Evolution of EWP in the Construction Industry

Until recently, the construction of large, multistory buildings was relegated to the use of either reinforced concrete or steel for the structure. Engineered wood products (EWP) have brought about a revolution in building techniques, with the introduction of products such as cross-laminated timber (CLT) and nail- laminated timber (NLT) enabling architects and builders to create taller structures.

For example, the T3 office building—with T3 standing for “Timber, Technology, Transit”—in Minneapolis, MN, designed by Michael Green Architecture and architect- of-record DLR Group for real estate firm Hines, is a seven-story, 220,000-sq.-ft. office building that opened in 2016. At the time, the building was reported to be the largest mass timber building in the United States.

Engineered wood products are rising in popularity. According to industry research firm IBISWorld, the engineered wood market in the U.S. has been growing, with revenue increasing at a compound annual growth rate (CAGR) of 3% over the past five years. Similarly, SkyQuest Technology Group, a global market intelligence organization, predicts the market to grow at a CAGR of 6.12% in the forecast period of 2023-2030.

EWP manufacturers are crossing their collective fingers that these numbers hold true, and they remain guardedly hopeful the market remains cooperative. “Amidst a dynamic year, the EWP sector saw strong demand as the resiliency of new home construction propelled the market forward,” says Duane Smith, vice president of marketing and business development for PWT. “Despite persistently elevated mortgage rates, new home construction continues to show long term strength. EWP demand will remain robust as we look toward the coming year.”

While recognizing the struggles of the past year, Jared Schulte, director of EWP for BlueLinx, sees positive indicators for the near future, but is still cautious. “After a lackluster first half of 2023, demand rebounded in the back half as recession fears abated due to positive economic data continuing to defy expectations,” he explains. “Moving into 2024, a strong labor market coupled with declining inflation has bolstered consumer spending and given rise to the belief that an economic ‘soft landing’ is now the most likely scenario.”

He goes on to say, “On the pricing front, heavy deflation in the first half of 2023 has given way to a more stable environment with most of the pressure stemming from a flood of European LVL due to a weaker economy across the pond. Looking ahead, despite recent positive inflation data, sentiment has begun to sour as higher interest rates and home prices damper the demand for new homes. Everyone knows the housing market is underbuilt and pent-up demand exists, but there are concerns the fed may engineer an unnecessary recession by delaying rate cuts, thereby delaying demand for new homes. Throw the election into the mix, and you have a recipe for some volatility in the second half.”

Chris Webb, general manager of Canfor EWP Sales, also sees positive indicators on the horizon. “Business has been steady,” he points out. “As the Federal Reserve gets inflation under control, interest rates will start to come down, creating more demand for single-family homes. LBM dealers should expect little to no EWP supply side disruptions near term; product will be readily available across all EWP product categories (Glulam, I Joist, and SCL) for the balance of 2024 into 2025.”

“The main challenge we see in the upcoming year is ever present market volatility,” says Paul Pfingsten, OSB sales manager at RoyOMartin. “Over the past 12 months, we have seen an OSB panel market that has dramatically changed. We have gone from hearing dealers report being over inventoried with very little need to make open market purchases, to an environment currently where lead times have more than doubled. Buyers are now having trouble securing the volumes they need to service their customers in a timely manner. This type of volatility impacts FOB mill pricing, as well as transportation costs associated with moving these goods around the country.”

An evolving market
If the overall market is being viewed with cautious optimism by EWP manufacturers, there are certain segments and trends that they point to as driving market growth. For example, PWT’s Smith points to the repair and remodel segment as being a strong driver of EWP growth, along with the continued interest in the outdoor living segment.

Canfor’s Webb sees offsite building as an area of focus where manufacturers can add value and efficiency to the supply chain. “Our Short Span Header product is gaining traction with wall panel producers as an alternative to multi-ply lumber,” he explains. “The one-piece application of the glulam header adds value as to labor costs in manufacturing over built-up lumber. When building with glulam the technician doesn’t have to turn the panel and reattach.”

As well, he predicts commercial construction—specifically the mass timber segment—as being another area of growth focus. “Canfor is making investments in new technology,” he adds. “We have a new 48″ technologically advanced glulam press and lay-up system. This new technology will allow us to offer wider width and deeper depth glulam options for our customers, especially those focusing on commercial, industrial, and mass timber markets.”

The evolution of building codes is also driving both product sales and product development, says BlueLinx’s Schulte. “We continue to see the increased adoption of new building codes focused on energy efficiency and building performance,” he says. “This has contributed to the increased use of deeper depths of engineered lumber that allow for increased insulation and holes for duct work, plumbing, and electrical without sacrificing floor performance.”

Wendy Minichiello, vice president of EWP sales for Weyerhaeuser, agrees, recognizing code changes as they are adopted by communities in various geographies driving the development of specific performance-driven EWP products, such as those that improve fire suppression, moisture management, and bug/rot prevention.

