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 in November by the 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," says David Jackson, WWPA economist. "The challenge for mills will be adjusting to a 'new normal' for the future."
Just 31 billion bf 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, according to the WWPA.
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 bf of lumber will be used in new construction in 2009, compared to 27.6 billion bf 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 bf 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 bf. That volume is the lowest since the 1930s and represents about half the volume Western mills produced in 2005. Mills in the 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 bf 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, according to the WWPA.
For next year, WWPA predicts lumber demand to rise 11 percent to 34.5 billion bf. 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 bf of lumber in 2010, up 8 percent. Sawmills in the South will match that growth rate and increase production to 12.6 billion bf.
WWPA represents lumber manufacturers in 12 Western states. For information, visit www.wwpa.org.