World Trends in EWP

Presentation to Joint ECE Timber Committee & FAO European Forestry

Commission October 10, 2000

Rome, Italy

World Trends in EWP

Presentation to Joint ECE Timber Committee & FAO European Forestry

Commission October 10, 2000

Rome, Italy

Al Schuler – USDA Forest Service

Craig Adair – APA – The Engineered Wood Association

Ed Elias – APA – The Engineered Wood Association

1. Definition of EWP

2. Compare/contrast world demand/end use applications

3. Demand drivers and outlook for next few years

OutlineOutline

1. EWP Definitions1. EWP Definitions

• 1. Structural Composite Lumber (SCL)– Laminated Veneer Lumber (LVL)– Parallel Strand Lumber (PSL)– Oriented Strand Lumber (OSL)

• 2. Wood I-Beams• 3. Glued Laminated Timber (Glulam)

2. World Demand Trends for EWP

2. World Demand Trends for EWP

EWP versus conventional wood products

Compare & contrast demand in North America vs Europe vs Asia

Why the major differences??

Consumption of sawnwood, wood based panels, and EWPs in Europe,

NA, and Japan

0

40

80

120

160

200

Europe North America Japan

Sawnwood Wood Panels EWP

Million cubic meters

1999 data

EWP still a small market

Source: APA,2000 & Timber database,2000

Regional EWP MarketsRegional EWP Markets

0

0.4

0.8

1.2

1.6

North America Asia Pacific Europe

mill

ion

cu

bic

met

ers

0

0.05

0.1

0.15

0.2

0.25

0.3

mill

ion

lin

eal m

eter

s

LVL Glulam I-beams

LVL, Glulam I-Beams

1999 Consumption

Glulam is the only universally used EWPLVL & I-beams geared to NA

Source: APA 2000 & Jaakko Poyry 2000

Wood frame constructionWood frame construction

0

0.4

0.8

1.2

1.6

2

2.4

Europe North America Japan

Mill

ion

unit

s

Wood Steel/Concrete

NA consumes the majority of EWPs to frame their homesTo date, little used in nonresidential/commercial construction

Source: APA 2000 & Jaakko Poyry 2000

I-beam productionI-beam production

0

100

200

300

North America Europe

Million linear meters Most of the I-beams used inResidential flooring applications

Source: APA 2000

LVL end usesLVL end uses

0%

20%

40%

60%

80%

100%

NA Europe Asia Pacific

I Joists Beams/Headers Other

North America - LVL used in I-beams primarilyEurope – main uses are engineered constructions/nonresidential buildingsJapan/Asia Pacific – main uses are furniture and other decorative/non structural applications

Market Share

Sources; APA 2000 & Jaakko Poyry 2000

North American EWP MarketsNorth American EWP Markets

New Nonres.Renovation

Homes BuildingsExport/Other

Glulam 52% 38%10% = 100%

I-beams 83% 7%10% = 100%

SCL* 60% 20%20% = 100%

* Structural composite lumber products not used to make I-joists.

Engineered Wood Products

Engineered Wood Products

In 1998, 8.6% of all lumber-like products* used in new home construction in North America were EWP

* Lumber products only. Panels excluded.

•Beams

•Floor Joists

•Roof Rafters

•Window/Door Headers

Glulam consumption versus importsGlulam consumption versus imports

0

200

400

600

800

1000

1200

Japan NA(U.S.&Canada) European Region

Domestic Production Imports

1000 cubic meters

Glulam is the only EWP that is heavily traded internationallyTrade is from NA and Europe to Japan

Source: APA 2000, Jaako Poyry 2000, & Japan Customs Bureau 2000

3. Outlook3. Outlook

Why Have Engineered Wood Products Grown???

Why Have Engineered Wood Products Grown???

