Current and Projected Sources of Timber

1
Innovative Uses of Wood Promotes Market
Development and Supports Forest Sustainability
A win win Situation for Society, Forest
Products Industry, and Forest Owners
UNECE Timber Committee Forum Forestier
Lemanique Symposium Neuchatel, Switzerland Septemb
er 23-26, 2002
Al Schuler USDA Forest Service Princeton, WV
USA (aschuler_at_fs.fed.us)
2
Background

• Need to better utilize the worlds forests 90
  are underutilized
• Forest sustainability requires forest management
  (costs )
• Many wood products are becoming mature while
  competition is
• increasing in key markets
• Construction is the key market they are in
  transition
• Need to develop new and innovative (competitive)
  wood products
• Solution(s) Research and Development
  (conversion technology
• forest management including biotechnology,
  marketing (promoting
• wood use),

3
Underutilized Forests - U.S. Example Hardwood
Inventory (MMCF) in U.S. versus hardwood RW
consumption
1 Roundwood use data for saw logs, veneer logs,
and pulpwood from TPO for 1995-1996 2 Roundwood
use data for OSB from USDA Forest Service for
2000 3 Inventory data from FIA average year of
completed inventory for the 11 states
investigated 1994 (range 1990 1997)  
4
Natural Forests Managed vs Unmanaged 1980s
estimate
Impact Puts too much Pressure on a few
geographic regions, few Species, and
sizes/grades. - need conversion Technology that
isnt species and size specific!!!
Milions of hectares
Source Bowyer FPJ, February 1995
5
Marketing - Wood Promotion Campaigns
NeededStory of wood relatively unknownIn past,
wood never needed to market itself because it was
viewed as a logical construction necessity, but
that perception is facing serious challenges
Wood is Good campaign, FPJ May 2001
Progress with Forest Certification should
help!! EX. City of Seattle has adopted the LEED
green building program where wood can get a
green building credit only if the wood comes
from a plantation (lt 9 year rotation), or fiber
from FSC certified land!!!
LEED U.S. Green Building Councils Leadership
in Energy Environmental Design Standards
6
Global Industrial Forest Plantations

• Plantations less than 3 of natural forests area
• Planting genetically modified trees big role
• in helping Northern hemisphere based industry
• remain globally competitive

Million Hectares
Source Bowyer, Wood Fiber Science 3(3)
318-333
7
Forest Biotechnology Important role in
enhancing forest industrys competitive position
in Europe and North America

• Europes 146 billion forestry sector needs to
  improve its
• biotechnology potential to remain globally
  competitive worth
• more than the chemical and mechanical
  construction sectors combined
• 300 year old industry employs 3.7 million across
  the continent
• Biotechnology has a role in disease control,
  conservation, and
• creating economic value
• In past 50 years, emphasis of production forestry
  and wood based
• manufacturing has switched from the northern
  hemisphere to the
• southern hemisphere to the tropics and
  subtropics ex. pulp mills in
• Brazil and Malaysia 20 40 years for profit
  versus 6 10 years
• Biotechnology can improve economic performance of
  Europes
• (and North Americas) forest by improving
  quality and yields, as well as
• helping with preservation, droughts, and
  biomedicines
• Darran Gardner, Forest Biotechnology in Europe
  Forum,
• Edinburgh, September 2002.

8
Tool to better market wood - Life Cycle of
Building Products
Source Forintek, Kozak Gaston (2001)
9
Life Cycle Analysis Results Cradle to grave
analytical tool for quantifying the environmental
impact of material choices
In many cases, wood is the Appropriate
environmental choice LCA is a tool that can
provides proof!
Source Forintek, Kozak Gaston (2001)
10
Sustainable Forest Managementwont happen
without new markets for wood products!!!

• Technological developments for more efficient
  processing
• - allow use of greater range of tree sizes and
  species which
• creates new silvicultural opportunities
• New technology for production of wood products
  becoming
• less dependent on specific wood
  characteristics of raw materials
• of the forest, as with a single species or
  species group.
• Improvements in sawing, chipping, and other
  areas!

