Lumber industry sees hopeful signs of slow recovery starting in 2010
By Western Wood Products,
PORTLAND, Ore. – Western sawmills, mired in historic lows in housing and lumber demand, should see signs of a recovery in 2010 after five straight years of losses, according to a forecast released by Western Wood Products Association. In its newest outlook, the lumber trade association notes 2009 should be the bottom for mills, with lumber demand dropping to the lowest point in modern history. While lumber markets are expected to improve in 2010, the recovery will be slow for Western mills.
“Given the unprecedented downturn, recovery for the lumber industry is unlikely to follow the same path as it has in the past,” said David Jackson, WWPA economist. “The challenge for mills will be adjusting to a ‘new normal’ for the future.”
Just 31 billion board feet of lumber is expected to be used in 2009 – less than half of what was consumed in 2005, which was an all-time high in lumber demand. Most of the drop in demand was caused by the U.S. financial crisis and ensuing collapse of new residential construction.
Housing is a key market for Western mills and traditionally has accounted for 45 percent of annual lumber consumption. 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, only 7.2 billion board feet of lumber will be used in new construction in 2009, compared to 27.6 billion board feet only four years earlier.
Repair and remodeling – the second largest market for lumber – has fared slightly better than 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 U.S. 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 about half the volume Western mills produced in 2005. Mills in the U.S. South have cut production as well, declining to 11.6 billion board feet in 2009.
Lumber imports from Canada and other foreign lumber suppliers have decreased more dramatically. Shipments from Canada are predicted to total 7.9 billion board feet in 2009, a decrease of 32 percent from the previous year. Imports from Europe and Latin America have declined at an even faster pace.
Markets should start the long road to recovery in 2010. But given the weak economy, continued high home foreclosure rates and a financial system struggling for stability, gains in lumber demand and production will be modest.
For next year, WWPA predicts lumber demand to rise 11 percent to 34.5 billion board feet. Housing starts will increase 21 percent to 668,000. While this increase will be a substantial improvement compared to 2009, it represents only half the total constructed in 2007.
Lumber production in the U.S. will move higher as demand improves. 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 rate and increase production to 12.6 billion board feet.
Canada should regain some of the market share it lost over the past few years. 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.
Both lumber demand and production should follow a slow upward trend in the coming years as the economy recovers and home construction regains strength. However, WWPA notes that it may be some time before lumber demand approaches levels seen earlier this decade.
“We don’t expect housing starts to exceed 1 million units before 2012,” said Jackson. “Demand for softwood lumber will be relatively low but it should be sufficient to allow most sawmills to continue operations and, hopefully, build their core customer base.”
Western Wood Products Association represents lumber manufacturers in the 12 Western states. Based in Portland, WWPA compiles lumber industry statistics and delivers quality standards, technical and product support services to the industry.
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