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

Outline

1. Definition of EWP 2. Compare/contrast world demand/end use applications 3. Demand drivers and outlook for next few years

1. 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

  

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

EWP still a small market

Million cubic meters 200

1999 data

160 120 80 40 0 Europe North America Sawnwood Wood Panels EWP Japan Source: APA,2000 & Timber database,2000

Regional EWP Markets

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

LVL, Glulam 1.6

1.2

0.8

0.4

1999 Consumption 0 North America Asia Pacific LVL Glulam Europe I-beams I-Beams 0.3

0.25

0.2

0.15

0.1

0.05

0 Source: APA 2000 & Jaakko Poyry 2000

Wood frame construction

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

2.4

2 1.6

1.2

0.8

0.4

0 Europe North America Wood Steel/Concrete Japan Source: APA 2000 & Jaakko Poyry 2000

I-beam production

Million linear meters 300 Most of the I-beams used in Residential flooring applications 200 100 0 North America Europe Source: APA 2000

LVL end uses

North America - LVL used in I-beams primarily Europe – main uses are engineered constructions/nonresidential buildings Japan/Asia Pacific – main uses are furniture and other decorative/non structural applications 100% Market Share 80% 60% 40% 20% 0% Sources; APA 2000 & Jaakko Poyry 2000 NA Europe Asia Pacific I Joists Beams/Headers Other

Glulam I-beams SCL*

North American EWP Markets

New Homes 52% 83% 60% Nonres.

Buildings 38% 7% 20% Renovation Export/Other 10% = 100% 10% = 20% = 100% 100% * Structural composite lumber products not used to make I-joists.

Engineered Wood Products

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

•

Beams

•

Floor Joists

•

Roof Rafters

•

Window/Door Headers * Lumber products only. Panels excluded.

Glulam consumption versus imports

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

1000 cubic meters 1200 1000 800 600 400 200 0 Japan NA(U.S.&Canada) Domestic Production Source: APA 2000, Jaako Poyry 2000, & Japan Customs Bureau 2000 European Region Imports

3. Outlook

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.

2.

3.

4.

5.

Canada – reduced AAC in BC and eastern Canada South America – rain forest harvest restrictions China – recent harvest and wood use restrictions Malaysia – harvest restrictions on tropical hardwoods Russia – infrastructure problems reduce harvest potential

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

Court ordered harvest restrictions on Federal lands

Million cubic meters 28 24 20 16 12 8 4 0 64 60 56 52 48 44 40 36 32

Private Public

Two major impacts:



Total harvest down 50%



Private share now about 78% “Spotted Owl Effect” - 50% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: USFS ( PNW –RB - 231 , May 2000)

EWP give higher yields from the log – that means less waste and lower manufacturing cost 80% Final product yield (%) 75% 64% 60% 40% 50% 52% 40% 76% 20% 0% Sawmilling Source: Forintek, TJ MacMillan, USDA FS Plywood LVL OSB Parallam Tmberstrand

Efficiency Advantages – EWPs Fiber Savings in U.S. Housing

Conventional Floor System

 1700 lineal feet (531 meters) lumber/house  With 1.3 million single family houses,

8.25 million cubic meters wood fiber/yr.

I-beam system

 50% 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

$5.80

$5.20

$4.60

$4.00

$3.40

$2.80

$2.20

$1.60

$1.00

$0.40

I-Joist & 2x10 Lumber Prices

Builders wanted higher quality and stable prices.

PRICE PER METER & PRICE SPREADS I-Joist $2.26

$2.85

$2.33

$2.62

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 Le

n

gths Publications

and

Engineered Wood Trends

Demand Drivers for EWP’s

Demographics – aging population favors labor saving construction techniques

An Older America – Implications for Building Materials

Japan’s & Europe’s demographics are worse

Distribution of Population By Age Group (%) 35% Framing Crew Labor Pool Prime House Buying Age Group 31% 27% 23% 19% 15% 1980 1990 2000 Baby Boomers 35 - 54 Yrs 2010 2020 18 - 34 Yrs > 55 Yrs

Source:

U

S Bureau of Census

Labor Saving Efficiencies Examples

Applications Conventional Solution EWP Solution

1.

Garage Door Headers 2.

3.

4.

Floor System Carrying Beams Roof Truss system with two 2x10’s nailed together one LVL beam conventional floor with 133 pieces three or four 2x12’s nailed metal plate wood truss with conventional lumber chords I-Joist system with 80 pieces (40% less) one 3 ½” (8.9 cm) LVL beam one Parallam beam metal plate wood truss MSR chords(25% less lumber)

Factory built homes and use of prefab (engineered)components gain share from “stick-built” construction.

Factory built homes use more EWPs

US Housing Starts by Type '000 2500 2000 1500 1000 HUD Code Panelized Modular 500 Production Builders/ Site Built 0 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99

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

Automated

Builder

EWP’s Plants in North America

Number of plants 120 100 80 60 40 20 0 16 8 30 1989

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

43 21 38 1999 Glulam LVL I-Joist Source: APA

North America EWP Growth

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

1000 cubic meters 1200 1000 800

Glulam

600 400 200

I-beams LVL

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: APA 2000

European glulam production

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

Thousand cubic meters 2000 1600 1200 800 400 0 1990 1999 2002-2003 Source: Jaakko Poyry 2000

Global Glulam Production

Thousand cubic meters

4000 3000 2000 1000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 US/Mexico France Canada Other Europe Germany Japan Austria

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

Global LVL Production

Thousand cubic meters

4000 3000 2000 1000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 US Canada Europe Oceania Other Asia Japan

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

Global I-beam Production

1000 cubic meters

4000 3000 2000 1000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 US Canada other

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 100

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

Market share 0 Source

: USFS

Develop. Expansion Rapid Growth Time Horizon Mature Decline

Potential Problems for EWPs

Adding capacity too quickly easy to do with new markets

MSR Premiums Shrink as Production Soars

Premium to #1&2 $80 $70 $60 $50 $40 $30 $20 $10 $0 1995 1999 Million BF 1600 1400 1200 1000 800 600 400 200 0 1996 1997 1998 2x4 1650,delivered Pittsburg Production Source: Random Lengths, MSR Lbr. Producer’s Council

Future Fiber Supply Uncertain???

EWPs offer additional flexibility to use whatever fiber is available Why?? 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.

2. 3.

We don’t use the majority of the species available to us Now, old growth is becoming “off limits” 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