SIC 2435
HARDWOOD VENEER AND PLYWOOD



This classification covers establishments primarily engaged in producing commercial hardwood veneer and those primarily engaged in manufacturing commercial plywood or prefinished hardwood plywood. This includes nonwood backed or faced veneer and nonwood faced plywood, constructed from veneer produced in the same establishment or from purchased veneer. Establishments primarily engaged in the production of veneer which is used in the same establishment for the manufacture of wood containers, such as fruit and vegetable baskets and wood boxes, are classified in various wood container manufacturing industries.

NAICS Code(s)

321211 (Hardwood Veneer and Plywood Manufacturing)

Industry Snapshot

The U.S. Census Bureau estimated that 332 establishments made hardwood veneer and plywood in the late 1990s. In 2000 these firms shipped $3.3 billion worth of goods and spent $2.0 billion on materials, and employed nearly 24,000 workers. About 200 of these establishments had at least 20 employees; 68 of them employed at least 100 people. Those with fewer than 20 employees shipped only about 4 percent of the products in this category.

Background and Development

According to U.S. Department of Commerce statistics, plywood sales constituted 45 percent of the industry's output for 1992, while hardwood veneer products constituted 25 percent. The U.S. Department of Commerce reported that nearly half of veneer and plywood output in the early 1990s went to construction, mainly residential. Roughly a quarter of the output was used in other lumber and wood products industries, and 11 percent was used in furniture and fixtures.

Veneer consists of layers of wood peeled from logs. Plywood can then be made by gluing these veneer sheets together, alternating the direction of the grain for each sheet. Typically, plywood sheets are four feet by eight feet. Veneer is also glued to lumber, fiberboard, and medium density fiberboard. It is also used in the production of oriented strand lumber and other engineered woods.

Plywood manufacturing and its related industries experienced hard times during the 1990s: a shortage of lumber increased operating costs, while the general economic recession of 1989-1991 resulted in numerous plant closings and lost jobs. Many small firms in the Pacific Northwest, dependent on timber from federal lands, were particularly affected. Industry critic Paul Ehinger claimed in a 1992 issue of Forest Industries that an estimated 133 sawmills, plywood, and veneer plants—20 percent of the mills in the Pacific Northwest—closed in this region between January 1990 and May 1992. This was an acceleration of a trend that saw 145 mills close in the 1980s. On the other hand, plywood firms with unlimited access to timber such as those in the South, or large firms with private sources of timber, profited from the soaring prices of plywood. According to a report of S.G. Warburg & Co. Inc., plywood prices rose 67 percent between 1991 and 1993.

To cope with supply pressures, firms developed new products like engineered woods. Some observers expected this trend to shift the composition of output in the industry. As predicted, the plywood and veneer hardwood industry lost market share to establishments involved in the manufacture of reconstituted panel products, which includes particleboard, medium density fiberboard, and oriented strand board (OSB), among other products. According to Wood Technology, the number of plywood plants decreased by 28 percent between 1987 and 1995, while OSB plants increased by 37 percent. David L. Fleiner, vice president of structural panels for Georgia-Pacific Corp, predicted that in the future plywood mills would have to produce less plywood and more specialties and veneer for laminated veneer lumber (LVL) in order to remain competitive.

Construction was hard hit by the 1990's recession and did not rebound as quickly as it had in past, despite low interest rates. Residential construction did not recoup its 1989 levels until late 1993, while the overall economy surpassed 1989 levels by mid-1992. Nonresidential construction continued its recession well into 1993. Both residential and nonresidential construction eventually recovered, with residential construction increasing by 8.9 percent in 1996 and nonresidential construction growing at 5.4 percent, according to Cahners Building & Construction Market Forecast.

Environmental Issues. During the 1990s, logging restrictions on federal lands, coupled with export restrictions of tropical hardwoods, affected the supply of raw materials for the industry. Legislation in the Pacific Northwest was designed to protect the spotted owl. Concerns regarding levels of dust, formaldehyde, and noise in plywood and hardwood veneer production also became an issue. The U.S. industry set voluntary formaldehyde emission standards.

