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Market Outlook

Market Outlook. October 2011. Key Assumptions – The World. Global Economy-GDP Weaker this year. Better next year. No global recession. Source: Moody’s Analytics. October 14, 2011. Key Assumptions – The U.S. Global Economy Weaker this year. Better next year. No global recession.

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Market Outlook

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  1. Market Outlook October 2011

  2. Key Assumptions – The World • Global Economy-GDP • Weaker this year. Better next year. No global recession. Source: Moody’s Analytics. October 14, 2011.

  3. Key Assumptions – The U.S. • Global Economy • Weaker this year. Better next year. No global recession. • U.S. Economy-GDP • Weaker this year. Somewhat better next year. Source: APA

  4. U.S. GDP Base Case - Quarterly Base Case Forecast: 50% probability. 2012: 1.7% Q-4 2011 Source: Dept. of Commerce, Bureau of Economic Analysis, APA forecast.

  5. U.S. GDP Downside - Quarterly Downside Forecast: 40% probability. 2012: 1.0% Q-4 2011 Source: Dept. of Commerce, Bureau of Economic Analysis, APA forecast.

  6. Consumer SentimentUniversity of Michigan 1966 = 100 Prior to theRecession Recession 2011 2010 2009 2007 2008 2004 2006 2005 Source: University of Michigan Consumer Sentiment Survey.

  7. U.S. Unemployment Rate % Of The Civilian Labor Force. 16.2% Broader Measure: Unemployed plus those who want more work. 9.1% Widely reported measure. Source: http://data.bls.gov Tables Summary A & A-15: U-3 and U-6. (Bureau of Labor Statistics)

  8. U.S. Housing Starts 1961 - 2011 StartsThousand 2.4Million 2.1Million 2.0Million Source: U.S. Census Bureau

  9. Existing Home Inventory Million Homes Source: National Association of Realtors. www.realtor.org/research.

  10. Key Assumptions • Global Economy • Weaker this year. Better next year. • U.S. Economy • Weaker this year. Somewhat better next year. • Other Assumptions • Continued high unemployment. • Continued low consumer confidence. • High existing home inventories. • Continued foreclosures. • Weak housing starts late in 2011 and first half of 2012.

  11. Key Assumptions • Global Economy • Weaker this year. Better next year. • U.S. Economy • Weaker this year. Somewhat better next year. • Other Assumptions • Continued high unemployment. • Continued low consumer confidence. • High existing home inventories. • Continued foreclosures. • Weak housing starts late in 2011 and first half of 2012. • The Bottom Line • Very slow growth. Recession avoided.

  12. U.S. Single-family Housing Starts Thousand 471 445 430 410 Source: Dept. of Commerce, APA forecast.

  13. U.S. Multifamily Housing Starts Thousand 185 155 116 109 Source: Dept. of Commerce, APA forecast.

  14. U.S. Single-family & Multifamily Starts U.S. StartsMillion

  15. Where is Housing Recovery? Winners-Top 15 for permits +23,000 Source: http://www.census.gov/const/www/permitsindex.html

  16. Winners and Losers Winners Losers Bottom 15 -11,300 Source: http://www.census.gov/const/www/permitsindex.html

  17. APA Structural Panel Wall Sheathing ForecastSingle-family Only APA’s forecast assumption: Lose market share to foam because of new energy codes. NAHB Research Center data. APA forecast.

  18. APA Structural Panel Wall Sheathing ForecastSingle-family Only Maintaining share at 78%: Volume benefit of 560 MMSF in 2016. NAHB Research Center data. APA forecast.

  19. Residential RemodelingOwner-occupied Improvements $Billion $114.6 http://www.census.gov/const/www/c30index.html, Private construction

  20. Nonresidential Building Construction $ Billion -1.9% Source: Dept. of Commerce, Report C30. APA forecast.

  21. ManufacturingIndustrial Production Index Less Mining & Utilities Monthly Year-Over-Year % Change September Source: Federal Reserve G.17, Table 12.

