Western Lumber Producers See Good Year Ahead, Even With Slightly Slower Markets.

SAN FRANCISCO--(BUSINESS WIRE)--March 14, 1997--Western lumber mills enjoyed healthier markets and a bit of stability in timber supplies in 1996. A slight drop in demand is expected in 1997, but sawmills in the region should still have a good year, a lumber industry trade executive said.

Robert H. Hunt, president of Western Wood Products Association, told more than 600 lumber industry professionals meeting in San Francisco this week that U.S. lumber consumption in 1996 was the second highest on record. The 50.53 billion board feet of lumber used in the country was just slightly below the all-time record of 50.56 billion board feet set in 1987.

"A strong level of housing construction and an expanding economy in many parts of the country made for an active lumber market in 1996," Hunt said. "It tested the ability of lumber mills throughout North America to fulfill demand."

Hunt noted the higher demand, coupled with several other market-related factors, were behind lumber price volatility. He disputed the claim made by builder and dealer associations that a U.S./Canadian lumber trade agreement reached last spring is the sole reason behind lumber price increases.

"Canadian lumber imports hit an all-time high in 1996, shipping nearly 18 billion board feet. Of that total, only a very small volume of that lumber carried the duties set by the trade agreement. So, at best, the agreement had a minor impact on prices," Hunt explained. "What builders and others seem to forget is that the last time lumber demand was this high, Western mills were producing more than 24 billion board feet of lumber. With the restrictions on federal timber and the corresponding loss of mills during the 1990s, the Western lumber industry now can produce just 17 billion board feet -- 30 percent less."

Hunt added that even with price increases in recent years, lumber remains an undervalued commodity. He noted lumber prices have failed to keep up with inflation in the past 10 years, unlike other products used in home building and construction.

Western mills managed to increase output in 1996 to meet customer demands. Lumber production in the region totaled 16.8 billion board feet, up 6.8 percent from 1995 totals and only the second annual increase in nine years. Lumber mills in the South also had a banner year, with production reaching a record 15.3 billion board.

The housing market, which roared to 1.475 million starts in 1996, will slow slightly this year. Hunt said housing starts are expected to total 1.39 million in 1997, down 5.8 percent. Lower starts, combined with slower activity in other markets, should bring lumber consumption to 48.86 billion board feet, down 3.3 percent.

Lumber used in new residential construction should total 18.6 billion board feet this year, 5.6 percent lower. Repair and remodeling uses of lumber will be down 4 percent to 14.76 billion board feet. Together, these two markets comprise more than two-thirds of the lumber used annually in the U.S.

Lumber production in the West is expected to decline 1.5 percent to 16.59 billion board feet. Mills in the South should see production fall to 15 billion board feet, a drop of 1.6 percent. Imports from Canada will be 7.5 percent lower, while overall imports are expected to be down 6.7 percent. Canada represents more than 97 percent of total imports.

"Overall, 1997 should be a good year for the Western lumber industry, despite a modestly slower market," said WWPA President Hunt. "There are still many challenges our sawmills face in gaining a sustainable, predictable timber supply. But it appears 1997 will be a solid, stable year for the industry."

Other highlights from WWPA's lumber forecast:

Lumber exports, which have declined each year since 1989, were 3.2 percent lower in 1996 to 1.925 billion board feet. In 1997, lumber exports are expected to decrease 9.7 percent to 1.74 billion board feet.

With stronger domestic markets, log exports were down 6 percent to 2.06 billion board feet (Scribner scale) in 1996. As U.S. markets ease in 1997, log exports are expected to rise slightly to 2.075 billion board feet (Scribner scale).

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

CONTACT: Western Wood Products Association

Robert (Butch) Bernhardt, Jr. 503/360-3488