World Trends in EWP Presentation to Joint ECE Timber Committee & FAO European Forestry Commission October 10, 2000 Rome, Italy Al Schuler – USDA Forest Service Craig Adair – APA – The Engineered Wood Association Ed Elias – APA – The Engineered Wood Association

1.Definition of EWP 2.Compare/contrast world demand/end use applications 3.Demand drivers and outlook for next few years Outline

1. EWP Definitions 1. Structural Composite Lumber (SCL) –Laminated Veneer Lumber (LVL) –Parallel Strand Lumber (PSL) –Oriented Strand Lumber (OSL) 2. Wood I-Beams 3. Glued Laminated Timber (Glulam)

2. World Demand Trends for EWP  EWP versus conventional wood products  Compare & contrast demand in North America vs Europe vs Asia  Why the major differences??

Consumption of sawnwood, wood based panels, and EWPs in Europe, NA, and Japan Million cubic meters 1999 data EWP still a small market Source: APA,2000 & Timber database,2000

Regional EWP Markets LVL, GlulamI-Beams 1999 Consumption Glulam is the only universally used EWP LVL & I-beams geared to NA Source: APA 2000 & Jaakko Poyry 2000

Wood frame construction NA consumes the majority of EWPs to frame their homes To date, little used in nonresidential/commercial construction Source: APA 2000 & Jaakko Poyry 2000

I-beam production Million linear meters Most of the I-beams used in Residential flooring applications Source: APA 2000

LVL end uses North America - LVL used in I-beams primarily Europe – main uses are engineered constructions/nonresidential buildings Japan/Asia Pacific – main uses are furniture and other decorative/non structural applications Market Share Sources; APA 2000 & Jaakko Poyry 2000

North American EWP Markets NewNonres.Renovation HomesBuildingsExport/Other Glulam 52%38%10% =100% I-beams83% 7%10% =100% SCL*60%20%20% =100% * Structural composite lumber products not used to make I-joists.

Engineered Wood Products In 1998, 8.6% of all lumber-like products* used in new home construction in North America were EWP * Lumber products only. Panels excluded. Beams Floor Joists Roof Rafters Window/Door Headers

Glulam consumption versus imports 1000 cubic meters Glulam is the only EWP that is heavily traded internationally Trade is from NA and Europe to Japan Source: APA 2000, Jaako Poyry 2000, & Japan Customs Bureau 2000

3. Outlook

Why Have Engineered Wood Products Grown??? Environmental issues & trade restrictions Fewer & smaller logs, higher log prices & Continued commodity price swings Builders like the results – better value Source: APA – The Engineered Wood Association

Demand Drivers for EWP’s Changing Fiber Supply leads to Fiber Cost Increases Lots of focus on U.S. experience, but we are seeing Similar fiber Restrictions all over the world 1.Canada – reduced AAC in BC and eastern Canada 2.South America – rain forest harvest restrictions 3.China – recent harvest and wood use restrictions 4.Malaysia – harvest restrictions on tropical hardwoods 5.Russia – infrastructure problems reduce harvest potential

U.S. Experience :Total Timber Harvest - Public & Private - Washington & Oregon Million cubic meters - 50% Source: USFS ( PNW –RB - 231, May 2000) “Spotted Owl Effect” Two major impacts:  Total harvest down 50%  Private share now about 78% Court ordered harvest restrictions on Federal lands Public Private

EWP give higher yields from the log – that means less waste and lower manufacturing cost Final product yield (%) Source: Forintek, TJ MacMillan, USDA FS

Efficiency Advantages – EWPs Fiber Savings in U.S. Housing Conventional Floor System  1700 lineal feet (531 meters) lumber/house  With 1.3 million single family houses, 8.25 million cubic meters wood fiber/yr. I-beam system  50% savings in wood fiber (Spelter, 1997 FPL GTR 99) 19.2 “ (48.75 cm) on center, LVL flange, same subfloor thickness, OSB web)  Save 4 million cubic meters wood fiber/year

Demand Drivers for EWP’s Builders/customers like the product due to Better Quality and less Price Volatility

I-Joist & 2x10 Lumber Prices PRICE PER METER & PRICE SPREADS I-Joist 2 x /2” I-Joist, 6-city delivered average 2 x 10 No. 2 & Btr. Southern Pine,KD, 14’, Westside, mill price Source: Random Le n gths Publications and Engineered Wood Trends Builders wanted higher quality and stable prices. $2.85$2.33 $2.62 $2.26

Demand Drivers for EWP’s Demographics – aging population favors labor saving construction techniques

An Older America – Implications for Building Materials Distribution of Population By Age Group (%) Prime House Buying Age Group Framing Crew Labor Pool Source: U S Bureau of Census Japan’s & Europe’s demographics are worse

Labor Saving Efficiencies Examples ApplicationsConventionalEWP Solution Solution 1.Garage Door Headers two 2x10’s nailed together one LVL beam 2.Floor System conventional floor I-Joist system with 80 with 133 pieces pieces (40% less) 3.Carrying Beams three or four 2x12’s nailed one 3 ½” (8.9 cm) LVL beam one Parallam beam 4.Roof Trussmetal plate wood truss with metal plate wood truss system with conventional lumber chords MSR chords(25% less lumber)

Factory built homes and use of prefab (engineered)components gain share from “stick-built” construction. Source: Automated Builder Production Builders/ Site Built Panelized Modular HUD Code Note: These estimates are slightly higher than U.S. Census estimates because they include production for export Factory built homes use more EWPs

EWP’s Plants in North America Source: APA Number of plants Number of plants has doubled, and average plant size is larger today

North America EWP Growth 1000 cubic meters Immediate growth – substitute for wide lumber (2x10’s) in residential markets Longer term – substitute for lumber and non wood products in all structural applications both residential and nonresidential/commercial markets Source: APA 2000 LVL I-beams Glulam

European glulam production Thousand cubic meters Growth driven by interest in timber frame construction And export opportunities (Primarily to Japan) Source: Jaakko Poyry 2000

Global Glulam Production Thousand cubic meters Source; R. Taylor & Assoc. Wood Markets Monthly, Sept. 2000

Global LVL Production Thousand cubic meters Source: R. Taylor & Assoc., Wood Markets Monthly, Sept. 2000

Global I-beam Production 1000 cubic meters Source: R. Taylor & Assoc., wood Markets Monthly, Sept. 2000

“Product Life Cycle” Competition, new technology, and changing resource driving trends to EWP Product Life Cycle Develop. Expansion Rapid GrowthMature Decline Plastic Lumber GFB, OSL, PSL* LVL, I - beams MDF OSB PB Laminated Lumber(glulam) Industrial Plywood Plywood Lumber Strawboard Source : USFS Market share Time Horizon *GFB – gypsum fiberboard OSL – oriented strand lumber PSL – parallel strand lumber

Adding capacity too quickly easy to do with new markets Potential Problems for EWPs

MSR Premiums Shrink as Production Soars Premium to #1&2 Source: Random Lengths, MSR Lbr. Producer’s Council Million BF

Future Fiber Supply Uncertain??? EWPs offer additional flexibility to use whatever fiber is available Why?? Here are two reasons!!!! > New conversion systems focused on small log resource e.g. flaking machines for SCL (LVL, OSL, PSL) > New resin technology/systems let us use more species

Facts: 1.We don’t use the majority of the species available to us 2. Now, old growth is becoming “off limits” 3.Plantation forests offer opportunities to grow “pulpwood” size trees in a fraction of the time required to grow “conventional size” fiber 4. EWPs technology allows us to use a wider range of available fiber