  22. Manufacturing Index - Annual Index: 2007=100 http://www.federalreserve.gov/releases/G17/ , APA forecast.

  23. U.S./Canada Structural Panel Markets Billion Square Feet 20112012Change Residential 8.4 8.6 0.2 Remodeling 6.3 6.5 0.2 Nonresidential 3.4 3.4 0.0 Industrial 6.9 7.1 0.2 Exports 1.6 1.6 0.0 Total 26.6 27.2 0.6

  24. U.S./Canada Structural Panel Markets Billion Square Feet 20112012Change Residential 8.4 8.6 0.2 Remodeling 6.3 6.5 0.2 Nonresidential 3.4 3.4 0.0 Industrial 6.9 7.1 0.2 Exports 1.6 1.6 0.0 Total 26.6 27.2 0.6 Imports (0.5) (0.6) (0.1) Inventory (0.1) 0.2 0.3 Production 26.0 26.8 0.8

  25. U.S./Canada Structural Panel Markets Billion Square Feet 20112012Change Residential 8.4 8.6 0.2 Remodeling 6.3 6.5 0.2 Nonresidential 3.4 3.4 0.0 Industrial 6.9 7.1 0.2 Exports 1.6 1.6 0.0 Total 26.6 27.2 0.6 Imports (0.5) (0.6) (0.1) Inventory (0.1) 0.2 0.3 Production 26.0 26.8 0.8 Plywood Production 10.9 10.6 (0.2) OSB Production 15.1 16.2 1.0 Total Production 26.0 26.8 0.8

  26. Total Structural Panel ProductionU.S. & Canada BSF 43.1 42.7 42.4 38.5 36.7 34.1 31.2 30.7 28.5 26.8 26.2 26.0 24.3

  27. U.S./Canada Structural Panel Downside Billion Square Feet Base Downside 20122012Change Residential 8.6 8.0 (.6) Remodeling 6.5 6.3 (.2) Nonresidential 3.4 3.3 (.1) Industrial 7.1 6.9 (.2) Exports _1.6 1.60.0 Total 27.2 26.1 (1.1)

  28. U.S./Canada Structural Panel Downside Billion Square Feet Base Downside 20122012Change Residential 8.6 8.0 (.6) Remodeling 6.5 6.3 (.2) Nonresidential 3.4 3.3 (.1) Industrial 7.1 6.9 (.2) Exports 1.6 1.60.0 Total 27.2 26.1 (1.1) Imports (0.6) (0.6) 0.0 Inventory 0.2 0.1(.1) Production 26.8 25.6 (1.2)

  29. U.S./Canada Structural Downside & Upside Billion Square Feet Base Downside 20122012Change Residential 8.6 8.0 (.6) Remodeling 6.5 6.3 (.2) Nonresidential 3.4 3.3 (.1) Industrial 7.1 6.9 (.2) Exports 1.6 1.60.0 Total 27.2 26.1 (1.1) Imports (0.6) (0.6) 0.0 Inventory 0.2 0.1(.1) Production 26.8 25.6 (1.2) Upside 27.3 .5

  30. All Residential Beams and HeadersMarket Share Share 49% 47% 45% 29% 27% 24% 10% 10% 7% Other: Steel, I-joists, Open web trusses, other.

  31. Glulam Production U.S. & Canada MMBF Nonresidential Construction51% Export<1% New ResidentialRepair/Remodeling42% Industrial/ Other7% 2011

  32. I-Joist Market ShareU.S. Single Family Floors 2009: I-joists lost share to lumber and open web trusses.2010: I-joists gained share and lumber declined. Share of raised floor area. 52% 52% 45% Source: NAHB builder surveys through 2010

  33. I-Joist Production U.S. & Canada MMLF New Residential66% Nonresidential9% Remodeling19% Export7% 2011

  34. LVL Production U.S. & Canada Million Ft.3 I-Joist Flanges26% Beam/Header/Industrial 74% 2011

  35. N.A. Production Summary-Base Case 2010201120122013 Structural Panels (BSF) 26.2 26.0 26.8 28.5 Glulam (MMBF) 195 185 190 210 I-joist (MMLF) 471 425 535 610 LVL (MMFT3) 41.1 39.0 42.4 48.0

  36. Production Summary-Downside Base Downside 2012 2012 Structural Panels (BSF) 26.8 25.6 -1.2 Glulam (MMBF) 190 180 -10 I-joist (MMLF) 535 495 -40 LVL (MMFT3) 42.4 39.3 -3.1

  37. Production Summary-Upside Base Upside 20122012 Structural Panels (BSF) 26.8 27.3+.5 Glulam (MMBF) 190 195 +5 I-joist (MMLF) 535 545 +10 LVL (MMFT3) 42.4 43.4 +1.0

  38. 2012 Forecast Probabilities Upside Case10% Base Case50% Downside Case40%

  39. Nonresidential Market Study Building Share-2003 2003 Volumes Lumber 1.3 BBF Structural Panels 2.3 BSF Glulam 5.6 MMBF I-joist 49 MMLF Composite Lumber 2.8 MMFT3

  40. Industrial Market Study Estimated 2010 N.A. end uses for all wood products including lumber, panels, and engineered wood. Source: APA, USFS, Composite Panel Association. Estimated consumption of 117 million cubic meters in 2010.

  41. QUESTIONS? October 2011

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