By the middle of the second quarter in 2010, wood flooring manufacturers began to think the talk about the recession having officially ended a year prior was finally coming true in their neck of the forest. Then, at the end of April, the federal government’s homebuyer’s tax credit expired and so did the sales, thus ending the industry’s hopes the dark times were completely gone.
In one sense, though, the influx of business during most of the first half of 2010 did put an end to the severe downward spiral the wood industry had been trapped in since reaching a peak in 2006. In fact, the 4.8% decrease in sales and 2.3% dip in volume was a welcome relief considering the category had experienced cumulative drops of 37% in sales and 41% in units over the three previous years.
The harsh decreases are reflected in wood’s overall market share of the flooring industry pie. In 2006, the category had just pushed itself above the 25th percentile (25.2%) in sales. By 2010, the segment was once again below that threshold, accounting for 24.5% of all industry sales dollars. In terms of units, the category dropped from a 4.4% industry share in 2006 to an even 4% in 2010.
But as the saying goes, “As goes housing, so goes the wood industry,” and when consumers put the brakes on making home purchases sales of wood flooring came to a screeching halt. Some mill executives cited Dickens’ “Tale of Two Cities” when trying to describe how the year was split between good and bad.
Concerning the government’s housing tax credit, most officials surveyed by FCNews said the affects of it were not fully appreciated until it was gone. With the government saying the recession officially ended in mid 2009 and consumer confidence showing signs of life, many in the wood industry got caught up in the euphoria thinking the housing market was beginning to move back to its historical numbers. But, as the numbers from the U.S. Census Bureau point out, not to mention actual sales of wood flooring, that was certainly not the case.
In fact, the Dickens novel was really apropos in the housing market as by April and May it was seeing starts reaching monthly highs not seen in over two years. Yet by the end of the year, they hit such a low there was only one other time since 1959 that monthly starts were at such a level.
Further proof of how true the saying is could be seen by what took place during the fourth quarter of 2010 when the commercial side started to awaken from its slumber. Sales of wood flooring are so heavily skewed toward residential and light Main Street (about 85%)—only laminate has a greater disproportion—they were barely effected by the wave of specified contract jobs coming in at the end of the year.
Anti-dumping accusations
That didn’t stop the wood category from staying out of the spotlight during the latter part of the year. In fact, when a group of U.S. manufacturers formed the Coalition for American Hardwood Parity (CAHP) and filed a petition with the U.S. government requesting an investigation into claims Chinese companies were “dumping” engineered wood floors in the country, thus creating an unfair playing field, it quickly became the story of the year.
Because the petition was filed late in the fourth quarter of 2010 and the fact a protocol must be followed in these types of cases, nearly every person surveyed by FCNews said it had no affect on either sales or imports of wood flooring for 2010. Most noted that may well be a different story when the final numbers come in for 2011 due to many importers starting the year off by taking a cautious approach as they waited to see what the preliminary rulings will be.
As such, imports in 2010 ac- counted for one-third of all wood floors sold in 2010. The picture is a little different when just looking at engineered products: imports amounted to 52% of goods sold. Engineered floors as a whole continued to gain share over solid and, in fact, now account for half the wood floors sold in North America.
With consumers still looking for more value-oriented products, sales of high-end exotic species such as Brazilian cherry have lost market share though it is still the most popular non-domestic wood used for flooring.
Whether the overall drop in using exotic woods is due to the impact of stricter environmental/logging laws—both in the U.S. and around the world—rising transportation costs or changing consumer tastes, manufacturers have been turning more and more to North American species in recent years.
Interestingly, the market share of the most popular species—oak—has remained constant during this period of increased domestic usage. In fact, after oak and maple, which has also experienced a stable market share in recent years, the overall use of other domestic species has risen approximately 64% since 2006. As a result, hickory has grown so much that for the first time it is occupying its own slot rather than being lumped with other species under the “other domes- tics” heading. FCNews research shows wood floors produced with hickory made up 5% of the category’s sales in 2010.
-Matthew Spieler