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Competing Nonwood Products

The potential for substitution between timber and other materials depends upon the level of technology and relative prices of alternative material inputs. For instance, the possibility for substitution away from wood to produce paper and paper-related products is low because there are currently no economically viable and widely available substitutes for wood fiber. However, the potential for substitution among alternative materials in building construction is much higher.

Even during the rapid growth phase described earlier, the use of lumber in the United States did not grow at the same rate as housing starts. Increasing prices of timber relative to steel and cement allowed for substitution away from lumber and toward these other materials during the last few decades of the 20th century. Very recent large upturns in cement and steel prices may portend a moderating or reversal of this substitution of raw materials. Although many factors contribute to price differences among raw materials, energy prices will have a strong influence on the future competitive position of wood. Generally, energy costs associated with production of steel and cement are higher than those associated with production of solid wood construction inputs. It is therefore possible that recent upsurges in energy prices could have a positive influence on demand for domestically produced construction wood, relative to its substitutes.

Changing shares of construction inputs reflect shifting prices of nonwood and wood substitutes relative to solid wood inputs. Fleishman and others (1999) report that lumber lost market share in the construction market between 1995 and 1998, with the share in wall framing down from 93 to 83 percent. Most of the lost share in the lumber market could not be attributed to nonwood substitutes. Instead, most replacement has been by engineered wood products—laminated beams, wood I-joists, and laminated veneer lumber (LVL) (fig. 8)—with some share also captured by steel, reinforced concrete, and wood-plastic lumber. LVL especially captured increasing market share between 1991 and 2004, with no decline in its rate of growth (fig. 8). Lumber has also lost market share in roof and floor applications (Fleishman and others 1999). The decline of market share of lumber during the 1990s can be attributed mainly to improvements in engineered wood product quality, declining quality of lumber, and perceptions that lumber is not as environmentally friendly as some alternative construction materials.

Substitution away from forest products is only one explanation of reduced market share for domestically produced forest products (Fleishman and others 1999; Zhang and Buongiorno 1997, 1998). Imports, technological change, and evolving consumer preferences are also determining factors. In the paper sector, for example, information technology continues to shift news provision from newspapers and toward electronic media, with important implications for paper demand. In addition, declines in demand for softwood pulpwood products such as unbleached kraft pulp are partially due to recent steep declines in paper bag manufacture and consumption domestically.