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Lumber Industry Facing Slow Road to Recovery

Lumber markets have experienced some historic times this decade. Unfortunately, the last few years have been the kind of history that sawmills in the West have not wanted to make.

In 2009, demand for softwood lumber dropped to the lowest point in modern history. The collapse of the housing market, fueled by a financial crisis that rippled through the U.S. economy, has impacted sawmills dramatically. While there are signs of improvements, the industry still faces a long road back to recovery.

Housing long has been a key market for Western mills, accounting for 45 percent of annual lumber consumption. After peaking at 2.068 million in 2005, housing starts declined steadily before plummeting in 2009 to post World War II lows.

Just 551,000 houses are expected to be built in 2009, down 39 percent from the previous year. That total is the lowest since 1945, when 326,000 homes were built.

As a result, just 7.2 billion board feet of lumber will be used in new construction in 2009, compared to the 27.6 billion board feet used in housing just four years earlier.

Overall demand for lumber is expected to total just 31 billion board feet in 2009 – less than half of what was used in 2005. Repair and remodeling uses, the second largest market for lumber, has fared slightly better that home building, but is still weak. An estimated 11 billion board feet of lumber will be used in repair and remodeling in 2009, down 26.6 percent from the previous year.

The unprecedented decline in demand has taken its toll on lumber producers. Western lumber production in 2009 is forecast to decrease 21 percent to 10.2 billion board feet. That volume is the lowest since the 1930s and represents a little more than half the volume Western mills produced five years earlier.

Production in the U.S. South has declined as well, falling to 11.6 billion board feet in 2009. In all, U.S. lumber production will total 21.8 billion board feet this year, down 21 percent from 2008.

Weak markets have been even tougher on Canada and other foreign lumber suppliers. Lumber imports from Canada are predicted to total 7.9 billion board feet in 2009, a decrease of 32 percent from the previous year.

Other imports, including lumber from Europe and Latin America, should decline by double-digit percentages for the fourth straight year and lose more market share to domestic producers.

Looking ahead to 2010, sawmills will begin to see some improvements in the market. But given the weak economy, continued high home foreclosure rates and a financial system struggling for stability, the gains in lumber demand and production will be modest.

WWPA is forecasting lumber demand to rise 11 percent in 2010, totaling 34.5 billion board feet. Housing starts will increase 21 percent to 668,000. While that is an improvement, the number of homes built will be just half the total of what was constructed in 2007.

Lumber production in the U.S. will move higher to meet the slow growing demand. Western mills are expected to produce 11 billion board feet of lumber in 2010, up 8 percent. Sawmills in the South will match that growth and increase production to 12.6 billion board feet.

Canada should begin to regain some of the market share lost over the past few years. Softwood lumber imports from Canada are expected to rise 18.8 percent in 2010 to 9.4 billion board feet. Volumes from Europe and Latin America will also increase to just over 1 billion board feet.

Beyond 2010, both lumber demand and production are expected to follow an upward trend as economic activity and housing construction continues to rise.

Western mills who have survived this historic downturn will be poised to meet the new demand with quality lumber products and competitive operations. And they are ready to write some new, more positive history for the industry.

Michael O'Halloran is the president of Western Wood Products Association, based in Portland, Ore. WWPA represents lumber mills in the 12 Western states and provides lumber grade inspection, technical services, product support and business information services to the industry.

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