Softwood Veneer and Plywood

SIC 2436

Companies in this industry

Industry report:

This classification includes establishments primarily engaged in producing commercial softwood veneer and plywood from veneer produced in the same establishment or from purchased veneer. Establishments primarily engaged in producing commercial hardwood veneer and plywood are classified elsewhere in SIC 2435: Hardwood Veneer and Plywood. Establishments primarily engaged in the production of veneer used in the same establishment for the manufacture of wood containers such as fruit and vegetable baskets and wood boxes are classified elsewhere in various wood container manufacturing industries.

Plywood was first developed in 1905 in St. John, Oregon. Plywood comes in different grades depending on the quality of surfaces and the type of adhesive. Softwood veneer is made by cross-laminating veneers, such as pine, spruce, fir, and hemlock. The grains are placed at right angles to improve strength, and panels are made in 4-by-8 foot sizes, with a thickness up to three-quarters of an inch. Veneers are bonded together using a waterproof or moisture-resistant adhesive.

The U.S. Census Bureau reported the value of output for the plywood and veneer (softwood) manufacturing industry at $3.43 billion for 2008, down from $4.05 billion in 2007. Forty-one firms composed the North American softwood plywood industry in the early 2010s. The top six firms accounted for roughly 63 percent of all output. The demand for veneer and plywood depends on the construction industry. Nearly 48 percent of veneer and plywood output goes to construction, mainly residential. Roughly 25 percent of the output is used in other lumber and wood products industries, with an additional 11 percent in furniture and fixtures. Rough softwood plywood accounts for more than 50 percent of total product shipments, followed by sanded softwood plywood and nonreinforced softwood veneer at 15 percent and 13 percent, respectively.

During the mid-2000s, construction-related industries expanded rapidly as new housing starts hit record highs. However, in 2008, the United States experienced a banking crisis that sent the housing market tumbling downward. In 2009, the number of new housing starts was the lowest since the federal government began keeping records 50 years earlier in 1959. As with other construction material-producing industries, this industry suffered significantly during the recession.

Previously, the industry had also suffered during a slow economy that occurred during 1990-1991, but it benefited tremendously from the surge in housing construction at the end of 1993. Growth continued until 1996, when shipments returned to 1993 levels. In 1997, product shipments increased one percent to about $5 billion over the previous year, which was attributed to healthy housing starts. Shipments increased to $5.15 billion in 1998 and to $5.56 billion in 1999, due in part to the strengthening U.S. economy. However, when the U.S. economy weakened in 2000, shipments declined to $5 billion and to $4.4 billion in 2001. Increased housing starts in the early 2000s were expected to boost shipment values.

Competition continued to increase from the oriented strand board (OSB) industry, since this product's average price was around 20 percent lower than plywood due to the simpler manufacturing process. In 1998, OSB held more than 50 percent of the North American sheathing market, and by 2003, it had grown an additional 25 percent. The one market segment plywood had been able to retain was the remodeling sector, which faced increased competition from OSB throughout the early 2000s.

Plywood manufacturers were trying to fight back by improving technology and looking for alternative markets. Better adhesives made softwood plywood less expensive to produce. Specialty markets, including higher-valued products, were being pursued. Throughout the late 1990s, plywood production shifted from the West to the South, which produced more than 75 percent of all grades of softwood plywood. According to the U.S. Department of Commerce, the West was expected to dominate high-end construction applications.

The industry has been challenged by the cost of complying with the growing environmental regulation of indoor pollutants. The industry set voluntary formaldehyde emission standards, and the U.S. Environmental Protection Agency (EPA) was collecting information on other forms of indoor pollutants. In the early 1990s, a national EPA investigation resulted in several companies paying millions of dollars in fines and for equipment upgrades. Timber companies were making efforts to become certified as being eco-friendly with regard to logging practices and for the products made from their wood. The Forest Stewardship Council has certified 50 million acres of forest worldwide.

The shipment value for softwood veneer and plywood industry in 2003 was $7.89 billion, increasing to $8.76 billion in 2005, according to the U.S. Census Bureau. Of the 41 firms producing softwood plywood, six were responsible for 63 percent of production, and Georgia Pacific held 31 percent of the industry market share in 2005.

According to the Engineered Wood Association (APA), U.S. and Canadian structural wood panel production fell 3.9 billion square feet, or nine percent, in 2007. The deteriorating housing market continued to keep housing starts at a standstill. Total housing starts, including manufactured homes, plunged to 1.4 million units in 2007 from 2.068 million units in 2005.

Current Conditions

According to a report by the U.S. Department of Agriculture's (USDA) Forest Service, 891 softwood lumber mills were in the United States and Canada in 2009, down from 1,025 in 2006. These mills had a capacity of 167.7 million cubic meters, down from 190.8 million cubic meters of capacity recorded in 2006. The United States' capacity shrank by eight percent, from 102.6 million cubic meters to 94.8 million cubic meters. In 2008, U.S. and Canadian softwood mills ran at 71 percent capacity, compared to 93 percent capacity in 2005 during the housing boom. Consequently, production fell from a high of 176.6 million cubic meters in 2005 to 124.7 million cubic meters in 2008.