Source Sayer, et. al. 1997, CIFOR paper 2
Youngs Hammett, FPJ Jan 2001)
11
Future Wood Fiber Source?? need more
innovative conversion technology
12
Example Engineered Wood Products (EWP) are
environmentally friendly and can be manufactured
from variety of species, sizes, grades,
13
Innovative Forest Products
Source Hammett and Youngs, JOF June 2002
14
Engineered Wood Products (EWP)
LVL
LVL
OSB
Oriented Strand Lumber
Wood I-Joist
15
EWP give higher yields from the log that means
less waste and lower manufacturing cost we need
more of these products!!!
Final product yield ()
SourceTJ MacMillan, USDA FS, Norbord Industries
16
Predictable Performance non species
dependent Products via technology (I.e.
performance based building codes)
17
Construction Market Issues An Industry in
TransitionSome issues/trends that are/will
impact the business climate for the worlds wood
products industry!!!!Need innovative solutions
new innovative wood products
18
Issue 1 Labor shortages
Implications of a older labor force? More
expensive labor!!! - Components (trusses,
panelized wall systems, etc.)
Share of employed civilian labor force
35-64 year old
16-34 year old
Source www.economagic.com/em-cgi/data.exe
19
Labor Cost Advantages for Manufactured Housing
Direct Labor share of costs (excl. finished lot
and gross margins)
Source Hallahan Associates, November 2000
20
U.S. Lumber Component Industry Growth
The industry is moving toward components that are
made in a factory and delivered to the jobsite.
Precision cut, no waste. Builders are learning
to use components.
US Billion Sales
Gross sales, US Billions
Source WTCA Structural Building Components
trade journal, August 2001, May 2002
21
U.S. Homebuilding Method Estimate1,000 Units
Concrete Steel are growing. Share growth of
these two is a wood loss of about 12,000 starts
per year.
1997
2001
Units Units Stick
Built1 1,175 79.7 1,157 72.2 Concrete2 125 8.6
150 9.4 Panelized3 105 7.1 223 13.9 Modular4 45
3.1 22 1.4 Steel Frame5 8 0.5 30 1.9 SIPs6 8
0.5 11 0.7 Logs 5 0.3 5 0.3 Post
Beam 2 0.1 3 0.2 Other 1 0.1
1 0.1 TOTAL 1,474 100 1,602 100
Trading Places Stick building decline is being
offset by panelization. The trend to panelization
means that builders will take steps to streamline
building and lower jobsite cost. They are
willing to change the way they build.
Source APA
1 stick built walls and floor with pre fab roof
trusses, 2 block or poured concrete walls, 3
panelized wood walls built in factory, 4 Factory
built modules (not HUD), 5 steel framing used for
at least exterior walls, 6structural insulated
panels (foam core with structural panels)
22
World Demographic Profile - 1998
Europe and Japan are older than North America
more impetus for Factory built housing/components
Share of Population by Age
Japan has rapidly moved to pre-cut framing and
wall panelization. Theyve gone there and were
headed there.
Source U.S. Census, World Population Profile,
WP/98
23
Japan Precut PlantsAnd Of Post Beam Homes
That Are Precut
No. of Plants
Of Post Beam
24
New and Innovative Building Productsand
Engineered Systems
25
Structural Insulated Panels (SIPS) A product
whose time has come??
26
SIPS
27
Modular Construction - 1
Source Courtesy Cardinal Homes
28
Modular Construction 2
29
Modular Construction 3
30
LVL(Laminated Veneer Lumber) and OSB wall panels
31
Factory Built Walls and Glulam Beams
32
Panelized Wall System for Modular Housing
33
Commercial Application Glulam, I-Joists And
Parallam
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35
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36
All Engineered Wood Floor System
37
Issue 2 - Construction Site Waste
Pounds of waste for a 2000 Sq. Ft. Home in U.S.
8,000 pounds of waste per housing start
Source NAHB
38
Waste from German Panelized Housing Project
Source APA
39
Wood Fiber VolumePer Unit Floor Area
efficiencies with EWPs

• LVL flanged I-joist vs. Solid lumber joist
• Flooring applications
• 46 less than lumber _at_ 16 OC (on center) vs.
• I-joist _at_19.2 OC
• 36 less when both are at 16 OC
• Spelter others. FPL-GTR-99. 1997.

40
Issue 3 Homebuilding Industry Consolidation

• Rationale
• Lower capital costs important because 65 of
• builders assets tied up in inventory
• Operating and O/H efficiencies
• Land control land development costs exceed 25
• of new home
• Brand recognition mobile society and some
  builders
• want to sell you your starter home, move
  up/custom,
• and retirement home brand loyalty consumer
  lock in
• Deeper pockets larger builders have money for
  RD,
• product development, etc.

41
Consolidation in U.S. HomebuildingWill
Accelerate Industrialization Trends
Top 10 Market Share
Top 100 Market Share
Homes closed by largest for sale builders
Source NAHB, Housing Economics, May 2002
42
Issue 4 Substitution
Many key conventional wood products are mature
losing market share to substitutes steel,
concrete, EWPs,
43
North American Wood Products Consumption
most wood products (70) go to residential
markets a lot at stake here if housing industry
starts shifting away from wood building
materials/systems
2001 Structural Panels 37.6 BSF(3/8)
2001 Lumber 60.6 BBF
Industrial 24
Industrial 25
RA 31
RA 20
New Residential 50
New Residential 39
NR 5
NR. 6
New Residential incl. SF, MF, and Mobile Homes
Source RISI
44
Construction Product Life Cycle
Alternatives to mature Lumber and
Plywoodconventional wood expected to continue
losing market share to materials with less
maintenance, stronger, predictable performance,