Environmental issues & trade restrictions

Fewer & smaller logs, higher log prices & Continued commodity price swings

Builders like the results – better value

Source: APA – The Engineered Wood Association

Demand Drivers for EWP’s

Changing Fiber Supply leads to Fiber Cost Increases

Lots of focus on U.S. experience, but we are seeing Similar fiber Restrictions all over the world

1. Canada – reduced AAC in BC and eastern Canada2. South America – rain forest harvest restrictions3. China – recent harvest and wood use restrictions4. Malaysia – harvest restrictions on tropical hardwoods5. Russia – infrastructure problems reduce harvest potential

U.S. Experience :Total Timber Harvest - Public & Private - Washington & Oregon U.S. Experience :Total Timber Harvest - Public & Private - Washington & Oregon

048

1216202428323640444852566064

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Million cubic meters

- 50%

Source: USFS ( PNW –RB - 231 , May 2000)

“Spotted Owl Effect”

Two major impacts: Total harvest down 50% Private share now about 78%

Court ordered harvest restrictions on Federal lands

Public

Private

EWP give higher yields from the log – that means less waste and lower manufacturing

cost

EWP give higher yields from the log – that means less waste and lower manufacturing

cost

40%

50% 52%

64%

76%75%

0%

20%

40%

60%

80%

Sawmilling Plywood LVL OSB Parallam Tmberstrand

Final product yield (%)

Source: Forintek, TJ MacMillan, USDA FS

Efficiency Advantages – EWPsFiber Savings in U.S. HousingEfficiency Advantages – EWPsFiber Savings in U.S. Housing

Conventional Floor System1700 lineal feet (531 meters) lumber/houseWith 1.3 million single family houses, 8.25 million cubic meters wood fiber/yr.

I-beam system50% savings in wood fiber (Spelter, 1997 FPL GTR 99) 19.2 “ (48.75 cm) on center, LVL flange, same subfloor thickness, OSB web)Save 4 million cubic meters wood fiber/year

Demand Drivers for EWP’s

Builders/customers like the product due to Better Quality and less Price Volatility

I-Joist & 2x10 Lumber PricesI-Joist & 2x10 Lumber Prices

$0.40

$1.00

$1.60

$2.20

$2.80

$3.40

$4.00

$4.60

$5.20

$5.80

Jul-9

7

Sep-

97

Nov

-97

Jan-

98

Mar

-98

May

-98

Jul-9

8

Sep-

98

Nov

-98

Jan-

99

Mar

-99

May

-99

Jly-

99

Sep-

99

Nov

-99

Jan-

00

Mar

-00

May

-00

Jly-

00

PRICE PER METER & PRICE SPREADS

I-Joist

2 x 10

•9-1/2” I-Joist, 6-city delivered average•2 x 10 No. 2 & Btr. Southern Pine,KD, 14’, Westside, mill price

Source: Random Lengths Publications and Engineered Wood Trends

Builders wanted higher quality and stable prices.

$2.85 $2.33$2.62

$2.26

Demand Drivers for EWP’s

Demographics – aging population favors labor saving construction techniques

An Older America – Implications for Building Materials

An Older America – Implications for Building Materials

15%

19%

23%

27%

31%

35%

1980 1990 2000 2010 2020

Baby Boomers 18 - 34 Yrs35 - 54 Yrs > 55 Yrs

Distribution of Population By Age Group (%)

Prime House Buying Age GroupFraming Crew Labor Pool

Source: US Bureau of Census

Japan’s & Europe’s demographics are worse

Labor Saving Efficiencies ExamplesLabor Saving Efficiencies Examples

Applications Conventional EWP SolutionSolution

1. Garage Door Headers two 2x10’s nailed together one LVL beam

2. Floor System conventional floor I-Joist system with 80 with 133 pieces pieces (40%

less)

3. Carrying Beams three or four 2x12’s nailed one 3 ½” (8.9 cm) LVL beam

one Parallam beam4. Roof Truss metal plate wood truss with metal plate wood truss

system with conventional lumber chords MSR chords(25% less lumber)

Factory built homes and use of prefab (engineered)components gain share from

“stick-built” construction.

