U.S. demand for molding and trim products will likely rise nearly 11% per year to become a $9 billion market by 2016, according to the Freedonia Group, an international business research firm. This assumes continued robust gains in new housing and remodeling activity.
If Freedonia’s forecast proves correct, what are the implications for dealers? Possible results include higher prices, more imported wood, and less molding use.
On the pricing side, with more than 80% of moldings produced for North America made from finger-jointed pine or MDF, a housing spike could lead to a supply crunch that drives up the cost of those materials.
“There’s not enough domestic wood fiber available to meet the growth potential for the U.S. molding industry,” says Peter Butzelaar, vice president of Wood Markets International, a Vancouver, British Columbia-based consulting and research firm. The one North American source that could meet the demand is Southern Yellow Pine, which he says has a surplus of 25.8 billion board feet of lumber, or roughly 1 ½ years of production at pre-2008 harvest rates. The problem is that few manufacturers want to take the time needed to dry it for molding use; such pine requires 50 to 60 hours of drying time, versus 18 to 25 for dimensional lumber.
Domestic limitations have led to an increase in imported pine, mostly from Brazil, Chile, and Mexico. This has made supplies somewhat price-sensitive to events in those nations, as the industry discovered when prices spiked temporarily after the 2010 Chilean earthquake damaged mills in that country.
The damage in Chile was repaired and the capacity back online in a couple of months, and at this point supply and demand are in balance. But more construction activity could upset that balance during the next few years. Butzelaar is predicting a shortage of finger-jointed pine during 2016-2017, with price hikes of 10% to 15% over current rates. He also expects price increases of 8% to 12% for MDF moldings. In addition to the temporary supply and demand imbalance mentioned above, he says that industry consolidation has also led to dominance by a few players, putting them in a better position to raise prices.
Some in the industry question this projection. Jay Barnes, millwork department purchasing manager at Lumbermens Merchandising Corporation in Wayne, Pa., says the buying collective has done its own research and doesn’t expect that much of an increase. “There’s plenty of capacity out there,” he says. But if Butzelaar's forecast proves correct, Barnes says, he expects to see an increase in demand for lower-priced MDF moldings.
In fact, that’s already happening. As far back as 2009, ProSales reported that dealers were scaling back their in-stock assortments to their best-selling molding profiles, and shifting to less expensive moldings made from lower-priced materials. If molding prices rise, expect to see more of that.
To help keep prices under control, distributors continue to look for imports that are priced lower than those currently available. One likely consequence, says Butzelaar, will be an increase in molding imports from China. He adds that while there have been quality issues with Chinese molding products in the past, the situation has improved. But he advises dealers to communicate with distributors on where molding is being sourced, and to keep and eye on quality.
“The dealer needs to pay attention to where the fiber being used in molding is coming from,” Butzelaar says.
If prices for finger-jointed pine rise as much as Butzelaar expects, another likely response will come from dealers’ customers, who will likely adjust the types and amounts of moldings they buy. This is already happening to some extent, with builders and architects speccing less expensive, less ornate moldings on more of their projects.
“Ten years ago, everyone wanted heavy moldings and trim work, but today they are simplifying,” says Bud Dietrich, a New Port Richey, Fla., architect with projects in several states. He sees this happening in all demographic groups, regardless of architectural style.
“I’m working on a Southern Colonial where most of the trim is a simple 1x4 with a cap on it," he says."It’s a transitional style between traditional and modern, with nice, clean lines.” While Dietrich attributes part of this trend to changing tastes, he says that clients are also putting more scrutiny on budgets, including interior trim budgets. “People got whacked in the recession and have become more careful,” he says.
Dealers and distributors echo Dietrich’s assessment. We spoke with companies in different regions of the country, and just about everywhere except the Northeast they report the same trend.
“We are seeing more of the contemporary look, so we’re beefing up on some of the more straight line patterns,” says Lloyd Cobb, Purchasing Manager with The Detering Co., a dealer in Houston.
Peter Grossman, chief marketing and merchandising officer at Hayward Lumber, a California dealer with seven locations, says that more of his customers are opting for Craftsman-style interiors, but with paint-grade moldings rather than hardwood.
Al Delbridge with East Coast Mouldings, a distributor in Wilkesboro, N.C., finds that “the average house today from our perspective seems to have more usable space with less attention to millwork.”
With more pro customers looking for less expensive options, one way dealers can help with displays that show tasteful combinations of simple, inexpensive profiles.
need to show how the pieces go together and how they enhance a room,” says Richard
Fontaine, General Manager at Huttig Building Products in Taunton Mass. That should
be a winning approach regardless of where prices go.