Wood Flooring Industry Faces Supply and Pricing Challenges

A new analysis from the National Association of Home Builders (NAHB) states that rising softwood lumber prices have increased more than 250 percent since April 2020, causing the average price of a new single-family home to increase by nearly $36,000. In the wood flooring industry, softwood may be used for cores for engineered wood flooring, as well as for subfloors. Meanwhile, hardwood prices are being attributed to labor shortages, transportation problems, and uneven supply and demand. So, the challenges with lumber prices and supply shortages that are all over the news, have had impacts on the wood flooring industry across the board.

Judd Johnson, editor of the Hardwood Market Report in Memphis, Tennessee, says it’s key to understand that supply was in a weakened state before COVID-19 and is a factor in inhibiting the recovery of sawmill production.

“The lumber business had recovered from the Great Recession [in 2008], and China was a huge component of that. That business did extremely well for a period of time,” says Johnson. “In 2017, U.S. exports of hardwood lumber to China reached another record high both in dollars and volume.”

Moving into 2018, there were discussions about tariffs and retaliatory tariffs. Johnson says prices and volumes of exports to China began to fall, and the market downturn carried over into 2019.

Chart information courtesy of HMR

“This had a strong impact on the U.S. hardwood lumber supply because it substantially lowered the international value of U.S. hardwood lumber,” explains Johnson. “The lumber that was exported to China, and was suddenly no longer being exported to China, had no natural place to move in the market. That high-grade lumber had to come back into the domestic marketplace, which elevated sales competition all the more. It found its way into markets that otherwise used primarily lower-grade lumber.”

Chart information courtesy of HMR

Johnson says the flooring industry was a perfect example of this. “The high- and middle-grade lumber moved into the oak strip market, which primarily uses 2 and 3A (lower grade) lumber. At the time, flooring manufacturers needed extra lumber so it worked out well for them, but they were not paying the value for that higher-grade lumber that would otherwise go to a molding manufacturer, for example,” says Johnson. “We saw in 2018-2019, collectively, an 8.2 percent drop in sawmill production, but the financial impact was anywhere from a 40-45 percent drop in revenue for many sawmills, and some sawmills and lumberyards went out of business.”

From there, the pandemic drove production down to historical lows. Johnson says May of 2020 is the lowest production month on record, according to their estimates. He cites labor shortages, weather, transportation, and having fewer oak strip flooring manufacturing companies as other factors contributing to the recovery moving slowly.

Chart information courtesy of HMR

“Things are moving in the right direction, but they haven’t rebounded where they need to be,” adds Johnson. “March 2021 marked the eighth, out of nine consecutive months, where sawmill production has actually increased. If we compare May 2020 to March 2021, March 2021 is up 42.4 percent higher.”

Barbara Titus, vice president of operations and international sales for Sheoga Hardwood Flooring in Middlefield, Ohio, tells us they are experiencing continued higher-than-normal pricing in the lumber market, particularly in white oak and walnut.

“Sawmill yards are slowly beginning to fill up and we anticipate seeing some easing of raw material costs in the next 45-60 days. However, the increased demand for white oak from consumers, whiskey and bourbon barrel makers, and demand from overseas indicates that this species may remain at record-level pricing for the foreseeable future,” explains Titus. “Our concern now is that white oak is being over-harvested, as sawmills/loggers take advantage of the premiums this species affords. This is the critical juncture where replanting and select harvesting is vitally important for the future of all our industries.”

Mike Glavin, founder of City Floor Supply in King of Prussia, Pennsylvania, describes the current situation as a perfect storm.

“Demand is awesome. Sales in every category we track are up over pre-pandemic revenue numbers.

Red oak and white oak exports to China have again begun to increase, putting even more pressure on supply and pricing,” says Glavin. “Sawmills and flooring mills that we are working with are having a hard time getting the raw materials they need, as well as staying staffed with the workforce they need.”

“In my 40 years working in the hardwood floor industry, I have never witnessed a supply issue like the one we are dealing with currently that has lasted this long,” adds Glavin. “We have struggled to obtain materials to sell. Since September, we have been struggling to obtain unfinished 2-1/4 and 3-1/4 red oak.”

Glavin notes that it’s not just the wood shortage; there are added complications with freight. He says trucks they have on order are taking nearly one year to deliver. (Read more about the less than truckload freight transportation capacity issue and what’s happening with ocean freight during the pandemic).

On the installation side, Lenny Hall, owner of Endurance Floor in Davie, Florida, says that some products are not as available as they used to be, and a few items are nearly impossible to get. “I had to mill my own 5” 1st-grade maple plank from U.S. lumber for a small 50-square-ft. floor repair because the distributor could not get ANY date for Canadian maple flooring into the U.S.,” shares Hall. “Another distributor told me to order adhesive well in advance, particularly large adhesive orders because a supply chain dip was being forecast. Then there are the cost jumps in basic materials such as plywood and dimensional lumber, that has me reworking months old bids with updated values.”

Hall offers this advice regarding providing quotes for jobs in this climate: “For those who have not done contracts with explicit expiration dates, material price increase allowances, or explicit reservation of the right to reprice the work based upon certain changes in economic conditions occurring, now is the time!”

In an NAHB press release, Chuck Fowke, chairman of the organization called for action on the rising costs. “These lumber price hikes are clearly unsustainable,” said Fowke. “Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints, and seek immediate remedies that will increase production.”

Attendees of the 2021 NWFA Wood Flooring Expo can expect to hear more about this topic from Fowke during the event’s opening session in Orlando, Florida. Register for Expo now and attend the opening session on July 7 at 4:30 p.m.

All chart information is courtesy of HMR.

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