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Value-Added Wood Industry and Market Trends for Ontario

Value-Added Wood Industry and Market Trends for Ontario. Wood Centre Feb. 23, 2007. Ian D. Manson, MNR. Industry Organization. PRIMARY. SECONDARY. $16.6B. Harvesting Forestry Nurseries Services. Commodity. Value-added. Wood Products Papers.

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Value-Added Wood Industry and Market Trends for Ontario

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  1. Value-Added Wood Industry and Market Trends for Ontario Wood Centre Feb. 23, 2007 Ian D. Manson, MNR

  2. Industry Organization PRIMARY SECONDARY $16.6B Harvesting Forestry Nurseries Services Commodity Value-added Wood Products Papers Lumber Residuals Pulp Newsprint $5.5B $2.8B $4.0B $4.3B $7.1B $9.5B In 1998 C$

  3. What are value-added wood products? Traditional Timber Non-Timber Products & Services Plants BioProducts BioMass • furniture • cabinets • millwork • EWPs • boards • mfd housing • converted papers • health care • personal care • foods • crafts • decorative • recreation • services • bio-fuels • bio-materials • bio-chemicals

  4. X6 Primary Forest Industry Value-Added Wood Industry What makes something ‘value-added’? the more capital (technology) and labour used to process a raw material the more value is created

  5. Sub-sector Segmentation Based on $ Revenue: Statistics Canada, ASM

  6. Importance to Ontario Source: Statistics Canada, 2002 ASM

  7. Importance to Ontario Source: Minister’s Council of Forest Sector Competitiveness, Statistics Canada

  8. Ontario is a Leader in Value-Added Wood Quebec has grown 51% in VA wood jobs since 1997 vs. Ontario at 31%. Ontario ranks #5 in North America for Value-Added wood jobs, but no industry association Source: Statistics Canada, Dept of Commerce

  9. … without leadership. • British Columbia - BC WOOD • ALBERTA - Dept. of Value-Added Wood • QUEBEC - QWEB • Great Lake States - Secondary Wood Mfg Association • ONTARIO - nothing representing value-added wood

  10. Large… and small

  11. Lack of Sector Integration Source, by % utilization Source: Linking the Forest to the Factory, MNR

  12. Species, by % utilization Softwoods Source: Linking the Forest to the Factory, MNR

  13. Species, by % utilization Hardwoods Other - cherry, basswood, walnuts, exotics Source: Linking the Forest to the Factory, MNR

  14. Materials, by % utilization Solids Source: Linking the Forest to the Factory, MNR

  15. Materials, by % utilization Composites Source: Linking the Forest to the Factory, MNR

  16. Industry & Market Structure Germany ManagementCapability WorkforceSkill Level RawMaterial Quantitative Ranking Clustering Policy Technology US Great Lakes 5.0 5.0 Denmark 4.0 4.0 Nordic Ontario 3.0 3.0 Quebec BC 2.0 2.0 1.0 1.0 * based on labour, energy and productivity costs Source: Jaakko Poyry: Assessment of the Status and Future Opportunities of Ontario’s Solid Wood Value Added Sector, June 2001 Alberta Benchmarking

  17. Ontario’s Wood Manufacturing Sector is…. • Large • Diverse • Export focused • Technically sophisticated • Expensive • Rudderless

  18. Trends Industrial Markets

  19. Top Strategic Industry Issues Source: Canadian Manufacturers Export Association

  20. Trends Effecting Value-added Wood Markets • developing populations • disposable incomes • housing starts • renovation market • ‘greening’ wave • skilled labour shortages • Changing consumer tastes • Glut of wood world wide • U.S. protectionism – commodities

  21. Trends in Value-Added Wood Source: Statistics Canada, 2002 ASM

  22. Opportunities • Manufactured Housing • Building components - EWPs • Doors, Windows, Moldings, other millwork • Furniture • Cabinets – Kitchen, bath & storage

  23. Existing Products Emerging Growth New Technologies Commodity Lumber EWPs and Bldg components Integrated Structural Systems $95 Hand-Crafted Timber Frame Log home $80 Std Precut, Panelized Construction Type $72 $55 Site built Single Family Per sq ft 1. Manufactured Housing The evolution of residential construction $31 Manufactured Home “ in 2006, one in seven American homes were ‘manufactured’”

  24. … Manufactured Housing Woodbridge Report Population = 83 million Construction Sales = $239B EWP/Components = $800m Manufactured Housing = $300m Millwork = $150m

  25. Manufactured Housing • Increasing export focus • e.g. Confederation Log Homes • But foreign markets don’t like dealing with Ontario companies, because they lack critical mass • Strategy to go after traditional domestic stick built market first?

  26. 2. EWP’sProduct Life Cycle Introductory Growth Maturity Decline Stage Stage Stage Stage 2nd/3rd Generation EWP’s 2nd Generation Wall Panels Species Segregated Softwood Lumber Composites Custom Orders Installed Sales New Laminate Technologies (fibre polymers) Eastern SPF MSR I-Joists PSL & LSL Eastern SPF FJ Commodity LVL Commodity OSB Glulam Parallam Commodity Eastern SPF framing lumber Variable quality Dimension lumber • Building components account for 14% of • total VA sales with 11% CAGR, but last • two years growth at 28%, again driven by • buoyant housing starts.

  27. 3. Millwork • Windows and doors account for 13% of total VA sales, with compound annual growth rate of 7%, but 16% in last 2 years, driven by high Canadian housing starts • However, window and door markets moving rapidly away from wood usage towards vinyl and steel respectively • Other millwork (moldings, stairs, flooring, etc.) = 22% of total, with a CAGR of 15%, and stable at 13% recent growth • Also, many of these products are moving away from solid wood towards FJ, MDF and composites

  28. Millwork - Flooring • the solid wood flooring market is rapidly giving • way to engineered wood flooring Solid Engineered • one piece of solid wood can provide up to 6 • surfaces on an EWF • built on an composite substrate, EWF can go • straight onto concrete and doesn’t move like solid

  29. 4. Furniture • Furniture = 36% of total VA sales with CAGR of 12%, falling to 1% in last two years • Perfect storm for most of industry as retail markets convert to RTA and imports; quality and design still important but becoming more of a niche market • Also large anticipated boom in office furniture

  30. 5. Cabinets • Cabinets are a very regional market business unless standardized sizes • Cabinets = 15% of total VA with CAGR of 11% and reasonably strong recent growth = 9% • Cabinet demand will double in 10 years driven by new home construction and home renovations

  31. Best Opportunities Pharmaceuticals (collection) Nutraceuticals Bio-chemicals Manufactured Housing Bio-Materials NTFPs Cabinets EWPs Market Growth Bio-energy Furniture Millwork - Other Bio’s Millwork – Doors/Windows $Thousands $ millions Capital Investment

  32. Questions?

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