Lumber forecast revised downward

By Western Wood Products Association,

PORTLAND, Ore. – With the weakness in the U.S. economy much deeper than was seen earlier this fall, Western Wood Products Association has scaled back its earlier forecast for lumber supply and demand for 2009.The Association reports Western mills are experiencing the largest downturn in lumber demand ever recorded. The downward trend is forecast to continue through 2009 before beginning recovery in 2010.

U.S. lumber demand is expected to finish 2008 at 40.9 billion board feet, the third consecutive annual decline in demand and 36 percent below the 2005 peak. For 2009, lumber demand is forecast to fall to 35 billion board feet, the lowest annual consumption since 1982.

The unprecedented decline in home building has been the chief cause of the demand freefall. Traditionally, home building consumes as much as 45 percent of the lumber used each year. In 2005 alone, some 27.6 billion board feet of lumber was used in new home construction. Since then, the number of housing starts has been reduced by more than half.

For 2009, housing starts are forecast to reach just 803,000 units, a post World War II low. Lumber used in residential construction will total 9.5 billion board feet, one-third of its 2005 peak.

Weak markets have taken their toll on production levels at mills in the U.S. and Canada. After peaking at 19.3 billion board feet in 2005, Western mills have reduced lumber production at an accelerating rate.

Production in the West should total 13.4 billion board feet in 2008, 17 percent below the previous year. In 2009, lumber output in the West is expected to reach just 11.8 billion board feet. Southern mills will follow the same trend, with production dropping 17 percent for 2008 and slipping another 13 percent to 12 billion board feet in 2009.

Canada and other foreign lumber suppliers have fared worse than U.S. mills. Canadian lumber imports have declined by some 10 billion board feet over the past three years and should finish 2008 at 11.9 billion board feet. Canada will lose even more market share in 2009, as shipments slip to just over 10 billion board feet.

According to the revised forecast, the lumber market is expected to start the slow road to recovery in 2010. Housing starts will move higher, to around 940,000 units for 2010, then rally in 2011 to more normal levels of about 1.5 million. Other markets for lumber, such as repair/remodeling and commercial construction will rise as well.

Western Wood Products Association represents lumber manufacturers in the 12 Western states. Based in Portland, WWPA compiles lumber industry statistics and provides business information services to mills. The Association also delivers quality standards, technical and product support services to the industry.

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