Hardwood Floors August/September 2019

MARKET MATTERS INDUSTRY INSIGHTS SOURCING OF WOOD FLOORING SUPPLY: U.S. MANUFACTURERS TAKE SHARE IN A CHALLENGING MARKET ENVIRONMENT U.S. manufacturers are finally taking share from foreign- based producers. This follows a decade of significant inroads made by foreign-sourced products. Based on first-half 2019 data, imports could account for only one-third of total dollar wood flooring dollar and square foot sales (U.S. shipments minus exports plus imports) this year. This is down from an average share of 42 percent of total dollar sales and some 55 percent of total square foot sales from 2016 to 2018. Import penetration rates were only about 15 percent in dollars and square feet in 2007. U.S. manufacturers are regaining share during 2019 due to the sharp drop in import shipments. Based on U.S. Customs data, U.S. wood flooring imports could drop by one-third in dollars, and be cut in half in square feet during 2019. The decline in imports was led by the contraction of shipments from China. Demand for Chinese-made wood flooring already turned sluggish in 2017 and 2018 due to the imposition of antidumping duties and countervailing duties on Chinese engineered wood flooring by the U.S International Trade Commission (ITC). Additional tariffs were added to Chinese wood flooring imports by the Trump administration in the fall of 2018 and the spring of 2019. As a result, tariff charges could rise to more than 12 percent of the total value of U.S. Chinese wood flooring imports during 2019. This is up from only 3.7 percent in 2017. U.S. wood flooring imports are also being adversely affected by a weak market environment. Wood flooring sales have been hurt by soaring demand for luxury vinyl tile (LVT) sales. The successful introduction of rigid core LVT has resulted in consumers reducing their preference for wood

flooring and other hard surface flooring. Wood flooring sales have also been adversely affected by the decline in housing starts in the first half of 2019. Housing starts declined in response to the sharp run up in interest rates in 2018. The decline in housing starts dampens wood flooring demand since wood flooring manufacturers and marketers have the highest dependence on new residential construction than any other floor coverings sector. In addition, the decline in import shipments can be seen in solid wood flooring product lines. This indicates that the drop in imports could have more to do with the domestic market environment since Chinese imports of solid wood flooring products were not affected by the ITC actions.

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