AHMI Annual Meeting Sheds Light On Key Industry Challenges

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Hollywood, FL–Business sessions at the annual meeting of the Appalachian Hardwood Manufacturers Inc. (AHMI) recently provided valuable information on key industry topics in 2022.

Attendees were pleased with each of the presentations and many requested copies of the reports. The following is a recap of the business presentations and the slides are available on the AHMI website www.appalachianhardwood.org.

Forest Carbon Credits In Appalachia

NCX Carbon is America’s top provider of forest carbon credits and Landowner Success Manager Kathryn Morse explained the program in the AHMI region. The NCX model pays forest landowners on an annual basis to defer timber harvesting activities.

She said there are no costs to landowners to participate and no minimum acreage required, but there is an annual deferral commitment. The NCX model is the only system that has been designed to eliminate these barriers, Morse said.

“We’re able to achieve this through leveraging the technology we’ve developed and meticulously designing our methodology to support this framework,” she said.

Using artifical intelligence and remote sensing data, the NCX assessment calculates a landowner’s model and the volume of carbon eligible for earning credits by deferring harvests for one year. The primary factors are standing inventory (size, species of trees) and harvest risk (proximity to markets, mill demand).

Landowners then bid on the price at which they would be willing to sell some or all of those credits to the market, Morse said. NCX gives landowners a report on what corporations are willing to pay to help determine the market clearing price. Landowners are notified of the results of the auction and if bids are accepted, they enter into a binding agreement to reduce their harvest by the agreed amount for one year. Morse said that after the year, a second evaluation is completed that issues the credits to buyers and payment to landowners for the actual amount of additional carbon delivered.

The Appalachian region has averaged $12-$14 per acre in the past. For more information, visit www.ncx.com.

Industry’s Growth And Challenges Addressed

Hardwood Market Report Editor Judd Johnson provided AHMI attendees an overview of the lumber industry’s strength during the past year and the news is positive. The Hardwood industry in large part has been buoyed by a robust housing market with consumers driving demand not only in new home sales but remodeling, renovation and DIY projects. Supported by an economy that emerged strong after the first year of the pandemic, homeowners have generously spent disposable income. Noted Johnson, additionally, as the Millennial Generation “comes of age” and enters the market as first-time home buyers – soon to be followed by Generation Z – this contributes to a positive mood in the housing market. That positively impacts the lumber industry.

Johnson noted that a temporary economic/housing cool down is afoot. He added, though, that is not due to a decline in product demand. Instead, product demand is actually building up, he said.

Some takeaways from Johnson’s detailed presentation include the following:

•The Institute of Supply Management puts the PMI (Purchasing Manager’s Index) at the highest level in 16 years. Johnson said that if the index is above 50 percent, it indicates expansion in the manufacturing sector. His presentation cited the most recent data for January of this year when the PMI was about 58 percent. It peaked at nearly 64 percent between February and March 2021 and has settled at a positive percentage.

•The housing industry has thrived, and like other industries, has been challenged by supply/demand issues. Johnson’s presentation compared the stages of homes under construction, those that have not yet started construction and those that completed construction between December 2019 to December 2021. Nearly 749,000 single family units were under construction, including those in inventory available for sale, those that had been sold, and those that were started but not included in inventory.

•These challenges in the housing market, too, are pushing home prices literally ‘through the roof.’ According to Johnson’s data, in two short years homes priced at $400,000 or more have increased from representing about 32 percent of homes sales in January 2020 to nearly 55 percent in January 2022.

The $200,000-$300,000 priced homes have decreased from 35 percent of the market in January 2020 to less than 10 percent. This has forced more homebuyers into the $300,000-$400,000 price range. This segment of the market has grown from about 24 percent in January 2020 to nearly 35 percent in January this year.

As of the first of this year, fewer than 5 percent of U.S. single family homes sold for under $200,000. That’s a decline from approximately 7 percent in January 2020.

•Lumber consumption between 2018 and 2021 decreased, creating the supply deficits that impact consumers, home builders and end use manufacturers, according to Johnson’s data. In 2018, domestic grade lumber consumption was 2.222 billion board feet (BBF). Johnson reported that during 2021, lumber consumption was 1.954 BBF. While that was a drop from 2018, it was an improvement over 2020 when consumption fell to about 1.8 BBF.

Johnson added that lumber consumption by the U.S. furniture industry, alone, peaked in 1997 at 3 billion board feet. However, in 2021, the consumption estimate was .373 billion board feet, which, he noted, is a loss of 2.627 billion board feet of domestic grade lumber usage.

•Regarding specific Hardwood species, Johnson illustrated that from February 2018 to February of this year, Hard and Soft Maple prices were up more than 100 percent from the respective low points. These prices were for kiln-dried 4/4 FAS Nos. 1 and 2 White Hard Maple and Sap & Btr Soft Maple.

4/4 Poplar prices hit a record high in August 2021 at $2235/M (price per thousand board feet) and 4/4 Hickory and Basswood prices at the time of Johnson’s presentation were at record highs.

