Value-added wood products are primary wood products that have been further processed into secondary products such as furniture; builders’ joinery and carpentry (BJC); profiled wood; and engineered wood products (EWPs). Demand is linked to drivers such as economic growth; housing and construction; fashion and design; and demographics.
BJC comprises a wide array of wood products, including wooden windows and doors; pre-assembled wooden flooring; posts and beams; and shakes and shingles. EWPs include I-beams (also called I-joists); finger-jointed sawnwood; glulam (sawnwood glued into beams); laminated veneer lumber (LVL); and mass timber panels, including cross-laminated timber (CLT). Profiled wood is wood shaped by machines, such as mouldings, tongue-and-groove, and lap siding.
Despite relatively good economic growth and otherwise favourable conditions, 2019 was a mediocre year for most value-added wood products, including furniture, BJC and profiled wood. Oddly, the first half of 2020 was better for many value-added wood products than might have been expected in the circumstances.
CLT production and demand continue to grow at an astonishing pace. Global production capacity in 2020 is estimated at 2.8 million m³, of which 48% is in Europe, 43% is in North America, 6% is in Oceania and 3% is in Asia (Africa and South America have minimal production capacity). Austria, Czechia, Germany, Italy and Switzerland continue to form the epicentre of global CLT production. These five countries accounted for more than 80% of the estimated global production of 920,000 m³ in 2019.
Two CLT plants are under construction in the Russian Federation, and another was built recently in Ukraine and is now operative.
A wide variety of products categorized as mass timber panels is in production in North America, including CLT. As of late 2018, ten mass-timber-panel manufacturing plants were in operation in the subregion (five each in Canada and the US), with a combined annual production of about 400,000 m³ (Beck Group, 2018). As of year-end 2019, 14 plants were producing mass timber panels in North America, and a further three were under construction. The current practical capacity (maximum capacity x 0.65) of these plants is 910,000 m³, but industrial matting constitutes more than half this. Thus, the practical capacity of mass timber panels for use in buildings in North America was about 439,000 m³ in 2019, and this is expected to increase by another 62,000 m³ in 2020.
COVID-19 will have an impact on market developments in 2020 and 2021. There is a general perception that most segments of the value-added wood products sector will see a falling-off before things start to improve in late 2021.
Furniture and cabinetry comprise a significant proportion of value-added wood products, a term used here synonymously with secondary wood products (i.e. primary products that have been reprocessed into new products with added value). A recent survey by the University of British Columbia found that furniture and cabinetry leads all other value-added forest products in Canada, with 29% of sales, and it is also the leader in providing employment, with almost 39% of workers in Canada’s value-added wood products sector working in the production of furniture and cabinets (Freshwater and Park, personal communication, 2020).
Office furniture accounts for about 10% of total furniture consumption in Europe. The value of the market grew for several years to reach $10 billion in 2019, the largest single consumers being Germany, the UK and the Netherlands (in descending order by value). About 75% of the products are made in Europe and traded within the subregion; nevertheless, the market for Chinese-made office furniture is increasing and now accounts for 9% of European consumption. According to a CSIL Milano analysis in June 2020, the consequences of the COVID-19 pandemic on office-furniture consumption vary among countries. At the time of the analysis, a huge drop in consumption was forecast for 2020, affecting all the top markets. The office-furniture market is expected to start recovering in Europe in early 2021 (CSIL Milano, 2020).
Furniture trade is dependent on global supply chains. For example, a UK-based furniture retailer specializing in chairs and sofas previously imported several containers per day from China, which, in normal circumstances, would mean inventory for a few weeks. When factories in China closed and shipping lines reduced cargo capacity, the company started looking for European manufacturers, only to realize that these also depend on raw materials and components from China (Pegden, 2020). Furniture imports for the world’s top five importers were either flat or down in 2019 (that is, before COVID-19 started having an impact) (graph 7.1 and table 7.1).
Poland has doubled furniture production in the past ten years and is now the sixth-largest producer after China, the US, Germany, Italy and India. Poland has overtaken Germany as the main furniture exporter in Europe and ranks second globally behind China (Buy Poland, undated). This success has encouraged wood-based-panel producers and other furniture cluster companies to further invest in Poland (CSIL Milano, 2020).