Factory built homes and use of prefab (engineered)components gain share from

“stick-built” construction.

US Housing Starts by Type

0

500

1000

1500

2000

2500

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99

'000

Source: Automated Builder

Production Builders/ Site Built

Panelized

Modular

HUD Code

Note: These estimates are slightly higher than U.S. Census estimates because they include production for export

Factory built homes use more EWPs

EWP’s Plants in North AmericaEWP’s Plants in North America

3038

8

2116

43

0

20

40

60

80

100

120

1989 1999

Glulam LVL I-Joist

Source: APA

Number of plants Number of plants has doubled, and average plant size is larger today

North America EWP GrowthNorth America EWP Growth

0

200

400

600

800

1000

1200

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

1000 cubic meters

Immediate growth – substitute for wide lumber (2x10’s) in residential marketsLonger term – substitute for lumber and non wood products in all structural applicationsboth residential and nonresidential/commercial markets

Source: APA 2000

LVL

I-beams

Glulam

European glulam productionEuropean glulam production

0

400

800

1200

1600

2000

1990 1999 2002-2003

Thousand cubic meters

Growth driven by interest in timber frame constructionAnd export opportunities (Primarily to Japan)

Source: Jaakko Poyry 2000

Global Glulam ProductionGlobal Glulam Production

0

1000

2000

3000

4000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

US/Mexico Canada Germany Austria

France Other Europe Japan

Thousand cubic meters

Source; R. Taylor & Assoc. Wood Markets Monthly, Sept. 2000

Global LVL ProductionGlobal LVL Production

0

1000

2000

3000

4000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

US Canada Europe Oceania Other Asia Japan

Thousand cubic meters

Source: R. Taylor & Assoc., Wood Markets Monthly, Sept. 2000

Global I-beam ProductionGlobal I-beam Production

0

1000

2000

3000

4000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

US Canada other

1000 cubic meters

Source: R. Taylor & Assoc., wood Markets Monthly, Sept. 2000

“Product Life Cycle”Competition, new technology, and changing

resource driving trends to EWP

“Product Life Cycle”Competition, new technology, and changing

resource driving trends to EWP

0

100

Product Life Cycle

Develop. Expansion Rapid Growth Mature Decline

Pla

stic

Lum

ber

GF

B,

OS

L, P

SL*

LVL

, I

- be

am

s

MD

F

OS

B

PB

Lam

inat

ed L

umbe

r(gl

ulam

)

Indu

stria

l Ply

wo

od

Ply

woo

d

Lum

ber

Str

awbo

ard

Source: USFS

Market share

Time Horizon

*GFB – gypsum fiberboard OSL – oriented strand lumber PSL – parallel strand lumber

Adding capacity too quickly easy todo with new markets

Potential Problems for EWPsPotential Problems for EWPs

MSR Premiums Shrink as Production SoarsMSR Premiums Shrink as Production Soars

$0

$10

$20

$30

$40

$50

$60

$70

$80

1995 1996 1997 1998 1999

0

200

400

600

800

1000

1200

1400

1600

2x4 1650,delivered Pittsburg Production

Premium to #1&2

Source: Random Lengths, MSR Lbr. Producer’s Council

Million BF

Future Fiber Supply Uncertain???Future Fiber Supply Uncertain???

EWPs offer additional flexibility to use whatever fiber is availableWhy?? Here are two reasons!!!!

> New conversion systems focused on small log resource e.g. flaking machines for SCL (LVL, OSL, PSL)> New resin technology/systems let us use more species

Facts:1. We don’t use the majority of the species available to us2. Now, old growth is becoming “off limits”3. Plantation forests offer opportunities to grow “pulpwood” size trees in a fraction of the time required to grow “conventional size” fiber 4. EWPs technology allows us to use a wider range of available fiber