Better Lumber Demand Aids Western Mills This Year; Modest Decline Seen For 1997.

COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Sept. 11, 1996--An active housing market and economic growth have been welcome tonic for beleaguered Western lumber producers in 1996.

Next year, however, the same good medicine may not be available to mills, a lumber association leader told industry executives meeting here today.

Robert H. Hunt, president of Portland-based Western Wood Products Association, announced the Association's semiannual lumber market forecast before an audience of executives from leading lumber companies in the West. The WWPA forecast is widely used within the industry and is recognized for its accuracy in predicting lumber market trends.

Hunt said Western mills overcame a slow start earlier this year and have managed to increase output to feed expanding consumer demand for lumber.

"This has been one of the better years for lumber demand, with housing construction stronger than expected. Western lumber producers are working hard to fill orders for products and are just finding the mix of logs from public and private sources they need to edge production up modestly," Hunt said.

Housing starts in the first six months were 14 percent higher compared to 1995. WWPA estimates by year-end starts will total 1.425 million, the best since 1994 and the second highest annual mark since 1988.

With more homes under construction, the volume of lumber used in housing should rise to 18.88 billion board feet, 5 percent above 1995 totals. Repair and remodeling, the second largest lumber market, should use about the same volume as last year, 14.4 billion board feet. Together, the two markets will account for almost 70 percent of the lumber used in the country.

Western mills have responded to the better markets with a modest increase in production and higher shipments, which have reduced lumber inventories at mills to all-time lows. For the year, Western lumber production is expected to reach 16.1 billion board feet, up 2.1 percent from 1995.

Hunt noted the production volume reflects the new operating realities for Western mills and other lumber suppliers.

"In the past, a strong market like this would bring even higher production from sawmills in the West. But with fewer mills, little timber coming from federal forests and higher resource costs compared to other competing regions, the Western industry is unable to add significant volumes to U.S. supplies at will," remarked the association executive.

Other regions are facing challenges of their own in supplying lumber. Mills in the southern U.S., producing at near record levels in 1995, are expected to make just 0.6 percent more lumber this year.

Imports from Canada should be lower in 1996, due to a U.S.-Canadian trade agreement to limit shipments following American documentation of Canadian timber subsidies. Non-Canadian imports are expected to rise, but far below the growth rate seen in previous years.

The demand increases of 1996 should fade next year. Higher interest rates are expected to curb home building in 1997 and starts are predicted at 1.35 million, a 5.3 percent decrease. Coupled with a potential slowing in other markets, lumber consumption is anticipated to decrease 1.8 percent to 47.6 billion board feet.

Western lumber shipments to U.S. markets are expected to fall 3.1 percent in 1997. Shipments from Southern mills will fall 1.5 percent and imports should decline 1 percent.

"While the industry would prefer better markets, 1997 should show reasonable stability for Western mills as production and available log supplies come closer to market balance," Hunt said. "Hopefully, we're at the end of the painful downsizing this industry has experienced during the 1990s. The Western mills operating in 1997 will likely be those that take the industry into the next century."

Western Wood Products Association, with headquarters in Portland, represents lumber manufacturers in the 12 western states. The Association provides quality control and marketing services for western mills and tracks industry performance and lumber-related economic trends

CONTACT: Western Wood Products Assn.

Butch Bernhardt, 503/306-3488