grading, an influential area of a wood tie or timber is the heartwood and where it resides in the finished tie or timber. Cross-sectionally, wood ties and timbers are delineated by the location of the wood pith center (or heart) in the frame of the dimensional product rendered. Three general categories are descriptors of that heartwood orientation: boxed-heart, split heart, and quarter heart. Simply put, a boxed-heart crosstie or timber encapsulates the pith center of the tree/wood into the center of the dimensional product, i.e., the heartwood is boxed in with sapwood surrounding in all planes. Split-heart ties come from trees/logs big enough to render two ties or timbers, which split the heartwood and yield an entire tangential surface (or face) of exposed heartwood on two ties. And finally, the quarter-heart category is a product of creating four ties or timbers from an exceptionally large tree/log, and the exposed heartwood is present in all four ties, typically in one corner and exposed longitudinally along the length of the tie.

Adverse drying is the primary quality concern with exposing wood heartwood. Like opening a banana peel, once wood is exposed to the elements; the deterioration process begins, and much more so with heartwood than sapwood. Therefore, special precautions must be followed when installing split and quarter heart ties in track, prioritizing installing heartwood down, not up. If non-boxed heart ties are installed incorrectly, and the heartwood is oriented “up” in track service, heart checks will open more drastically (than sapwood) and allow water to enter the interior of the tie and decay the tie far prematurely. Some railroads specify a shallow saw kerf mark to be sawn into ties during initial processing to help field personnel; once ties are dried, treated, and sent out for installation, distinguish which surface should be installed facing up on the track.

Limitations for defects are delineated in the AREMA 30 standards and covered extensively at the RTA annual Tie Grading Seminar. Please visit rta.org for more information on wood ties and timbers, the Tie Grading Seminar and other offerings RTA provides to our industry.

SOURCES:

• Railway Supply Institute: www.rsiweb.org/data-technical-resources/railsupply-economic-impact-study/

• Railway Tie Association: www.rta.org/why-rta

• American Railway and Engineering Maintenance-of-way Association: www.arema.org/AREMA_MBRR/Committees/30.aspx

WHAT IS YOUR VIEW OF CROSSTIE COMPETITIVE POSITION RELATIVE TO OTHER HARDWOOD PRODUCTS?

REGARDING YOUR ABOVE ANSWER, PLEASE PROVIDE CONTEXT FOR MARKET, WEATHER OR OTHER CONDITIONS.

Eastern Us

LAKE STATES

Minnesota, Iowa, Wisconsin, Michigan, N Indiana, N Illinois: Weather has been very dry. Oak wilt restrictions are still in place until July 15th. Log supply is low due in part to Oak wilt restrictions. Some mills are taking more time off this summer.

Atlantic

West Virginia: Grade lumber is depressed in about every specie. Pallet cants are hard to move, sawdust and chips are difficult as well. Production is being hampered because of the markets.

Virginia: Markets for Pallet and Flooring are still down fairly low. Some mills are slowing down on ties because the side boards are so cheap. Quotas are in place at flooring and pallet plants.

New England

New England 1: Log prices remain high, so smaller mills cannot compete with bigger mill prices. Recent rains may slow down some logging production. Pallet, lumber, pulp, and wood chips are very hard to move. Timber mat demand is still very strong which is helping some small mills in the are. Tie production trended downward this month due to low log inventory.

Pennsylvania: Weather has been dry and good for logging. Most mills have the log volumes they want to carry.

Midsouth

E Texas, NW Louisiana: Logs are beginning to move it's finally drying out, pallet mill continues to be slow and paper mills are still holding back on chips and fuel trucks.

Southeast

Kentucky, Tennessee: In some areas log supply is down due to loggers not able to move pulpwod and their contracts requiring them to harvest pulpwood when they cut. Rail tie production is high in my area.

Alabama, Florida, Georgia: Mat Timbers are hot and logs are scarce. Chips are harder to move. Pallet market is soft.

Mississippi: Pallet, chip and lumber markets are soft. Mat markets are holding steady. Crossties hold a strong competitive advantage.

www.nwfa.org www.ahec.org

Extended Lead Times and Causes: The NWFA/Hardwood Floors magazine’s 2023 Industry Outlook found that more than 74 percent of NWFA members reported labor shortages as a primary cause of extended lead times. Freight disruption and production facility shutdowns or scalebacks also have played a big role. To combat supply chain disruption, NWFA members reported plans to source from new suppliers, as well as improve communication with current suppliers. Other strategies included adding new suppliers for certain products.

LOGS TO CHINA NEAR PRE-TRADE WAR LEVEL, BUT LUMBER STILL STRUGGLING

By Tripp Pryor, AHEC International Program Manager

The Chinese market for US hardwood lumber has been consistently slow since the Trade War, but the market for logs has bounced back to near 2016 levels. In 2017, a year of record US-China trade, the United States exported 2.4 million m3 ($1.5 billion) of hardwood lumber to China and 1.2 million m3 ($555 million) of hardwood logs. Those trade levels were decimated by tariffs of up to 25% on American hardwood products, and demand was slow to return during China’s recovery from COVID-19 even after tariffs were removed. However, US log exports have been faring much better than the lumber markets over the last two years and reached a total of 963,566 m3 ($510 million) in 2022, which is 80% of 2017’s record volume level. By dollar sales value, the gap is even closer – the total trade value of US hardwood logs to China in 2022 was 92% of the dollar value in 2017.

To put that another way, our log exports to China have recovered to 80% of where they were pre-Trade War, but lumber exports are still only 45% of where they were five years ago. So far in 2023, both logs and lumber are down, and we expect a trade level of about 1 million m3 for lumber and 840,000 m3 for logs based on data received through May. The most common species of logs exported to China are, in order, red oak, walnut, ash, and white oak. The average price per cubic meter of red oak and walnut was significantly lower than other countries that are primarily veneer-focused, and our market research points to vertically integrated furniture and flooring companies cutting their own dimension stock as main customers of US hardwood logs. Utilization of US hardwood products in all forms is a strong sign that species like American red oak are still in favor, but a prolonged drop of roughly a million cubic meters per year in sales of US hardwood lumber in the Chinese market remains a cause for concern.

On September 8th, AHEC will host our AHEC Greater China Convention in Chengdu, China, our first convention in the country since 2019. We will use this opportunity to reconnect the United States and Chinese hardwood industries and promote fair, healthy trade of US hardwood products. This will be a fantastic opportunity to promote your business in China and develop business in the largest international market for American hardwood products. Registration is free for all AHEC members, and if you are interested in this or future AHEC events please check out our website:

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