The saw mill and woodworking machinery industry comprises establishments engaged in manufacturing sawmilling and woodworking machinery (except handheld), such as circular and band sawing equipment, planning machinery and sanding machinery. In addition, producers of certain woodworking cutting tools and manufacturers of hand and power tools used by woodworkers and woodworking firms are considered part of this industry. Also included as part of this industry sector are manufacturers of machinery involved in fire suppression and dust and fume extraction, processes intimately tied to the operation of woodworking machinery in the industrial environment. For purposes of this industry assessment, the above will be referred to as the woodworking machinery industry. The woodworking machinery industry is classified under NAICS code 333210.
Overview and Global Competitiveness
The woodworking machinery industry serves primarily three customer groupings: (1) custom woodworking shops; (2) woodworking hobbyists; and (3) saw mills. Many firms serve niche segments of these markets. Others produce parts and attachments, machine guarding, safety, and dust and fume extraction and fire suppression equipment.
Industry shipments of woodworking machinery totaled $1,101,754,000 in 2006, down from $1,149,305 in 2005. Almost certainly, shipments have continued to decline over the past two years.
Employment in this industry has held fairly steady for some years, although a downturn, primarily due to related saw mill closings, seems likely in 2008-2009. In 2006, total employment in the industry was 5,874, virtually unchanged from the 5,846 reported in 2005. Of this total, 3,533 were production workers, up by 2 percent from the 3.476 total reported in 2005.
Suppliers of woodworking machinery can be found in nearly all parts of the country. However, the industry has a heavy concentration in several states in the Midwest. Michigan, with its production in Grand Rapids and other parts of western Michigan, has long been the leading woodworking machinery manufacturing state. Other Midwestern states, including Ohio, Indiana, Illinois and Wisconsin, have established plants. The Upper South, primarily North Carolina and Tennessee, have facilities, and there is a long West Coast presence of the industry in the states of Washington, Oregon and California. The industry has tended to concentrate in areas that have historically manufactured furniture (Michigan, North Carolina) or have significant numbers of saw mills (the Pacific Northwest).
Ultimately, the competitive drivers of this industry are the financial health of its customers, domestic and foreign, the productivity of its workforce, and the industry’s ability to maintain strength in specialized markets. Even when it is not able to maintain price advantage, the industry can often compete on quality and service.
The immediate future does not bode especially well for the woodworking machinery industry. The industry supplies its products to manufacturers serving markets, such as residential construction and remodeling, furniture and cabinet making, and other wood product manufacturing. These markets have been especially sensitive to the effects of the credit crunch, mortgage foreclosures, and the reduced demand for residential construction domestically and in key foreign markets, such as Canada.
The recovery of the woodworking machinery industry likely will lag behind the recovery of its principal customers, since manufacturers defer purchases of new machinery until order books are once again filled. Some elements of the stimulus package may, as elsewhere noted, aid woodworking machinery manufacturers in gaining orders, especially from many of the small businesses that form the bulk of the customer base.
For much of the woodworking machinery industry, the recession arrived sooner than expected and was evident in trade show activity as early as mid-2007. Customer attendance at the major domestic trade shows fell at both of the iterations of the industry’s major events in 2007 and 2008. Hobbyist attendees, who customarily attend without support from employers, were most conspicuous by their absence. Their attendance customarily undergirds buyer attendance from woodworking firms.
With the advent of the credit crunch in September 2008, the industry began to gird itself to sustain the full headwinds of recession. In 2009, the industry will likely see further layoffs, plant closures, and shifting of work to foreign locations. Ironically, as noted below, major foreign suppliers have also retrenched, bringing a decrease in imports and likely fewer foreign buyers and foreign exhibitors at trade shows. An early example of this retrenchment may be found in the decision of Biesse America, a large Italian manufacturer, to skip the 2009 American Woodworking and Furniture Supply Fair (AWFS).
The domestic outlook for the woodworking machinery industry in 2009 is clearly marked with pessimism as the steep fall in new residential and commercial construction has reduced demand for building products, kitchen cabinets, home furnishings, and related products critical to the output of woodworking shops and saw mills. The closure of saw mills and woodshops has also thrown more used woodworking machinery on the market, depressing demand for new products.
On the positive side, passage of the economic stimulus legislation and the unveiling of the President’s housing package provide indications than an upturn may be foreseeable. Provisions in the stimulus package to allow single year expensing of capital expenditures (as opposed to annual capital loss deductions) by small businesses may include many woodworking shops. This incentive may encourage purchase of new woodworking machinery at a time when demand has slumped.
