A lack of confidence, or perhaps an abundance of caution, slowed US recovery, but it is now gaining momentum. Increased energy production has been a major contributor to the rebound, and residential construction and refurbishing, although still below static demand, are making strong percentage gains.

There remains a climate of risk aversion among US sawmills. They are not top of banks’ list for lending, so expansion has had to be organic, fuelled by profits reinvested in raw materials and increased variable costs of growth.

But while utilisation remains at around 2008 levels, or 9 billion bd ft, capacity has been added in the last year. We’d now estimate it to be similar to 2007 and more is coming on line.

Both figures are 70% lower than those of 1999 when, after a near doubling of growing stocks in 50 years, production topped out at 12.6 billion bd ft for eastern lumber and 560 million bd ft for western. But in my opinion output will now recover and grow to whatever point the market can profitably support.

On the domestic market, mills are seeing increased demand for cross ties (sleepers) thanks to railroad expansion, and board road and crane mat timbers from the growing North American petroleum sector.

Solid wood flooring was one grade lumber market that leapt forward in 2012 and 2013 and, while weather disrupted residential construction this winter, it is now poised for further growth.

Cabinetmaking also posted an impressive percentage gain last year, and moulding and millwork did well. Furniture increased lumber consumption too, although much growth was in the upholstery sector.

Ingrained exporter
There is a great deal of near-term domestic market growth potential for US hardwoods. However, while there may be times when hardwoods are less competitive internationally, I cannot envision them ever being closed to the rest of the world. Our industry is global and doing business abroad is ingrained.

Credit to increased consumerism, the export market with most potential is China. The US housing market improved last year, but the Chinese remained assertive in terms of volumes and prices, leading the pursuit for grade lumber.

Next in line is Vietnam, as much of its manufactured goods are exported to Japan, Europe and other parts of the world. It could also be well positioned to supply India’s growing economy, particularly hospitality.

More mature markets, such as western Europe and Japan, may have less potential as, like the US, they have relatively low population growth. But I’m very encouraged by Europe’s economic recovery and solid growth in the UK.

Because the US lumber manufacturing grid had adjusted to low sales during the downturn, and perhaps over corrected, renewed domestic and export demand led to tight supply and inflation in the second half of last year, trailing into this.

Although a few items are at historical current dollar highs, none have reached the 2004 high marks in real terms. But the problem has been the rate of increase, with downstream markets struggling to absorb such rapid gains. However, I see this year as an evening out period. There may be some lingering shortages, and the lumber drying process must improve first (a seasonal issue), but there’s an equal chance some items will later be in ample supply.

Looking at raw material provision, 78% of hardwood timberland and growing stocks are privately owned, and this ownership becomes more fragmented as land passes down the generations. But the bottom line is that, while these private owners don’t have to sell their timber at any particular time, they will sell.

However, timber sales from public lands get mired in political push and pull, with harvests almost always challenged. The repercussion is that overstocked forest is now a critical problem in some areas, leading to poor forest health and ultimately fuel for wildfires. It is important here that the US hardwood industry, which is globally acknowledged to have a stellar record in forest management, does a better job informing the public about the positive influences it has on the environment, economy, and society.

Emerald ash borer
On the supply impact of the emerald ash borer (EAB), it is possible that loggers and mills in quarantined areas merchandise more ash logs to pulp and/or other fibre markets, resulting in less lumber. But it is a minor growing stock (4.9%) and always experienced price volatility and, frankly, I’ve been surprised EAB has not had a greater impact on business. The combination of quarantine, heat-treatment and fumigation policies is an effective plan and harvested trees will regenerate.

On the future of the industry more widely, there’s a trend for mills to process raw materials closer to the end product, providing width sorts and specific lengths, for example. It is not yet widespread, but some mills and concentration yards are also into thermal modification. We may see some secondary processing introduced too, but I don’t think there is a broad movement to step far beyond core competencies: timber, logs, and lumber production.

In terms of growing stocks, I think continued expansion at the rate of the past 60 years would result in overstocking. But I believe we will see further growth, with more potential to be tapped from secondary species.

So the primary challenge now is attaining and maintaining a balance of supply with demand. In reality, that never occurs and it’s reasonable to expect some speed bumps in the market, but the outlook on business conditions seems positive for the next several years. In the near term, the best-case scenario for transitioning from the hectic pace of 2013 is for US hardwood sawmill production to catch the global economy on the rise.