According to David A. Pease, writing in Wood Technology in 1993, this concern was not limited to American manufacturers. The Dutch adopted strict dust level restrictions of 1.7 parts dust per million parts air (by weight). They set formaldehyde at 0.3 parts per million of air and noise exposure to 90 dbA with hearing protection. The Germans implemented similar limits. The Environmental Protection Agency (EPA) drafted a catalogue of indoor air pollutants, including formaldehyde and other volatile organic compounds, that result from the production of plywood, particleboard, medium density fiberboard, oriented strand board, and other engineered wood products.

In the early 1990s, the EPA launched a nationwide investigation of outdoor air pollutants generated by this industry as well. As a result, Weyerhaeuser Company paid more than $1.5 million in state fines and agreed to install millions of dollars worth of controls in its plants. Louisiana-Pacific pledged to install $70 million in control devices and paid $11 million in Federal fines. Georgia-Pacific, however, lobbied to curtail the EPA investigation to avoid fines and costly upgrades. Executives at Weyerhaeuser estimated that controls added an additional $1 million a year to plant operating costs.

The plywood industry experimented with several means of reducing these emissions. One was to use other chemicals to bond particleboard, plywood, and other products. Another possible solution was to treat the product with ammonia after it had been glued with traditional compounds. Further complicating efforts to address these environmental concerns, however, was the increasing emphasis on engineered wood production, which required the use of volatile organic compounds.

Current Conditions

In the late 1990s, the U.S. Census Bureau reported that the 108 establishments that made hardwood veneer as a primary business shipped $1 billion worth of goods. Indiana, North Carolina, Wisconsin, and Michigan had the largest product shipments in this segment. The 59 establishments principally manufacturing hardwood plywood shipped $1.3 billion worth of goods, mainly from Oregon, North Carolina, and Virginia. This category excluded prefinished hardwood plywood made from purchased hardwood plywood, which was the primary product at six establishments that shipped $155 million worth of goods, mainly from Indiana and North Carolina. The 28 establishments that primarily made other hardwood plywood type products shipped $187 million worth of goods, with the largest shipments originating in Indiana and Oregon. North Carolina had by far the largest concentration of establishments that manufactured hardwood veneer and plywood, followed by Indiana, Wisconsin, Virginia, South Carolina, Oregon, and Arkansas.

Industry growth remained steady throughout the late 1990s and into the early 2000s. Total industry shipments grew from $2.86 billion in 1997 to $3.34 billion in 2000. Over the same time period the cost of materials grew from $1.75 billion to $2.04 billion, and the total number of employees increased from 22,029 to 23,768.

Industry Leaders

One of the largest companies that made products in this category as its principal business was Ply Gem Industries Inc. (a subsidiary of Nortek Inc., based in Providence, Rhode Island) with 4,079 employees and estimated sales of $790 million in 1998. Roseburg Forest Products Co. (Roseburg, Oregon) had 3,975 employees and sales of $758 million. It made hard and soft plywood and particleboard. Columbia Forest Products Inc. (Portland, Oregon) had 3,500 employees and estimated sales of $500 million. It made hardwood plywood, hardwood veneer, and related products.

Numerous large, diversified companies also competed in this category. They included Georgia-Pacific Corp. (Atlanta, Georgia); Boise Cascade Corp. (Boise, Idaho); Champion International Corp. (Stamford, Connecticut); Stone Container Corp. (Chicago, Illinois); Temple-Inland Forest Products Corp. (Diboll, Texas); Louisiana-Pacific Corp. (Portland, Oregon); Herman Miller Inc. (Zeeland, Michigan); Carolina Builders Corp. (Raleigh, North Carolina); and Crown Pacific Partners L.P. (Portland, Oregon).

