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.