The American Hardwood Veneer and Plywood Market: Vietnam Replaces China as Top Foreign Supplier

IndexBox has just published a new report: 'U.S. Hardwood veneer and plywood Market. Analysis And Forecast to 2025'. Here is a summary of the report's key findings.

The American Hardwood Veneer and Plywood Market is to Languish on the Backdrop of the Pandemic

The hardwood veneer and plywood market in the U.S. stood at $4.9B in 2019 (IndexBox estimates), which was -9.1% less than the year before. This figure reflects the total revenue of producers and importers (excluding logistics costs, taxes, and tariffs, which will be included in the final consumer price). Over the last five years, it increased gradually, driven by rising construction.

In physical terms, the market volume reached approx. 6.9M cubic meters, declining by -3.3%. The decrease in market volume was caused, on the one hand, by the slowdown in the U.S. economy in 2019, and, on the other hand, by a sharp drop in the volume of imports from China due to the introduction of anti-dumping duties, which could not be immediately replenished by domestic producers and suppliers from other countries.

Plywood is one of the basic materials widely used in construction, and, to a lesser extent, in industry. Therefore, the key factor determining the development of the plywood market is the dynamics of construction, which, in a broader context, reflects the overall GDP growth.

According to the World Bank outlook from January 2020, the U.S. economy was expected to slow down to +1.7% per year in the medium term, hampered by increasing global uncertainty, trade war, and slower global growth. The number of building permits increased steadily, with single-family premises posting the most prominent growth. Those factors were driving the market over the period under review and were assumed to remain in the medium term.

In early 2020, however, the global economy entered a period of the crisis caused by the COVID-19 epidemic, due to which most countries in the world put on halt production and transport activity. The result will be a drop in GDP relative to previous years and an unprecedented decline in oil prices.

The U.S. is struggling with a drastic short-term recession, with the expected contraction of GDP of approx. -6.1% in 2020, as the hit of the pandemic was harder than expected, and unemployment soared due to the shutdown and social isolation. The construction sector has proven extremely vulnerable to the pandemic as due to quarantine measures, construction projects were paused, and the drop in incomes of the population makes mortgage loans less affordable.

In the medium term, should the pandemic outbreak end in the second half of 2020, the economy is to start recovering in 2021 and then return to the market trend of the gradual growth, driven by the fundamentals existed before 2020 and boosted by support measures imposed by the government.

Taking into account the above, it is expected that in 2020, the consumption of plywood will drop by approx. 6%. In the medium term, as the economy recovers from the effects of the pandemic, the market is expected to grow gradually, with an anticipated CAGR of +0.2% for the period from 2019 to 2030, which is projected to bring the market volume to 7B cubic meters by the end of 2030.

The U.S. Hardwood Veneer and Plywood Market Remains Dependent on Imports

In 2019, the production of hardwood veneer and plywood decreased by -2.3% to 4.5M cubic meters, falling for the second year in a row after five years of growth. The total output volume increased at an average annual rate of +4.7% over the period from 2013 to 2019; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years.

Over the period under review, the share of imports in terms of total hardwood veneer and plywood consumption in the U.S. decreased from 52% in 2007 to 44% in 2019 (based on physical terms). It means that the U.S. hardwood veneer and plywood market is still largely supplied by foreign manufacturers. The market position of domestic producers may improve further as the anti-dumping tariffs were imposed against plywood from China. This, however, is disputed by American furniture producers who relied on the imports of cheap raw materials. Anyway, some other countries like Vietnam and Cambodia, and, to a lesser extent, Brazil, Spain, Canada, and Russia, benefit from the counter-China trade measures, increasing their supplies to the U.S. market to fill the market gap.

Vietnam Emerged as the Largest Hardwood Veneer and Plywood Supplier to the U.S. After the Chinese Products Were Kicked Out

The volume of hardwood veneer and plywood imports in the U.S. totaled 2.8M cubic meters (IndexBox estimates) in 2019, decreasing significantly for the second consecutive year. As mentioned above, the decrease is caused by a deep slump in supplies from China which has not yet been compensated by other supplying countries. In value terms, it amounted to $1.7B in 2019.

In terms of supplying countries, Vietnam (555K cubic meters), Indonesia (441K cubic meters), Russia (432K cubic meters), and Canada (411K cubic meters) were the main suppliers of hardwood veneer and plywood imports to the U.S., together accounting for 62% of total imports. Imports from Vietnam soared over 2018-2019, filling a gap that appeared on the market after the Chinese plywood been pushed off. Imports from Brazil, Cambodia, and Spain also increased due to the same reason.

In value terms, the largest hardwood veneer and plywood suppliers to the U.S. were Vietnam ($362M), China ($340M), and Canada ($302M), with a combined 45% share of total imports. These countries were followed by Indonesia, Russia, Cambodia, Malaysia, Spain, Brazil, Ecuador, Italy, and Uruguay, which together accounted for a further 43%.

The average hardwood veneer and plywood import price stood at $742 per cubic meter in 2019, with a decrease of -11.6% against the previous year. Over the period from 2013 to 2019, it increased at an average annual rate of +2.0%. The pace of growth appeared the most rapid in 2018 when the average import price increased by 19% year-to-year. As a result, import price reached the peak level of $839 per cubic meter and then declined in the following year.

Prices varied noticeably by the country of origin; the country with the highest price was Cambodia ($1,310 per cubic meter), while the price for Uruguay ($285 per cubic meter) was amongst the lowest.

From 2013 to 2019, the most notable rate of growth in terms of prices was attained by China, while the prices for the other major suppliers experienced more modest paces of growth.

Companies Mentioned in the Report

Columbia Forest Products, Smith Family Companies, Veneer Technologies, States Industries, Decorative Panels International, Mt. Baker Products, Rutland Plywood Corp., The Freeman Corporation, Marion Plywood Corporation, David R. Webb Company, Nmsa, International Timber and Veneer, Miller Veneers, Amos-Hill Associates, Swaner Hardwood Co., Manthei, Murphy Company, Ferche Millwork, Standard Plywoods Incorporated, Swanson Group Mfg., Coldwater Veneer, Birchwood Lumber & Veneer Co., Plycraft Industries, Bessemer Plywood Corp., Davis Wood Products, Timber Products Michigan Limited Partnership, Danzer Services, Northern Michigan Veneers, Columbia Plywood Corporation, Plum Creek Northwest Plywood, Coastal Plywood Company, Ivc USA Inc.

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Source: IndexBox Market Intelligence Platform