Workforce

Workers in the plywood manufacturing industry often participate in management or own an interest in the company. For nearly three-quarters of a century, many plywood mills in the Pacific Northwest have been operated by worker cooperatives. The workers own and control these firms. Major decisions are made, policy is developed, and a board of directors is chosen democratically at the quarterly or semiannual meeting of the general membership.

A study of Pacific Northwest plywood cooperatives published in Economic Analysis and Workers' Management noted that proceeds from this type of enterprise are generally distributed according to work performed rather than on an equal basis or by capital stake. Members usually prefer to forgo earnings rather than suffer unemployment. These enterprises tend to use raw materials efficiently and are less capital intensive than conventional mills.

Some conventionally owned mills also encourage workers to participate in management. For example, workers sometimes influence a mill's production or the hiring of employees.

According to U.S. Department of Labor statistics, the hardwood veneer and plywood manufacturing industry has a high injury and illness rate—approximately 50 percent higher than for general manufacturing.

Employment varies considerably over time in hardwood plywood and veneer manufacturing establishments because of its dependence on the larger construction industry. U.S. Department of Commerce statistics indicate that employment in the industry plummeted 17 percent between 1989 and 1991. In 1992 approximately 20,000 people were employed in the industry, at an average hourly wage of almost $10. In 2000 the industry employed 23,768 people, including 20,644 production workers who earned an average hourly wage of $11.13.

America and the World

According to the U.S. Department of Commerce, imports of plywood grew only 1.5 percent between 1989 and 1993, while exports shot up 62.0 percent. The United States, Indonesia, and Japan were the top three plywood producers, according to the FAO statistics. However, a 1996 Nikkei Weekly report indicated that plywood plants in Indonesia were shutting down due to a low supply of logs caused by overcutting.

In veneer production, China, Malaysia, and Canada were the leading producers during 1993. Chile experienced some growth in the veneer market with new startups by the Rio Itata group reported in 1995. The Chilean forestry industry was growing along with the nation's economy. The reduction of trade barriers between Canada, Mexico, and the United States as a result of the North American Free Trade Agreement (NAFTA) continued to shift international trade patterns. Because of an outcry from the industry, a timber pact was made between Washington and Canada restricting imports by allowing only 14.7 billion board feet of lumber into the United States without a duty.

Research and Technology

The emphasis in new technology has shifted from labor-saving innovation to material-saving innovation. To get more lumber from wood pulp, producers have been developing engineered wood products such as laminated veneer lumber, particleboard, medium density fiberboard, and oriented strand board. This trend represents a shift out of this industry and into reconstituted panel products (see SIC 2493: Reconstituted Wood Products. )

Further Reading

Blackman, Ted. "Adding Value: Chilean Mills Get Full Value From Forests." Wood Technology, January/February 1996.

Einhorn, Cheryl Strauss. "Behind the Inflation Fears: Are Lumber and Energy Prices Really So Strong?" Barron's, 9 September 1996.

"Hardwood Plywood & Veneer Assn." Wood & Wood Products, December 1998.

Keil, Bill. "US Leads in Wood-Based Panel Output As Global Volume Rises To New Record." Wood Technology, January/February 1996.

Kennedy, Kim. "Q1/97: Slower But Steady Gains Ahead." Cahners Building & Construction Market Forecast, March 1997. Available from http://members.aol.com/cahners/bcmf.html .

"Panel Capacity Race Starts to Slow down." Wood Technology, September 1996.

"Provinces Fight Over Lumber-Quota Shares." Wood Technology, 8 (1996).

"Timber Shortages Cripple Some Indonesian Plymills." Wood Technology, May 1996, 53.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

U.S. Department of Commerce. Census Bureau. 1997 Economic Census. Washington, DC: GPO, 1999. Available from http://www.census.gov/prod/ec97/97m3212a.pdf .

"Wood Products Mirror Modest Economic Gains." Wood Technology, January/February, 1996.



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