And of course, the economy itself and the state of the building industry is in and of itself driving EWP product growth, explains Paul Pfingsten, OSB sales manager at RoyOMartin. “With housing affordability a continued concern for many buyers, they are considering more affordable options, such as manufactured housing. For RoyOMartin, that means that we are looking to push out more of our new commodity T&G flooring product, TuffTier. As always, we continuously analyze the market and our capabilities to develop products that meet the needs of our customers and their customers.”

Meeting customer’s needs
In today’s market, builders are looking for solutions that improve consistency, efficiency, and cost savings, all factors that can help simplify the building process and are provided by engineered wood products.

As BlueLinx’s Schulte explains, “Engineered lumber is manufactured to be more uniform in strength, size, and quality compared to dimensional lumber. This consistency ensures predictable performance and simplifies the construction processes. The strength and stability coupled with the availability of large sizes allows for longer spans and greater load-bearing capacity, reducing the amount of material needed. In addition, the ability to source a wide variety of pre-cut lengths and sizes reduces on-site cutting and waste and simplifies inventory management. Taken together, the benefits of engineered lumber allow builders to produce a better product more efficiently, and help solve their biggest challenge today—the cost and availability of skilled labor.”

RoyOMartin’s Pfingsten shares Schulte’s opinion, adding in how the lack of skilled tradespeople is causing builders and remodelers to look for innovative solutions. “Builders are continuously looking for more economical and efficient ways to build as skilled, dependable labor continues to be a hurdle,” he says. “They need something that withstands the elements, is resilient, and easy to handle. Not only that, but we believe that service and support after the sell is equally important.”

And it’s not just the LBM dealer or builders who are feeling the strains of a diminished workforce, points out Weyerhaeuser’s Minichiello. “Our challenges are similar to what LBM dealers are experiencing for their own businesses: labor shortages in the trades and for manufacturing, cyber security and technology improvements such as artificial intelligence, climate change and the regulatory effect on business conditions,” she explains. “With so many competing challenges from outside the business, I think LBM dealers are well served to focus on one or two key customer segments and work really well to service those. Getting clear about who you are as a dealer and who your focus is in the wide customer base can help to better define everything from service postures to margin requirements.”

So how can an LBM dealer be successful at meeting these needs with EWP? First and foremost, EWP manufacturers stress the importance of offering products that are of the highest quality (which should come as no surprise). “Dealers need to ensure the product they are offering is of high quality, readily available, and has a distribution partner that provides the breadth of services to support the product for technical and business requirements while making it easy for the dealer to conduct business and support their customers,” says BlueLinx’s Schulte. “We are seeing a lot of import product enter the market, exposing customers to inconsistent performance and product outages due to more complex supply chains and a lack of service support.”

PWT’s Smith agrees. “Choosing a brand that is reliable is important. Also a brand that continues to innovate and push the envelope adds opportunities for businesses to capitalize on.”

“Offer your customers the best product for the application even if it’s a product that you don’t currently stock but can source as a cost-effective solution for the application. This will create a value-add for the LBM dealer and their downstream customers,” advises Canfor’s Webb.

Of course, to avoid situations such as these, manufacturers recommend LBM dealers be positioned to offer a variety of solutions—both with product and with knowledge—for their customers’ needs, no matter the application. Says BlueLinx’s Schulte, “If they have the space, stocking a wider variety not only improves service, but allows for more competitive pricing. If space-constrained, ensure their distribution partner has the scale to get them what they need when they need it. Lastly, equip their sales staff with product knowledge so they can be an educational resource and provide more value to their customers.”

Part of being able to offer solutions involves dealers taking a hard look at their contractual commitments for 2024, says RoyOMartin’s Pfingsten. “The traditional ‘buy cycles’ that many industry veterans have known for years are no longer present,” he explains. “It may be time for some dealers to consider a different approach with their OSB panel inventory plans. The past 12 months have shown us just how quickly the single family home builders in this country can impact the demand for structural panels in the U.S., more specifically, how quickly projections can change and cause volatility.”

As with all segments in the LBM industry, there’s no guarantee on how the future will pan out for engineered wood products over the next twelve months. Factors such as a fluctuating housing market, high interest rates, continued inflation, and the uncertainty of the upcoming presidential election all will play into EWP’s future. But the successful LBM dealer will be ready to provide high-performing products and cutting edge solutions no matter what the winds of fate blow in, and EWP manufacturers stand ready to help LBM dealers succeed. As RoyOMartin’s Pfingsten puts it, “The last 12 months havn’t been without market and pricing challenges, but our facilities have remained at production capacity despite the market dip. We expect demand to continue to rise in the coming months as there are still buyers looking to move with limited existing homes on the market. The demand must be met with new construction.”