Why lumber prices are rncreasrng

By Robert H. Hunt President Western Wood Products Association

I N a dramatic enactment of the law of I supply and demand, the demand for western softwood lumber is nearly certain to increase sharply this year while, simultaneously, the supply of that lumber will decease even more sharply.

The resulting impact on the lumber market is almost certain to be substantial. We want you to know that now, and to know why.

To back up a bit, the market for softwood lumber is frequently cited as an ideal model for free competitive markets. It features thousands of independent sellers, thousands of independent buyers, and constantly changing prices. In addition, Federal Trade Commission studies show the concentration of production in the largest firms to be among the lowest for lumber of any of the nation's major industries.

But when a big chunk of an industry's basic raw materials resource is removed, and when, at the same time, demand for that industry's prod- uct increases, then things begin to heat up and get a little crazy. And that seems to be what's beginning to happen now. Two preliminary reasons account for there having been no serious or lasting spike in prices before now. One hasbeenthe lower-than-normal demand because oflower 1990 and 1991 housing starts. The other has been what was once a several-year backlog offederal timber the lumber industry has had in its inventory. But both of those reasons are now coming to an end. At the same time. In a sort of cosmic application of Murphy's Law for people who buy lumber in significant amounts, demand is almost certain to increase at the very same time that supply will definitely decrease.

Make no mistake about the reduced volumes of timber available to the westem softwood lumber industry. The spotted owl set-asides, plus a continuing scourge of other legal actions, have knocked the potential federal harvest just in Washington and Oregon (Oregon is the largest lumber-producing state, Washington is third) from 5 billion board feet in 1988 to less than 1 billionboard feet this year. This means that the federal timber resource base for westem lumber in those two states alone has decreased more than 80% since 1988. These and other pressures on the resource base are also at work in California, the country's second-biggest lumber-producing state, and just about everywhere else in the West. Similar pressures are also mounting in forest industries in the South and Canada.

Bringing that home and nailing it down: federally-owned forests provide about 60% of thetimber needed by mills in Oregon, more than 30% in Washington, and 40-50% of the supply for mills in Idaho, Montana and Califomia.

So no matter how you look at it, less timbera whole lot lessis going to be available. It doesn't matter that housing starts will almostcertainly increase. It doesn't matter that remodeling continues to boom (its requirements for lumber have doubled in the last decade), or that the do-it-yourself market is growing almost daily.

And, as we all know by now, it doesn't matter that trees are the only major commodity resource in the world that renews itself: that just keeps comingback. Oil doesn't. Steel doesn't. Concrete and masonry don't. Aluminum doesn't. No other resource does. But, maybe because it's hard to chain yourself to a bauxite mine, timber is the resource everybody is up in arms about.

At any rate, there is no nice or soft or easy way to say this. Although there may soon be the strongest demand for

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