The Russian Federation has a substantial furniture industry with over 6,000 manufacturers in the country. Production for 2019 at the end of the third quarter was up by 13% over the same period in 2018 (Russian Timber Industry. 2019). However, according to a recent survey, 70% of Russian furniture enterprises may go bankrupt in the wake of COVID-19; only one-quarter of those surveyed said they were sure they would survive the crisis (as of April 2020). The main exacerbating factors are forced downtime due to non-working days, an absence of State support, and non-payments from customers buying on credit (Association of Furniture and Woodworking Enterprises of Russia, 2020a).
According to a survey conducted in the US by consulting firm Smith Leonard, new orders to US domestic furniture manufacturers were down by 8% (year-on-year) in May 2020, but this was a 166% improvement over April 2020. Smith Leonard anticipated that June would see a further improvement on May (Furniture Today, 2020).
Working from home has been mainstreamed during COVID-19. In the first half of 2020, many people with desk jobs modified their homes accordingly, including with new desks, chairs and bookshelves. The pandemic has hastened structural changes already taking place in the furniture industry. Digitalization will not only support working from home but also drive online furniture sales. The industry is adapting quickly.
The pandemic will likely cause changes in the office-building segment, simultaneously reducing the need for office space as more people work from home and increasing the need for separated space for those who don’t.
In addition to new-building construction, home and office renovations and repairs are important demand drivers for BJC products. After almost a decade of sustained growth in spending on home-improvement projects, remodelling activity is likely to decline during the pandemic-induced economic downturn (despite anecdotal accounts of improved sales of wood products in the do-it-yourself market). Except for France (profiled wood), and Japan (BJC), profiled wood and BJC imports in the top five importing countries either plateaued or declined in 2019 (graphs 7.2 and 7.3 and tables 7.2 and 7.3). In the US, import value returned to 2017 levels in 2019.
According to the Leading Indicator of Remodeling Activity, expenditure on home renovations and repairs in the US is expected to decline through the first quarter of 2021 due to fallout from the COVID-19 pandemic (Joint Center for Housing Studies of Harvard University, 2020).
Glulam timber/beams, I-beams and LVL are all heavily dependent on residential construction (new and just as importantly, renovations and repairs) and non-residential building construction (e.g. offices, schools, restaurants, stores and warehouses).
Home construction was flat in Canada in 2019 and increased modestly in the US. The seemingly good news in the US was dampened, however, by a drop in spending on new housing in 2019 (suggesting more modest buildings). Similar results were obtained in non-residential construction.
It remains to be seen if recent societal trends towards working from home and doing less shopping in brick-and-mortar shops (in favour of online shopping) continue. If so, there could be a substantial reduction in non-residential construction. Although this sector is dominated by concrete and steel in North America, an estimated one-quarter is wood-framed, and there is room for growth, especially with the emergence of products and systems such as cross-laminated and heavy timber and, more recently, “tall buildings” of ten storeys or more.
The COVID-19 pandemic is clouding forecasts. Nevertheless, the question is not whether demand will slow further but, rather, how much slower it will be and for how long.
Data on glulam in Europe and EECCA are generally limited to trade, with production data often unavailable. Austria exported just under 2 million m³ of glulam and CLT in 2019. Exports were flat to Italy, at 686,000 m³, but increased to Germany by 11% (to 484,000 m³) and to France by 15% (to 161,000 m³) (Jauk, 2020). Austria exported just over 600,000 m³ in the first four months of 2020, down by 4%, year-on-year, despite a 3% increase to March. There were significant drops in imports by Italy, Spain and Norway, and Austrian exports fell away quickly in April 2020 (Nöstler, 2020).
Japan’s imports of glulam from Europe increased in the first four months of 2020. Finland, Romania and Austria (in descending order) are the largest suppliers of glulam to Japan; combined, exports from these countries to Japan increased by 29,000 m³ (16%) in this period. Glulam exports from the Russian Federation (the fourth-ranked glulam exporter behind Austria) also increased to Japan (by 26%) in the first four months of 2020 (Ebner, 2020).
Overall production of glulam in North America declined from 750,000 m³ in 2006 to 285,000 m³ in 2009 but increased between 2010 and 2018. There was a decrease of 5.3% in 2019 (to 443,000 m³), but a slight increase is predicted for 2020, to about 445,000 m³ (table 7.4).
I-beams are produced and consumed in Europe, but data and market intelligence for that subregion were unavailable for this report. The status of I-beam manufacture and markets in EECCA is unknown.
