Declining Demand for Lumber through 2007

This is an interesting outlook for 2007 lumber business.

FOR IMMEDIATE RELEASE Contact: Butch Bernhardt
Prepared December 28, 2006 503-306-3488

DECLINING DEMAND FOR LUMBER
TO CONTINUE INTO 2007 AS HOUSING SLOWS

PORTLAND, Ore. – After four consecutive years of record lumber consumption, demand for lumber fell in 2006 and is expected to slow further during 2007, according to a forecast by Western Wood Products Association (WWPA).

A decrease in housing construction is expected to reduce lumber demand in 2006 by 3.2 percent to 61.9 billion board feet, compared to the all-time high of 63.9 billion board feet recorded in 2005. The slide in demand will continue into 2007, with WWPA forecasting total lumber use at 57.1 billion board feet, a decrease of 7.2 percent.

Slower housing markets are the key reason for the lumber demand declines. New housing starts will be down nearly 9 percent in 2006, and fall another 10 percent to 1.69 million in 2007, according to the association’s forecast. Residential construction is the largest market for lumber, accounting for more than 40 percent of the lumber used each year.

The volume of lumber used in repair/remodeling is anticipated to decrease as well, though not as deeply. WWPA anticipates repair/remodeling use of lumber to fall 2.6 percent in 2006 and nearly 6 percent in 2007.

“While home prices will still fall in some areas, we think that housing starts and home sales are nearing a sustainable rate,” said Kevin Binam, the association’s chief economist. “But construction is going to be lower than we’ve seen in the past few years and that will mean less demand for lumber.”


DECLINING DEMAND FOR LUMBER

The weaker markets for lumber will create challenges for Western lumber mills. Lumber production in the West is expected to finish 2006 at 18 billion board feet, down 6.7 percent. For 2007, production volumes are expected to fall again by 6.7 percent to 16.8 billion board feet.

Production at mills in the Coast region, covering the western portions of Oregon and Washington, is anticipated to be 6 percent lower in 2006, then dip by 4.7 percent to 10.5 billion board feet by 2007. Mills in the rest of the Western region will feel the downturn more acutely, with production down 8 percent in 2006 and off another 9.7 percent to 5.5 billion board feet in 2007.

Sawmills in the South also will be impacted by slower markets. After producing at record levels the past two years, Southern production is predicted to slip by 7.1 percent to 17.4 billion board feet in 2007.

Lumber imports are forecast to fall as demand slides, though volumes shipped from Canada will fare better than those coming from other foreign shippers. WWPA estimates Canadian imports will be down 1.4 percent in 2006 and off another 6.1 percent in 2007, slipping below 20 billion board feet for the first time in three years.

Non-Canadian imports will see larger declines, decreasing 11.7 percent in 2006 and 18.6 percent in 2007 to 2.28 billion board feet. Unfavorable currency exchanges and lower lumber prices are expected to reduce shipments from Europe by almost 600 million board feet from 2005 levels.

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

You will find the full downloadable text for this article at the wwpa website at http://www.wwpa.org/newsroom.htm