Oak and ash veneer prices falling due to threats of tariffs, sugar maple remains stable
Exports to China could be hit hard, experts say
Columbus, Ohio -- Some in Wisconsin’s forest products industry are blaming the threat of tariffs from China for a recent drop in prices of oak and ash veneer. Sugar maple veneer prices have held more stable, likely because a higher proportion of sugar maple veneer products are processed and sold domestically.
President introduced a first round of punitive tariffs on Chinese products in July, and said he would consider increasing tariffs on many Chinese imports from 10 percent to 25 percent if concessions were not made. After first setting a deadline of Jan. 1, 2019, the escalation was postponed until March 1 if progress isn't made.
China, in the meantime, has made several goodwill gestures, but have also planned to retaliate against the U.S. if tariffs are increased, and hardwood markets are among the country’s official targets.
The price of some veneer products were falling in late 2018 as Chinese buyers scrambled to get ahead of the new tariff increase. Chinese buyers are reducing the prices they’re willing to pay for hardwood products in general, as they look to recoup the expected cost of the tariffs, said Scott Bowe, a professor and wood products specialist at the University of Wisconsin-Madison.
China is the number one export market for U.S. hardwood, and last year the U.S. sold about $260 million dollars of veneer products into the country, according to the American Hardwood Export Council, an industry trade group. So while only a couple of Wisconsin companies ship veneer or veneer logs overseas, the ongoing changes in the export market are likely to have a broader effect across the hardwood market.
“[The tariffs] could be, I don’t want to say ‘catastrophic,’ but very, very painful for the industry,” Michael Snow, executive director of the American Hardwood Export Council, told Bloomberg News in August.
Wood Veneer in Wisconsin
Veneer is among the highest grades of wood products that a landowner in Wisconsin can sell. According to a 2004 report from the USDA Forest Service, it can bring in prices 1.5 to 6 times higher than the highest grade of lumber log. The Forest Service estimates that less than one percent of hardwood logs meet the stringent standards to be veneer. Exact specifications vary by species and by company grading systems, but veneer logs generally need to be at least 12 to 15 inches in diameter at the small end, straight-growing, and have very little to no external defects. Length requirements can vary from 30 inches to 17 feet, but are generally in the 8 to 9-foot range. These wide ranges in standards reflect the wide range of uses for veneer, which vary from plywood to fine furniture production. Additionally, desired specifications can change quickly with changing styles and uses. Generally, bigger veneer trees will command higher prices. However, growing trees for a longer time comes with the risk of lost value due to heart rot, especially in oaks.
On a given timber sale, veneer logs are sold along with lesser quality logs, both to maintain forest quality and to make logging more economical. However, the high-quality logs can greatly improve the overall price of the sale. Generally, some trees believed to hold veneer grade logs are left on the property, in order to improve the genetics of the trees that regenerate after a harvest. A forester can help you make the decisions that will give you the most value for the high-quality trees on your land, while maintaining the health of your woods.
Oak veneer is particularly vulnerable to price drops, as it is used by many Chinese furniture manufacturers. Some Wisconsin veneer producers are seeing the ongoing changes in the oak veneer market as a beneficial slowdown, which could actually help long-term market stability and resource sustainability.
Meanwhile, ash veneer is also expected to experience price declines. Ash had previously been selling well as Chinese buyers were trying to get ahead of the loss in ash supply caused by the spread of the emerald ash borer, an exotic beetle.
The U.S. didn’t export much hardwood to China until around 2010, and there was some debate as to how long the export boom would last. At least one timber investment company was projecting in 2017 (pre-tariffs) that the sale of U.S. hardwood products to China would decrease in the years following 2017 as the new export market stabilized.
However, the exact trajectory of veneer prices will depend on the specific product in question.
“Veneer isn’t just one thing,” said Collin Buntrock, a forest products specialist at the Wisconsin Department of Natural Resources. “You have a lot of different markets that exist under the term ‘veneer.’”
Additionally, shorter-term market fluctuations can often be caused by weather patterns. For example, sugar maple supply in Wisconsin was low for much of this summer, due to heavy rains this summer limiting machine access in the Northwoods, which likely helped keep maple veneer prices up for those with accessible maple logs.
Also, the future of trade negotiations between the U.S., China and other markets is uncertain in today’s geo-political climate, making it difficult to accurately forecast the long-term future of veneer markets in the U.S.