In the above podcast discussion, Timer Products Vice President Mike Clausen explains how countervailing and antidumping duties levied on Chinese hardwood plywood imports would impact your business.  Hear answers to common questions regarding hardwood plywood prices, supply and availability, what products are impacted, and what to expect in the hardwood plywood market during the rest of 2013.

What questions do you have?

Hello, 2013. We’ve been waiting for you. After nearly four-plus years of a depressed housing market, which trickled down to the cabinet business, it appears that things are about to get back on track. Or at least to healthy levels for homebuilders and suppliers.

This turnaround feels different, though. We see caution and careful planning going into each decision about materials, staffing and capital investments. Nobody wants to get burned or over-react to the business climate.

That’s why over the past several years the Spectrum Division of Timber Products has been aggressively investing in custom components and the stock drawer side business. Many of our customers are now seeing increased business coming in the door and turning to Timber Products to add value to their panels. What do I mean by value?

I mean that we can cut up your panels for you to the exact specifications that you provide. This allows you to focus on running your shops at current manning levels without having to add people or machinery, save money on cutting time-consuming parts, and better utilize your resources.

And it will be right every time.  Each month Spectrum produces an average of nearly 100,000 component parts for shipment to our customers.  These components are manufactured from a variety of panel types, from raw particleboard to high-end prefinished panels.

To provide you with better component options, we’ve added several new pieces of edge finish equipment and bulked up on stock panels that are ready to be sawn to your specifications.  We are currently stocking prefinished ½” C-2 Maple in both 7 ply domestic and 11 ply TimberPly construction to support our drawer side programs.

As we enter the busy building season, it’s time to think about bringing in a partner to provide the custom components that add value to your business. We understand you don’t want to jump all-in yet, and partnering with your panel supplier for components is a smart move. You choose the product width, construction, dado specification and packaging requirements and we’ll get it done.

What questions do you have?

In this new Species Spotlight, I share my insight on Alder. 

Species: Alder (Alnus Rubra), sometimes called Western Red Alder, began to make inroads in the kitchen cabinet market roughly 15 years ago when Birch heartwood was in limited supply and high demand. Alder became an alternative to red Birch, and has since gained a foothold in the market as one of the more popular species. Alder is the most abundant hardwood species in the Pacific Northwest, where most trees are harvested (and replanted) for housing and woodworking use. And here’s a fun fact: because of its oily smoke, Alder is the wood of choice for smoking salmon.

Appearance:  Alder has more character than the traditional hardwood species. Rustic, with its knotty appearance, is the most popular of the Alder grades. Although Alder is a hardwood, its grades and appearances tend to be more similar to Western Softwood species rather than hardwood species.

Uses: Common uses of Alder include cabinets, furniture, millwork, pellets, musical instruments and firewood. Its popularity for producing guitars stems from its balanced tonality. In panel form, Alder is most often used for making kitchen cabinets. At Timber Products Company, Alder is the largest plain sliced species produced for customers. Alder is primarily used in the West for Western style log homes.

Characteristics: Light tan to reddish brown in appearance. Color darkens and reddens with age. No visible distinction between heartwood and sapwood.  Rustic grade features a lot of knots and character. Small pores and a fine, even straight grain. Rustic’s goal is to have lots of knots and character. Always planked-matched.  Glues well and stands on its own with a clear finish.

Current Trends:  Recently, Alder has moved beyond log homes and mountain lodges into modern homes where it really stands out and adds character to otherwise plain interiors.  A popular veneer lately is our TP Knotty Alder, which is often described as Rustic Alder on steroids for its ultra-Rustic appearance. The veneer is sliced exclusively from lumber, so the color is already set.

What questions do you have?

Currently affiliated with The Livingston Group, Mark E. Rey served for eight years as the nation’s Under Secretary for Natural Resources and Environment at the United States Department of Agriculture (USDA).

As Under Secretary, Rey oversaw the programs for the U.S. Forest Service and Natural Resources Conservation Service. Serving on Capitol Hill for the Senate Committee on Energy and Natural Resources, he was responsible for drafting legislation and organizing more than 100 legislative and oversight hearings. 

Our company newsletter, Timberline, recently caught up with Rey to talk about the state of the nation’s forests. Here’s what he had to say:

Timberline: What are the biggest issues facing managers of our federal forest resources?

