Residential construction will support demand, though competition from China will rise
Los Angeles, CA (PRWEB) November 26, 2012
The Wood Paneling Manufacturing industry has faced stiff challenges over the five years to 2012; revenue is expected to decline at an average annual rate of 6.8% to $16.7 billion during the five years to 2012. According to IBISWorld industry analyst Austen Sherman, “Between 2007 and 2009, housing starts declined 35.4% per year on average as the housing market entered its most significant downturn since the Great Depression.” Industry operators produce a range of engineered wood products that are primarily used to construct homes, furniture and nonresidential building; the housing market is the biggest purchaser of wood paneling products.
More recently, the industry experienced a small turnaround as the broader real estate market started its recovery. “Housing starts have risen each year since 2010 as the economy continues to recover, says Sherman.” As a result, industry revenue is expected to increase 9.6% in 2012. Despite these recent gains, decreased sales volumes during the height of the recession, combined with commodity price increases, reduced profit margins for the average industry firm; margins are expected to contract from an average 3.0% in 2007 to 2.7% in 2012; The tightening profit margins and heightened competition forced a number of companies to exit the industry or to be acquired by competing firms. Consequently, the number of wood paneling manufacturing companies fell at an average annual rate of 2.0% to a total of 1,370 companies during the five years to 2012.
The Wood Paneling Manufacturing industry has a low level of market share concentration. In 2012, the top four companies in the industry accounted for an estimated 39.1% of revenue. The largest companies are vertically integrated, and they include Weyerhaeuser, Georgia-Pacific, Louisiana-Pacific and Boise Cascade. However, most companies in the industry are small to medium-size operators that compete largely on a regional basis. Market share concentration declined over the five-year period as major companies had to restructure their operations and close down poorer-performing facilities. For example, Weyerhaeuser Company sold its TJ Commercial business in 2009 and its Northwest hardwoods unit in 2011. Furthermore, Weyerhaeuser was forced to close four lumber mills, two engineered lumber mills and six distribution centers in 2009 and three lumber mills and four US distribution centers in 2008. Georgia-Pacific, which is owned by Koch Industries, sold six wood products mills to particleboard manufacturer Roseburg Forest Products Co. in 2006.
During the next five years, IBISWorld anticipates that the residential construction market will build on its recent turnaround, driving demand for wood paneling products. From 2012 to 2017, revenue is forecast to rise, overtaking its prerecession level in 2015. However, the industry will face sustained competition from imported wood paneling products unless provided with further government assistance or protection. Particularly, China will increasingly move into the production of higher value-added wood panel products, challenging revenue gains for domestic manufacturers and increasing global price competition.
For more information, visit IBISWorld’s Wood Paneling Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
The industry includes companies that manufacture veneer or plywood, engineered wood or reconstituted wood products. The industry does not include companies that primarily engage in sawmilling or wood preservation, nor does it include companies that primarily produce dimensions stock.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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