The used woodworking machinery trade remains healthy, although a potential glut of used machinery may develop as saw mills close and woodworking plants shut down or disable machines. The rising availability of used machinery has been indicated in a rise in advertising space in publications devoted to the used woodworking machinery trade and an increased number of auctions of machinery from closed facilities.
One of the major indicators of woodworking activity, the Census Bureau’s CD-50, Residential Improvements and Repairs series, has been discontinued. To supplant it, industry sources are now using the Leading Indicators of Remodeling Activity, a series provided by the Joint Center for Housing Studies of Harvard University. This indicator shows a flattening in the rate of residential repairs which offers little optimism for improvement in 2009. Residential remodeling remains one the largest sources of woodworking demand.
The Role of the Hobbyist
Neither the U.S. Census Bureau nor the private sector has provided a precise definition of a woodworking hobbyist, although hobbyists are generally considered to be woodworkers who are employed outside woodworking shops or saw mills. Most hobbyists operate machinery in homes or garages. These conditions frequently place limits on the size and sophistication of machinery used by hobbyists. However amorphously defined, woodworking hobbyists form a market segment that is essential to the success of the woodworking machinery industry. Although figures are not directly available, surveys of the industry indicate that time devoted to woodworking hobbyist activity may be rising as need develops to maximize income sources and some professional woodworkers are laid off from primary jobs.
Closely associated with the woodworking machinery industry are manufacturers of woodworking machine tools. This segment of the industry is primarily composed of small, often family-owned manufacturers dedicated to serving nearby manufacturers. These firms seldom export and are not well suited to face competition in a globalizing industry. Import penetration in this industry segment is rising, although not as steeply as with primary woodworking equipment. Tool making requires extensive cooperation with the customer, since the tooling is often customized, and woodworkers often produce a customized product with the applicable tooling. Indeed, such circumstances also often apply in the sale of primary machinery to the customer base of small woodworking shops.
The Domestic Regulatory Environment
Federal regulation of the industry is primarily felt through regulations of the Occupational Safety and Health Administration (OSHA). OSHA regulations establish standards and tolerance levels for sawdust, filings, and fumes in the workplace and have created a lively market in dust and fume extraction equipment. OSHA regulations have also established standards for machine guarding and personal safety.
Personal safety in an industry using saws and saw blades and other blunt cutting instruments is of paramount importance, equal to the critical factor of fire safety. The industry requires extensive fire suppression given the rapidity with which fires can spread in a saw mill or woodshop and threaten lives and destroy the value of the investment in machinery and property.
State and local regulations also impinge on this industry. Workplace safety regulations are often enforced at the state level by state occupational health and safety agencies and by local fire departments.
No state’s regulatory regime has a broader effect on the industry than California’s. The California Air Resources Board (CARB) has imposed regulations on formaldehyde exposure from composite wood products containing urea-formaldehyde resins which affect machinery operators in woodshops and saw mills. The continued regulation in this area will require additional equipment to trap residues and wood dust and will offer opportunities to suppliers of such equipment from within the industry. Further, localized air quality requirements are imposed by local air quality management districts, such as the South Coast Air Quality Management District (SCAQMD) and the Bay Area Quality Management District.
Additionally, small shops and hobbyists frequently have to contend with local zoning laws that may limit their ability to operate in residential areas, regulate hours of operation, and require permits to allow expansion of facilities.
The woodworking machinery industry has long sustained a negative balance of trade. Ironically, that imbalance eased somewhat in 2008, as weakened demand slowed imports from all five of the largest import sources, China, Taiwan, Germany, Italy, and Canada. Overall, U.S. woodworking machinery imports fell by one quarter in 2008, from $1.137 billion in 2007 to $856 million in 2008. Conversely, exports showed a modest rise of 5 percent from $251 million in 2007 to $263 million in 2008.
Despite the growing impact of the economic slowdown, U.S. woodworking machinery exports to the major export markets remained relatively steady throughout 2008, with Canada continuing in its long-standing position as the U.S. leading export destination. For 2008, the leading U.S. export destinations were Canada ($61 million), China ($26 million), Australia ($18 million), Mexico ($18 million), Poland ($12 million), the United Kingdom ($11 million), Germany ($9 million), Turkey ($7 million), Russia ($7 million), Japan ($6 million) and Brazil ($6 million).