The drastic decline in new housing starts between 2005 and 2009 was reflected in the direction of softwood toward end use. According to the USDA, in 2005, 57.8 million cubic meters of softwood lumber was used in the market place in new single homes, accounting for nearly 38 percent of all domestic softwood lumber. In contrast, in 2009, an estimated 12.5 million cubic meters--less than one-fourth of the 2005 total--went to new houses, accounting for just 16 percent of all softwood lumber domestic use. Although both residential remodeling and industrial uses of softwood lumber declined, they did not drop as significantly as new housing starts; thus, they retained higher proportions of the end use market. Residential remodeling, which took up a 32 percent market share (49.4 million cubic meters) in 2005 jumped to a 44 percent market share in 2009 (33.6 million cubic meters), and industrial uses grew from 18 percent (27.5 million cubic meters) in 2005 to 24 percent (18.3 million cubic meters) in 2009.

According to a report by the American Plywood Association, in 2008, consumption of approximately four percent of total U.S. lumber, 11 percent of total structural panel, and 11 percent of engineered wood products went into nonresidential low rise buildings (e.g., hotels, stores, offices, and schools). This total included 1,098.5 million square board feet of softwood plywood and 1,578.3 million square board feet of OSB.

According to the report, trends in wall framing options among different building types shifted between 2000 and 2008. For example, 57.8 percent of hotels in 2008 used wood, compared to 64.3 percent in 2000. Hotels showed an increase in use of concrete, which grew from 12.7 percent of new builds to 19.5 percent. On the other hand, schools, which were predominately framed with metal in 2000 (60.4 percent), increased their use of metal in 2008 to 70.7 percent. Overall, in 2008, 11 percent of new low-rise nonresidential buildings and additions were framed in wood (up from 9.6 percent in 2000), 26 percent were framed with concrete (down from 33.5 percent), and 62.9 percent were framed with metal (up from 56.9 percent).

Historically, plywood and veneer demand and prices have followed new housing starts. Total new housing starts in 2009 in the United States were 554,000, a 50-year low and down from a record high just four years earlier of 2.068 million new starts. In 2009, the United State produced 8.845 million cubic meters, down significantly from the 17.271 million cubic meters in 2000. Based on population figures alone, the housing industry was expected to recover in the United States but much more slowly than during the swift expansion of the mid-2000s.

Industry Leaders

Georgia-Pacific LLC, based in Atlanta, Georgia, posted 2009 sales of $12.58 billion, holding 31 percent of the U.S. plywood market share. In 2002, the firm added to its plywood operations with the acquisition of two mills, one in Texas and one in Louisiana, from Louisiana-Pacific Corp. In 2005, Georgia Pacific continued to lead the industry with 31 percent of total production representing nearly $19.7 million in revenues. Georgia Pacific was a subsidiary of Koch Industries.

International Paper, located in Memphis, Tennessee, had sales of $23.37 billion in 2009. The company, which made a wide range of paper, boxes, and wood products, held a nine percent share of the plywood market in 2009.

Weyerhaeuser Company, headquartered in Federal Way, Washington, was a leader in the forestry industry, including plywood products. Besides its wood-related products endeavors, Weyerhaeuser owns or manages over six million acres of U.S. forestland and some 15 million acres of Canadian forestland. The company, which has 14,900 employees, reported revenues of $5.53 billion in 2009; it held eight percent of the U.S. plywood market share.

Boise Cascade, located in Boise, Idaho, recorded sales of $2.98 billion in 2009. The company held an eight percent share of the plywood market in 2009. Roseburg Forest Products, of Dillard, Oregon, specialized in panels, engineered wood products, and plywood. The company, founded in 1936, was owned and operated by Allyn Ford, son of philanthropist Kenneth Ford, who created the Ford Family Foundation. In 2008, the company posted revenues of $1.2 billion and employed approximately 4,000. Roseburg held a five percent market share of plywood in 2009.

Workforce

According to the Bureau of Labor Statistics, veneer, plywood, and engineered wood product manufacturing employed 75,990 in 2009. Of this total, 40,200 (52.9 percent) of jobs were production related. Production jobs paid an average hourly wage of $14.30. Transportation and material hauling related jobs accounted for 13,980 jobs (18.4 percent) and paid an average hourly wage of $14.14.

America and the World

Softwood lumber exported from the United States to all countries but Canada dropped sharply between 1989 and 2009. According to a 2009 report by the USDA, "Two decades ago, U.S. exports were as much as seven times greater than they were in recent years, but a strong U.S. dollar from the mid-1990s onward dampened exports." In addition, varying definitions of grades and measurements complicate exports, making North American trade a much easier process than overseas shipments. However, during the late 2000s, as the economy trended downward, some producers looked to foreign markets to drum up business in the poor business climate.

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