Rey: For once the single, biggest issue facing federal forest managers is not unique to the national forests. It is the same issue facing all federal agencies.  That issue is the rising federal deficit, and what the President and the Congress are going to do about it. Every federal agency is at this moment living in a state of suspended animation, waiting to see what will happen with entitlement reform, tax reform, domestic spending, and defense spending. The decisions made within the next 90 days will determine whether federal forest managers will be able to make investments in federal resource management. No other issue is currently of comparable importance.

TL: How can we do a better job of balancing economic and environmental considerations?

Rey: In this case, the answer is not for Congress to enact new and better laws. The statutes that exist already provide mechanisms for balancing these interests. What would produce a better result would be a concerted effort by agency decision makers to seek out and involve representatives of both interests as early as possible in the decision making process with a clear understanding that they will have to accommodate each other before any kind of final decision is reached. Local collaborative efforts have demonstrated that competing interests can be depended upon to do the right thing by one another—after they have tried everything else. A skilled decision maker, appreciative of this reality, can make the balance happen faster and better by forcing early engagement.

TL: What can be done to reduce the number and magnitude of wildfires?

Rey: There are two critical needs in this area. The first is to continue to make investments (assuming there is any money—see the answer to #1) in fuels treatment work. The second is to move to modernize the large air tanker program.  Large air tankers are a primary initial attack asset. They keep new ignitions from becoming large fires.  As such, they save firefighting costs. However, the current fleet is falling out of service and falling out of the sky. The planes are substantially older than the pilots flying them. Here again, assuming there is any money left, Congress must provide the federal firefighting agencies with the tools to keep fires from becoming catastrophic.

TL: How would you assess the health of our national forests?  What needs to be done to make it better?

Rey: In some regions, the health of our federal forests is just fine. In fire-dominated ecosystems, however, it is not good. As a consequence of both fire suppression and reduced timber harvests, fuel loads are providing the fuel for fires that are ecologically and economically catastrophic. There are about 80 million federal acres where fuel reduction work is critical. This work cannot be funded exclusively through federally appropriated dollars. Federal forest managers are now finding, and will continue to have to find, ways of making this effort pay part of its way out of the woods.

TL: What can be done to increase harvest levels, to even a fraction of the Clinton Plan?

Rey: The Clinton Plan was a solution that ignored the underlying problem—a pitched legal battle over the continued harvest of old growth timber. If we want to use the goals of the Clinton Plan as a worthwhile jumping off point, and we believe that these goals are desirable (both ecologically and economically), then the only way they are all going to be achieved is for Congress to legislatively protect the plan and its implementing actions from judicial challenge. Otherwise, the legal battles will continue.

What do you think about the state of our nation’s forests?

When Superstorm Sandy battered the Eastern Seaboard in late October, the wood products industry took a hit just like everyone else. But not for long.

Flooding and power outages were widespread in the aftermath of the storm, and wood products distributors like Roberts Plywood, which serves customers from Connecticut to New York to New Jersey, were shut down for a few days to recover. But by Nov. 1, three days after the storm touched down, Roberts was back in business running on limited power, taking deliveries and doing everything it could to help customers.

“We lost power for a few days but other than that had very little damage because we are six miles inland from the ocean,” said Norm Roberts, president. “We prepared for the storm by placing our trucks up against our building to prevent the wind from knocking our doors open. We feel fortunate because a lot of our customers were closed a good part of that week and their employees couldn’t get to work due to the shutdown of the mass transit systems.”

Some areas were hit hard than others, said Roberts, and will need more time to recover. He cited some of his customers who are out of business completely and those who found their CNC equipment underwater due to flooding.

“New Jersey and Long Island got hit hard by flooding,” he said. “Sea water is more damaging than rain water because of the salt so it will take a while to clean up. The bright side is that these communities will rebuild and the homes and buildings will need cabinets and furniture. Restaurants, in particular, can’t stay closed too long so they will start the process right away. The first quarter of 2013 will be busy.”

At his home in Long Island, Roberts was without power for 12 days following the storm, and water crept up his driveway. Downed trees littered the neighborhood.

“I happened to be in Florida during the storm and my neighbors pulled together to help out,” said Roberts. “I’ve lived on Long Island for 58 years and never seen anything like this. To make it worse, we had a snowstorm the following week.

