Engineered Wood Products (including Plywood and Veneer) manufacturing is a very diversified segment. The industry manufactures reconstituted wood products, including softwood and hardwood sheets and boards. This includes a great variety of commodity-like items, such as Particleboard, Medium density fiberboard (MDF), Oriented Strandboard (OSB), Waferboard, Plywood, and Veneers. Some companies also produce higher value-added items, such as roof trusses, fabricated and/or laminated structural wood members, plywood faced with metal or plastic, and similar products.  

There are about 1500 companies in the American Engineered Wood Products  industry, employing over 120,000 workers. Their combined production value stood at an estimated US$ 29.5 billion in 2004. This compares to a value of $21.3 billion at the beginning of this century. The increase of 38.5% is partially due to higher prices. However, if we exclude the impact of inflation, growth between 2000 and 2004 still amount to a respectable 30.2%.  

The South Eastern United States - above all North Carolina and Florida - is the location with over one-third of the country's establishments. This region is rich in forest resources and has an abundance of sawmills.  

The industry's performance was unsatisfactory during the first few years of this millennium, but the fortunes changed dramatically during the past two years, with annual growth rates in the 20% range. 

Fig 1: Sales 2000-2004 (in Millions of US$) 

We do not believe that this stellar performance can be maintained in the next few years. In view of the cooling housing market in the USA, we predict growth rates of only approximately 3% both in 2005 and 2006.  

Reconstituted wood products make up the lion's share of the industry's overall shipments, amounting to 27% as of 2004. However, this share has been on a moderately declining trend since 2000. Major items within this product category include particleboard, MDF, waferboard, OSB and hardboard. Following reconstituted wood products, softwood veneer and plywood constitutes the second most important products category. Its share is about 25% and also on a long term declining trend. Wood roof and floor trusses is a growing product, capturing at the present time about 23% of the market. Another 16% is taken up by hardwood veneer and plywood, and the remaining 9% represent a variety of other products of insignificant importance.

Fig 2: Market segmentation by product (2004)

Over 55% of the industry's overall output is sold (directly or through wholesalers) to residential  house builders, and an additional 18% goes into commercial and industrial buildings. The furniture industry consumes a share of 22%. Only 4% (as of 2004) is for export markets.

The residential housing share has been on a strong upswing during the past two years. It seems that the American housing market is a bit oversupplied now and may cool down this year. The main products used in housing is softwood plywood and OSB. This latter product has become a very popular building material and it is seriously encroaching on the usage of plywood. The principal products used in the furniture industry are particleboard and MDF.

The competition between plywood, veneers and engineered wood products companies is severe, largely because the entry barriers into the industry are relatively low. However, access to an established wholesale and distribution network may be a hurdle. Most of the major players have long-term delivery contracts in place to supply key lumber wholesalers and large construction companies.

The competitive pressure did not preclude the industry from raising prices during the recent periods of high demand from the building construction sector. For instance, during 2004 the price index for softwood plywood increased by a whopping 30%. 

Only 4% of US produced Veneer, Plywood and Engineered Wood Products are destined for the export market. As of 2004 Exports were valued at US$ 1.2 billion. While this is up a bit from 2003, it is virtually even with the value of 2000. In relative terms, the share of exports is on a moderately declining trend. Almost half of all exports go to Canada. Other export destinations of much lesser importance are Mexico, Germany, Spain, and China. 

The industry is facing stiff competition from foreign producers. Imports of veneer, plywood and engineered wood products exceed exports by a wide margin. As of 2004 imports were valued at almost US$ 9 billion. This represents close to one-quarter of the domestic demand. Not only are imports much larger than exports, the growth of foreign supplied veneer, plywood and engineered wood products was very high in recent years. The growth in 2004 is estimated at a staggering 51%, and this in spite of the weakening US-Dollar. The American trade deficit in veneer, plywood and engineered wood products amounted to US$ 7.8 billion. Similar to exports, Canada is the predominant foreign source country for the USA.

Plantation softwood is the major input required for producing plywood, veneer and engineered wood products. Access to sawlogs and other raw materials can sometimes be difficult. The growing concern for the preservation of native hardwood is further limiting the supply.

The industry is not highly concentrated, but moderately increasing. The low concentration of ownership demonstrates that competitive levels are significant since no business in the industry has substantial market power on a national scale. However, regionally some of them have much greater influence.

The undisputed market leader is Weyerhaeuser of Portland, OR. This company's sales are in the US$ 10 billion range and its market share in excess of 10%. Weyerhaeuser produces building materials, such as lumber and plywood, coated and un-coated papers, newsprint, wood pulp, container-board and other engineered wood products. The company owns around 5.9 million acres of timberland, mostly in the southern part of the United States and the Pacific Northwest. Weyerhaeuser employs approximately 44,800 people, most of them in the timber-based businesses.  

Other major players are Georgia Pacific, Boise Cascade and Louisiana-Pacific. The combined market share of the top four producers is about 30%.