In North America, I-beams are over 80% dependent on new-home construction, mostly for single families. Builder surveys indicate that the I-beam share of raised-wood -floor area (which does not include concrete floor area) has remained steady between 44% and 46% for the last six years. I-beam market share was only 16% in 1992.
Demand for I-beams peaked in 2005, when it equalled the practical capacity of I-beam plants at that time; housing starts were so high that manufacturers were producing all they could. I-beam demand and production declined, however, when the US housing bubble burst. Roughly 115 million linear metres were produced in 2009, with significant increases since then; the forecast for 2020 is 217 million linear metres (table 7.5).
Most I-beams – 88% – are used in new residential construction. The balance is used in non-residential building construction and repairs and remodelling.
LVL is produced and consumed in Europe, but data and market intelligence for that subregion were unavailable for this report. The status of LVL manufacture and markets in EECCA is unknown.
In North America, LVL is used primarily in new-home construction. In 2019, 72% was used for beams and headers, rim boards and similar applications, and the balance was used for I-joist flanges. Rim boards are used on the perimeters of I-beam floor systems to provide fastening points for the I-beams and to assist in distributing loads on walls. Production peaked with the US housing market in 2005 at 2.6 million m³ and declined thereafter, along with I-beam production and the housing market. Production in 2020 is forecast at 2 million m³ (table 7.6), up by more than 120% from the trough in 2009 (APA – The Engineered Wood Association, 2020b).
LVL is well accepted for use in beams and headers, and growth should return with an improving housing market. Like other EWPs, LVL enables the use of longer spans and fewer pieces to carry the same loads compared with conventional wood products.
CLT has become popular in Europe, Japan, North America and Oceania. The global production of mass timber panels (primarily CLT) in 2019 was estimated at 1.44 million m³ (valued at $773 million), and it is forecast to more than double by 2025 (Jauk, 2019). The 2019 Wood Rise congress in Québec City indicated an increasing global trend in the number of medium- and high-rise wood-framed buildings due to the innovative use of CLT products. A list of outstanding high-rise projects in 12 UNECE countries has been made available (Woodrise, 2020). Annual global CLT production is predicted to exceed 2 million m³ in 2020 (to as high as 2.5 million m³) (Jauk, 2019), but that prediction was made before the COVID-19 pandemic, and it remains to be seen if it will come to fruition.
Global CLT production capacity is estimated at 2.8 million m³ in 2020, of which 48% is in Europe, 43% is in North America, 6% is in Oceania and 3% is in Asia (Africa and South America produce minimal CLT). If only mass timber panels for use in buildings are included (i.e. excluding industrial matting), Europe accounts for 61% of production, North America for 27%, Oceania for 7% and Asia for 3%, with the remainder in Africa and South America (Beck Group, 2020).
Austria, Czechia, Germany, Italy and Switzerland continue to form the epicentre of global CLT production. These five countries account for more than 80% of global production, estimated at 920,000 m³ in 2019 (Jauk, 2019). This volume was up by 12% over 2018, with most of the increase the result of greater capacity in existing plants rather than due to greenfield projects. The forecast is for production in the five countries to break the 1 million m³ mark. CLT production is also increasing dramatically in northern Europe, with Norway (50,000 m³ in 2019) and Sweden both increasing production faster than the central European CLT cluster countries; Sweden is increasing its production capacity from 25,000 m³ in 2018 to 400,000 m³ in the near future (Jauk, 2019).
In EECCA, two CLT plants are being built in the Russian Federation, and a recently constructed plant in Ukraine is now producing CLT.
A wide variety of products categorized as mass timber products is in production in North America. This section addresses only mass timber panels, which, in addition to CLT, includes nail-laminated timber, dowel-laminated timber and mass plywood panels. The 2019 Review noted that, as of late 2018, ten CLT manufacturing plants were in operation in North America (five each in Canada and the US), with a combined annual production of about 400,000 m³ (Beck Group, 2018). As of year-end 2019, 14 plants were producing mass timber panels in North America, with a further three under construction and three more announced. The current practical capacity of these plants is 910,000 m³, but the majority (slightly over half) of this production continues to be aimed at industrial matting (platforms for equipment to work on in muddy or environmentally sensitive areas). Thus, the practical capacity of mass timber panels for use in buildings in North America was about 439,000 m³ in 2019, and this is expected to increase by another 62,000 m³ in 2020, excluding proposed new plants (Beck Group, 2020).