FJ lumber
MSR Lumber
Sales
Engineered Components
LVL I - Joists
OSB
Roof Truses
Plywood
Autoclaved Concrete
Lumber
Industrial Plywood
Conventional Concrete Block
Laminated Lumber - glulam ?
GFB, OSL, PSL
Steel Studs
Plastic Lumber
Foam Core Panels
Introduction Growth
Maturity Decline
Time Horizon
Source USFS
45
Building Material S Curves S curves -
product life cycle for one product
Most products max out near 80 - many wood
products have maxed out thats why
substitutes are making inroads
Market Share ()
Generic S Curve
Plywood S Curve
OSB S Curve
I-Joist S Curve
Sq. Ft. Footprint, single family, trusses
truss/rafter combination Raised wood floor
share
Sources USDA Forest Service, APA, Wood
Products Council
46
Adoption of Technology (S Curve) and Costs
Need RD New technology has to be competitive
Innovation Growth
Maturity
90
S Curve for adoption of new products
Cost Curve New Products
10
Time Horizon
Source USFS
LVL
47
Interesting R D Statistics
US Canada Sweden Forest Sector
GDP 1.6 3.0 3.7 Commercial forest (000 Sq
Km) 1956 2450 240 Forestry RD (US
million) 471 113 65 Forest Products RD (US
million) 1712 94 260
Interesting annual RD spending
comparisons Pfizer - 4.35 Billion Merck 2.45
B Intel 3.76 B IBM - 5.29 B Weyerhaeuser -
55 million Entire U.S. Forest Products Industry -
1.72 Billion
Sources Forintek Canada Corporation,
www.multex.com
48
Trade Balances Industries that spend more on
capital improvements (RD) generally have more
favorable trade balances 2000 basis
Industry CAPEX / Shipments Trade Balance Wood
HH Furniture 2.1 - 7.0 billion Synthetic
Rubber 6.5 0.3 billion Plastics
Resins 6.5 6.2 billion Automotive
Parts 5.0 1 billion Commercial
Printing 4.4 0.4 billion Agric.
Chemicals 4.6 2.8 billion Industrial
Chemicals 8.4 1 billion Telephone.
Eqpt. 3.3 3 billion Aircraft
Parts 5.2 10 billion
Total capital expenditures divided by value of
shipments for latest year available
49
Innovative Forest Products Wont happen unless we
spend more on R D
Source Hammett and Youngs, JOF June 2002
50
Steel Framing Implications
If builders and wood products suppliers dont
solve the labor cost, waste, and other problems,
someone else will
Tons of steel in site built Residential
construction
Source NASFA, 2001
51
Steel Framing is Growing!!
Steel framing residential market share
Non load bearing wall share is 7.4
Source NASFA
52
Sawnwood Lumber Substitutes
BBF equivalent
Source Russ Taylors Wood Market Monthly, August
2001
53
Lumber Losing Market Share
Lumber market share
Lose share to Steel Concrete
Lose share to I-Joists Steel
Roof trusses take market share
54
Woods Falling Market Share residential
structural materials
Multi and single family structural materials
(Floors, Walls Roofs)
Million SF
Market Share
Source R. Taylor, Wood Markets Monthly, August
2002
55
Woods Falling Market Share residential
sheathing
Multi SF residential sheathing
materials (floors, walls, roofs)
Million SF
Market Share
Source R. Taylor, WMM, August 2002
56
Woods Falling Market Share Residential Floors
Multi SF residential structural materials (all
floors)
Million SF
Market share
Source R. Taylor, WMM, August 2002
57
Engineered Wood Products- more on the story -
58
North American Engineered Wood Products (EWP)
Now over 5 of Lumber supply
Million BF Eqvt. (LVL CF16BF I-Joists LF1.68
BF)
LVLGlulamI-Joists 4.3
Source APA, Report E68
59
EWPs Plants in North America have Doubled in
past Decade
Source APA
60
I-Joists are a North American Phenomenon Currently
Million Linear Meters Production, 1999 Basis
61
Regional Comparison LVL versus Glulams
Demand Million M3
62
Global Top Structural LVL Producers
38 capacity increase planned for 2002
Company Capacity 2001 Million CF Global Capacity Planned Capacity 2002 Million CF Global Capacity

North American 73.5 86 81.9 69
Asian 6.5 8 29 24
European 5.8 7 8.6 7
Total 85.8 100 119.5 100
Source Russ Taylor, 2002 Edition Wood Markets
63
Global OSB Capacity
Large capacity increases in Europe as OSB follows
the North American model (displace
plywood), and construction particleboard
applications European capacity increased by 1.28
BSF(3/8) or 57 in 2001
BSF (3/8)
Mostly Europe
Source Taylor, Wood Markets Outlook 2002
Significance Limits plywood and OSB export
opportunities from North America to Europe

64
Summary

• Forest Sustainability wont happen without new
  markets for
• forest products
• 90 of worlds forests are not utilized
• Wood products seeing increasing competition
  substitution!
• Construction markets in transition
• Whats needed? Technology, Marketing, Research
  
• Development to create new markets to better
  utilize worlds
• forests and compete with non wood building
  materials
• Wood Products industry is getting the message
  that they need
• to compete