Among the leading U.S. export markets, China, up from $15 million in 2007, and Brazil, up from $2 million in 2007, showed the largest increases. Conversely, Japan, down from $15 million in 2007, showed the largest decrease. Exports to Canada have remained steady, with unspectacular growth since 2004, ranging from $61 to $65 million each year. In 2008, the U.S.-Canadian balance of trade in woodworking machinery was nearly even at $61,475,000 in exports and $61,170,000 in imports.
U. S. woodworking machinery exports to India, target of the Market Development Cooperator Program (MDCP) award to the Wood Machinery Manufacturers of America (WMMA), reached a high of $1.614 million in 2006. Since then, exports of U.S. woodworking machinery to India fell to $857,000 in 2007, before staging a modest 9.8 percent rebound to $941,000 in 2008.
Although still limited, U.S. imports of woodworking machinery from India rose from $89,000 in 2007 to $227,000 in 2008, ironically indicating some maturation of the traditionally modest Indian output of woodworking machinery.
The Historical Imbalance of Trade
As noted in previous reporting, this industry sustains a substantial negative balance of trade. However, reduced domestic demand primarily resulting from the decline in new residential and commercial building construction and a drop in residential rehabilitation, substantially reduced import demand for woodworking and saw mill machinery. Nine of the top ten import sources showed reduced shipments to the United States. The exception, Japan rose by 18 percent off a floor of $14.5 million to $17 million, still well below the $25.7 million high in 2005.
The leading U.S. import sources for woodworking machinery in 2008 were China ($252 million), Taiwan ($211 million), Germany ($134 million), Italy ($85 million), Canada ($61 million), Mexico ($37 million), Austria ($23 million), Japan ($17 million), and Sweden ($7 million). Even Spain, which has been seeking to establish a beachhead in the U.S. market as Italy did in the 1990’s, saw its woodworking machinery exports to the United States fall from $7.2 million in 2007 to $3.1 million in 2008. Most of the increases registered from foreign import sources in 2008 were from smaller markets, such as Denmark, Poland, and Slovenia. These increases resulted, in part, from the relocation of both U.S. and foreign-owned manufacturing plants to markets with lower labor costs.
U. S. woodworking machinery manufacturers usually compete on quality, service, and parts availability rather than on price advantage with foreign, especially Chinese and Taiwanese, producers. Quality also remains the most important factor usually cited by U.S. producers competing with Italian and German manufacturers. Price, however, does seem to exert greater importance in competition with EU-based woodworking machinery suppliers.
Trade Fairs and Exhibitions
The largest international trade fairs and exhibitions serving this industry are the biennial European trade fairs – Ligna (Cologne, Germany) and Fiero Milano (Milan, Italy). Two large domestic fairs, each held biennially in alternating years, serve to expose U.S. and international business visitors to the products of the industry and to associated industries, such as power driven hand tools. They are the Internal Woodworking Fair (IWF) held in even years in Atlanta during August and the AWFS fair held in July of odd years in Las Vegas. Both fairs have received past support from Commerce’s International Buyer Program (IBP) which has established and operated an International Business Center at each fair. The IBP program will again be present at AWFS in 2009, and the 2010 IWF has applied for renewed IBP support.
WMMA Design Center in India
WMMA received an MDCP award in FY 2008 to establish a design center and a base for expansion of U.S. wood machinery exports to India. Historically, U.S. wood machinery exports to India and many other markets have been project driven, hence rising sharply in one year and then falling again as a project is completed. The MDCP award is designed to provide, in India, a means for U.S. manufacturers to maintain a steady rising export base by building permanent relationships with Indian wood working firms and cultivating repeat business.
There are two principal trade associations serving the domestic industry. The WMMA was founded in 1899 and is based in Philadelphia. It represents domestic machinery manufactures and auxiliary equipment suppliers. WMMA received a $483,000 grant under the MDCP to undertake a program to establish a greater presence for the U.S. woodworking machinery industry in the Indian market. To represent them in the international marketplace, WMMA employs a consultant who was formerly an ITA officer.
The Wood Machinery Industry Association (WMIA), based in Baltimore County, Maryland, represents U.S. firms that import foreign-made woodworking machinery. Many WMIA members act as distributors for foreign-based suppliers. However, they often add value to the machinery at U.S. facilities and provide direct service, including repair, to U.S. firms.