As for inventory, Roberts Plywood was fully stocked and ready to serve customers right away.

“Our regular shipments were coming in as scheduled, and we even unloaded a few trucks on the Wednesday after the storm,” he said. “My philosophy has always been ‘inventory is king,’ so we were prepared. It helps to have suppliers like Timber Products to keep the orders coming to us consistently.

“The region was hit hard but we will bounce back,” he added.

Since it’s almost the end of 2012, the Timber Product team recently completed a review of the primary market sectors for hardwood plywood panels and graded their overall 2012 business activity performance to date.

To do this we researched market statistics, spoke with industry sources and our customers, and connected with our in-house experts. Some are excelling while others need to bring up their midyear efforts. 

Office/Contract Furniture
Performance Grade: A
Comments:  U.S. production was up 13 percent and consumption was up 12.7 percent in 2011, according to BIFMA, and 2012 has not slowed down. The institutional furniture sector has been strong so far this year due to companies refreshing their office interiors and the need to keep employees comfortable, efficient, and ergonomically safe. Timber Products sees continued growth in this sector in the next six months.

Store Fixtures
Performance Grade: B+
Comments:  The retail environments industry is on track for a third consecutive year of revenue growth in 2012, according to A.R.E.’s midyear report. Business activity from manufacturers to suppliers showed a 15.7 percent growth in 2011 over 2010 and is on track for a 10 percent increase for 2012.

While all segments of the industry are growing, not all firms are. Companies covering retail sectors that are not recovering are not faring as well. Recent growth has been based almost entirely on renovations and refreshes, not new store construction. Timber Products Company has participated in several “signature” retail makeovers, and we see more on the way.

Cabinets
Performance Grade: B-
Comments: Timber Products sees continued growth in cabinet sales through home centers.  Custom cabinets are strong in certain parts of the country, like the Northeast, but weak in others, like the Southeast. The recovery for the cabinet market has been very regional. We see the overall cabinet market coming back, but at a painfully slow rate.

According to KCMA data, stock cabinet sales are up 7.9 percent through July over the same period the previous year, reflecting strong demand for cabinets through the home center channel.  While overall YTD sales are up only 3.6 percent, the growth rate has gained strength as the year has gone on, with the month of July up 8.6 percent.

Educational/Institutional
Performance Grade: B-
Comments: This market sector has seen pockets of strong activity, such as in Pennsylvania and California, but in many regions funding has dried up. Designers and specifiers are demanding sustainable materials at competitive prices to bring projects in on budget. With our vertical integration, we have been able to deliver product solutions for many projects in this category.

Hospitality
Performance Grade: B+
Comments: According to a September 2012 edition of Hotel Horizons, published by PKF Hospitality Research, record numbers of guests continue to occupy U.S. hotel rooms. The company is forecasting that on any given night in 2012, nearly 3 million of the nation’s 4.8 million hotel rooms will be occupied.  This is 5.6 percent greater than the level of lodging demand in 2007, the year prior to the recession.

What do these figures mean? At Timber Products we see this resurgence in hotel occupancy driving numerous remodeling projects, from budget properties to luxury resorts. Sustainability is a key factor in their material choices.

Residential Furniture
Performance Grade: C-
Comments:  While we see some residential furniture manufacturing coming back to the U.S., the market is still dominated by imports. Timber Products has individual success stories around the nation, but in total they represent a fraction of the residential furniture being bought in America.

Architectural Millwork
Performance Grade: B
Comments: Architectural millwork reaches into a number of market and building sectors. Press releases from AWI – Architectural Woodwork Institute – are upbeat about all the projects and innovations happening with their members. Most of Timber Products’ customers who serve this market are small, but we have many of them across the country.

Some of the positive news for this market sector is an outgrowth of the healthy commercial and office market.

Medical
Performance Grade: A
Comments: With the aging U.S. population and the baby boomers reaching retirement, Timber Products has seen an explosion of medically related projects across the nation. From small physician offices to gigantic regional hospitals, we see nothing but growth in this market sector despite the turmoil and the changes happening in medicine.  At NeoCon 2012 this summer in Chicago, there were several companies showing off the “new” look of medicine: use of wood to make these environments feel less institutional and more comfortable.

What do you think about these grades? Connect with us on Facebook or Twitter and share your own grades for these market segments.