Meanwhile, wooden kitchen cabinet and countertop imports to the U.S. increased 21.9 percent to a record high from 2020-2021. His presentation showed that back in the early 2000s, the emphasis was on Oak cabinets. Then in the mid-2000s, design shifted to natural finished light woods. Design trends didn’t significantly shift again until years after the Great Recession when painted cabinets became a trend around 2013. This was followed in 2019 and 2020 with a sizeable dip in imports due to tariffs on Chinese imports, Johnson stated.

•Solid Hardwood flooring shipments from U.S. manufacturers in 2021 were 20.6 percent higher than they were in 2020, said Johnson. This is the highest level for this product since 2007. His presentation illustrated that in 2021 U.S. market consumption of solid Hardwood flooring far outpaced imports, which had cornered considerable market share in the mid-2000s.

Millwork saw an uptick in 2021 (0.453 BBF) over 2020 (0.431 BBF). So lumber consumption for millwork is getting close to being as high as it was in 2019, when it reached its highest level in nearly 10 years at 0.495 BBF. Johnson explained that from 2013 to 2021 lumber consumption for millwork rose 17.1 percent and in 2020-2021 it still gained ground at 5.1 percent despite the pandemic.

•Regarding U.S. exports of Hardwood lumber, Johnson said 2021 total exports were just over 1.4 BBF. That is 8.4 percent higher than 2020 and 2.5 percent higher than 2019, but below 2016-2018 averages.

Hardwood Federation Advocacy In 2022

Hardwood Federation Executive Director Dana Lee Cole said the group will deliver four key messages to Congress this year:

•Forest products are part of the climate solution and must be counted in federal carbon accounting programs.

•Tax and regulatory reforms must be favorable to growing and sustaining the Hardwood industry and facilitate passing family-owned businesses to the next generation.

•Infrastructure and transportation legislation must address barriers to shipping over land and water.

•Healthy export markets are key to industry success.

HF advocates for a broad swath of issues, and we need to continually build relationships with lawmakers from diverse political and geographical backgrounds, Cole said.  Policy impacting the Hardwood sector is rarely passed on a partisan level.

Insurance Forum Covers Crucial Business Issues

During the AHMI annual meeting, four AHMI member insurance professionals presented key details about issues the Hardwood industry is currently facing in 2022.

Two takeaways were: the cost of insurance for the Hardwood sector is rising as carriers move away from offering coverage and company leaders must review policies to make certain they have adequate coverage.

The four presentations were titled:

(1) General Liability, Commercial Automobile, Workers’ Compensation: Joe Hughes of ECM Solutions

(2) Umbrella / Excess Liability Coverage: Ryan Harman, Mountcastle Insurance

(3) Cyber Security & Best Practices: Toye Oshoniyi and Duke Baldridge, Dominion Risk

(4) Contractual Risk Transfer Agreements Specific to Logging / Hauling: Dawn Daum, McGriff Insurance.

These presentations are available to view at www.appalachianhardwood.org and offer more details than can be reported here. The contact information for each presenter is included in their slides and readers of this publication are encouraged to contact them directly with questions or for more information.

Real American Hardwood Seeks Support

The Real American Hardwood Coalition is in the final development of a consumer website to educate and encourage people to buy Hardwoods.

RAHC members Amy Snell of the Wood Components Manufacturers Association and Ray Moistner of the Indiana Hardwood Lumbermen’s Association presented the update at the 2022 AHMI Annual Meeting. The group has completed its research, branding, industry website, and funding strategy.

The emphasis now is the consumer website which should be launched this spring and funding for it and other work. Snell recapped the progress to date highlighting social media posts promoting American Hardwood. Moistner explained how 28 industry associations are working together to develop the effort.

Companies and individuals are encouraged to use the branding materials and to donate annually to the campaign. More information is available at www.realamericanhardwood.org or from the AHMI office.

AHMI Officers and Trustees

This year was the election of AHMI Officers and Trustees and the members present elected the following for 2022-23:

Chairman: Tom Sheets of Blue Ridge Lumber, Fishersville, VA

Vice Chairman-elect: Roy Zangari of Meadow River Lumber, Rainelle, WV

Treasurer: Tony Honeycutt of Mullican Flooring, Johnson City, TN

Past Chairman: Jay Reese of Penn-Sylvan International, Spartansburg, PA

Trustees:

Dean Alanko of Allegheny Wood Products, Petersburg, WV

Sebastian Church of Church & Church Lumber, Wilkesboro, NC

Jamie Coleman of Robert S. Coleman Lumber, Culpeper, VA

Brian Conklin of Gutchess Lumber Co., Cortland, NY

Scott Cummings of Cummings Lumber, Troy, PA

Tim Parton of Gilkey Lumber Co., Rutherfordton, NC

David Pierson of Pierson Lumber, Clay, WV

John Pysh of Pennsylvania Hardwoods, Pleasantville, PA

Jason Twigg of Tuscarora Hardwoods, Elliottsburg, PA

Ray White Jr. of Harold White Lumber, Morehead, KY

Distributor: Mark Vollinger of W.M. Cramer Lumber Co., Hickory, NC

Forestry: Steve Harp of Pardee Resources, Summersville, WV

Consumer: Gat Caperton of Gat Creek Furniture, Berkeley Springs, WV

The next meeting of Appalachian Hardwood Manufacturers, Inc. is the 2022 Summer Conference set for July 23-26 at The Homestead in Hot Springs, VA.

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