Hardwood Markets: Cautiously Optimistic

By AMANDA BOUTWELL, Marketing Communications Manager

Domestic markets for hardwood lumber have seen significant shifts over the past five years due to Covid-19, supply-chain issues, and global politics. It’s been tough for the hardwood industry, but there is a silver lining. As NHLA has traveled across the globe to attend industry trade shows, the two words that keep coming up regarding the outlook for 2023 are “cautiously optimistic.”

The biggest driver of hardwood demand is the housing market, which is on shaky ground. In January (the most recent data available at press time), housing permits, completions, and new sales were positive (month-over-month), which resulted in rising demand. Nevertheless, housing starts have suffered due to increasing mortgage interest rates (which have more than doubled in the last 12 months) and artificially inflated home prices. However, people with older homes continue to remodel rooms like kitchens and bathrooms, which has positively affected domestic hardwood markets. Home remodels are expected to grow modestly in 2023, increasing as much as 10.2 percent from 2022.

One of the primary challenges facing the hardwood lumber industry is look-alike products. To combat this, NHLA is involved with the Real American Hardwood Coalition (RAHC), donating 5% of all member dues to further the Coalition’s mission of promoting the benefits of real American hardwood lumber to consumers.

NHLA has also received a grant to work with the U.S. Forest Service to promote the use of hardwood lumber. Dallin Brooks, Executive Director of NHLA, explains, “Since the 2008 housing crash, the hardwood market has struggled to rebound. The markets for graded hardwood lumber dropped from highs above 6 billion board feet and remained around 2 billion board feet for over 14 years. Meanwhile, the US economy’s GDP, housing starts, and repairs and remodeling expenditures have all grown over that same length of time.”

Brooks continues, “The objective of NHLA partnering with the Forest Service is to grow and stabilize the hardwood lumber market and industry. The first goal to accomplish this objective is to create and distribute content with hardwood information targeted for architects, specifiers, designers, structural engineers, and other hardwood users. The second goal is to enhance communication with hardwood sawmills about optimization and education services provided by the Forest Service, NHLA, and other organizations to improve their business operations.”

Some hardwood sectors have positive outlooks for the coming months. For example, the market for hardwood cabinets is experiencing market growth. The NKBA/John Burns Kitchen & Bath Market Index (KBMI) predicts a 6.5 percent increase in the cabinet market (on average) in 2023 compared to 2022. This expected growth comes primarily from smaller projects, with KBMI reporting that significant home improvement projects are now being broken down into smaller, more affordable undertakings by homeowners. At press time, KBMI claims the outlook for the first quarter of 2023 is a 2.7 percent increase from the fourth quarter of 2022.

Amanda Conger, the Executive Director of the Cabinet Makers Association, says, “Speaking on behalf of the industry’s smaller shops who handle custom projects, both residential and commercial, I can tell you that they are busier than ever. Lead times are pushed out six months or more. Although business is booming, they struggle to meet customers’ demands while managing the continued stress on the supply chain.”

Betsy Natz, the CEO of The Kitchen Cabinets Manufacturers Association (KCMA), has plans to release the results of a survey that speaks to domestic markets later this month (May 15). NHLA will share the results of the KCMA survey in the future.

The hardwood flooring sector is also optimistic. According to the latest Industry Outlook survey by the National Wood Flooring Association (NWFA), the wood flooring industry is hopeful for 2023, with 39 percent of NWFA members reporting they expect sales to be up three to eight percent and 40 percent of respondents expecting sales to be flat from 2022.

NWFA President/CEO Michael Martin urges temperance, saying, “Challenges remain, including supply chain disruptions, labor shortages, economic uncertainty, and competition from look-alike products. NWFA is helping to address competition from look-alike products with its Real Wood Real Life consumer campaign and its participation in the Real American Hardwood Coalition.”

The post-pandemic era has not been as kind to the furniture market. A new survey by Smith Leonard (a furniture industry consultant firm) shows that the furniture industry is still experiencing a slowdown. Year-over-year stats aren’t relevant because of the spike in purchasing due to the COVID-19 pandemic. Furniture Today quotes Ken Smith (the co-founder of Smith Leonard) as saying, “77% of our (survey) participants reported negative growth in orders compared to January 2022.” However, this negative growth is being compared to January 2022, when furniture markets were riding high on the wave of remodeling brought on by the pandemic. According to Statista, furniture markets are expected to rise annually by 3.98% (CAGR 2023-2027).

Other segments of the hardwood lumber market are faring much better. Nate Irby, the Executive Director of the Rail Tie Association (RTA), is looking forward to a strong 2023, saying, “Due to current low inventories of railroad crossties and timbers on hand, we postulate demand for hardwood tie and timber products will remain high for the next 12 to 18 months. We remain supremely hopeful that sawmill operators can find a sustainable sawing solution based on current market dynamics. Ties will continue to help carry many mills for the foreseeable future.”

Irby also points out, “We cannot afford to lose any more capacity and repeat the 2008 Great Recession scenario of mass permanent closures of sawmills. As aforementioned, overcoming the low volume of ties that have been produced over the last two years will take time to recover, while our supply chain constituents of all varieties are facing sustained labor inconsistencies and parts/equipment shortages, which are preventing them from operating at higher production levels.” are pushed out six months or more.”

The hardwood lumber industry anticipates seeing expansion throughout 2023. Yet, it’s critical to remember that the hardwood industry is competitive, making it crucial for mills to be informed on trends and prepared for market changes. John Hester, the Chief Development Officer at NHLA, encourages a positive outlook. “As someone who has traveled extensively across the country this year,” Hester says, “I’ve noticed a pervasive feeling of hopefulness within the industry. Despite waiting for prices to rebound, businesses are keeping busy, and market trends suggest that we may see even more growth this year.”