Of course Covid-19 hit the timber industry globally. But according to Judd Johnson of the Hardwood Market Report (HMR) the impact on the US hardwood industry was heightened as the pandemic struck when the sector’s resilience was already diminished.

“As a prelude to how Covid affected business, you have to take account of the financial damage to the US hardwood supply grid caused by the US/China trade war and China’s soft economy in 2018/2019,” said Mr Johnson. “We estimate that US hardwood sawmill production decreased 8.2% in the 18 months from mid-2018 through year end 2019.”

This was a substantial decline, but output contraction was less of a problem than loss of value for grade lumber in China-centric species, such as ash, cherry and red oak.

“Between the direct hit on prices and shift in production from this grade lumber to more industrial products, US hardwood mills could easily have lost up to 40-45% of revenue from the China downturn. Not every US mill or lumber yard experienced that sort of contraction, but all saw sharp revenue declines and lost money. So substantial wealth was sucked out of the US hardwood supply grid leading up to 2020. Then came Covid-19.”

Few sawmills or yards shut down due to the pandemic, although, according to Mr Johnson, the difference for many between staying in business and closing was the federal government’s Paycheck Protection Plan. But federal government strategy also made securing labour a challenge. By supplementing laid-off workers’ state unemployment benefit, it meant many received more money than their normal salaries.

“It paid them more not to work and effectively companies found themselves competing against federal government when rehiring laid-off employees,” said Mr Johnson. Additionally, he said, the pandemic disrupted production, causing shutdowns when employees were infected or exposed to the virus, while Covid mitigation safe work practices cut into efficiencies.

The 2019/20 winter added to market stress. Mr Johnson’s research over 26 years at HMR has shown that adverse weather alone rarely causes chronic supply constraints in the hardwood sector, but it exacerbates pre-existing supply strains.

“The current situation is no exception. The US hardwood supply grid was beat down before winter 2020 began,” he said.

Further curbing capacity, some hardwood mills also switched production to softwood to capitalise on soaring demand from US construction.

Due to these various brakes on output, mills were unable to keep pace as economies emerged from lockdown and consumption of US hardwood started to climb in America itself and worldwide.

The result, as buyers will know around the globe, has been significant price inflation – albeit, as Mr Johnson highlights, that prices for most grade lumber items were depressed prior to the pandemic.

While demand has risen across US export markets, growth in some has been especially strong.

“Vietnam continues to expand as a major destination for US hardwoods,” said Mr Johnson. “Mexico has also gained momentum, primarily due to US business for manufactured goods, cabinets in particular.”

Chinese buyers have also been increasingly active, proving particularly reluctant to shift on price initially, but ultimately having to accept the inevitable.

“China ignored or refused to believe there was fundamental damage to the US hardwood supply grid and that China-centric grade lumber inventories had greatly declined,” said Mr Johnson. “That said, this is not a uniquely Chinese buyer trait to question supply issues. It’s a tendency of buyers, in general, especially those distanced from the resource and some rejected the idea of shortages as recently as November. Sometimes it takes hearing ‘no’ a second or third time before it sinks in.”

US hardwood prices are now up across the board.

“In no particular order, I’d list rises in walnut, white oak, red oak, ash, poplar, cherry and hard and soft maple as particularly pronounced,” said Mr Johnson. “But grade lumber and industrial products in all species have experienced inflationary pressure as constrained production and contracted supplies are market wide-conditions.

“Moreover, we’re now experiencing pandemic aftershocks with transportation problems and rising costs, which are further escalating prices.” So far, mills have not been able to return to normal production levels, with Covid-19 still an obstacle and continued problems hiring employees. However, said Mr Johnson, supply is now on an upward trajectory. What is more, the outlook for consumption is set increasingly positive, with US demographics pointing to longer term market growth.

“Demand rose as Covid-19 constraints on downstream markets relaxed and state and local economies reopened,” said Mr Johnson. “But it’s my strong belief the surge is due to more than post-lockdown pent-up consumerism. The US is also undergoing a population age shift where the largest generation is of home-buying age now and the second largest will be in around 10 years. Together, these two generations account for over half the US population and are under 40 years of age. Imagine the impact when both are at home-buying age simultaneously. The US won’t manufacture all the goods these consumers will buy, but US hardwoods should get a measurable bump in domestic and international markets.”