Soqring demond should keep lumber qnd pqnel prices slrong

fr OOD times loom over the next lLftiu. years for North Amerrcan solid wood products as a demand-driven market pushes prices higher, according to a new report by International WOOD Markets Research and R.E. Taylor & Associates.

"The main driver for the solid wood products sector will be the positive outlook for U.S. wood products consumption that is predicted to remain strong through to 2004," explains Russell Taylor, publisher of the 600-page WOOD Markets 2002: Solid Wood Products Outlook to 2006. "Supply-side dynamics are expected to be more balanced relative to demand (as compared to the over-supplied conditions in parts of 2000 and '01) leading to fumer and/or stronger prices for most wood products."

After persevering through the market crash in tech stocks in 2000 and then the Sept. 11 terrorist attacks, the U.S. now appears poised to return to a robust, sustainable growth. A key contributor to the recovery is the residential building sector, where prospective homebuyers have been taking full advantage of 40-year lows in mortgage rates since fourth quarter 2001.

Housing starts of 1.603 million in 2001 are forecast to rise progressively through to 2004, reaching 1.69 million units-the highest level since 1986. GDP growth should reach I .2Vo in 2ffil.2.lvo in2002 and 3.8Vo in 2003.

The growth of the economy may have a down side where it may be limited by inflation, potential labor shortages and rising energy costs. Such factors may force the Federal Reserve to rein in the economy by tightening money supply and raising interest rates. o'However," says Taylor, "the improving economic outlook in the U.S., Europe and many regions of Asia is expected to bode well for wood products demand and commodity prices. Lumber, plywood and OSB panel prices should see stronger prices in 2442, peaking in 2004. MDF and particleboard will not see any real price improvements until 2003."

Globol Supply

The world is not running out of industrial timber."In fact," says Taylor, "the globe has generally been awash in pulpwood, sawlogs and veneer logs for most of the second half of the 1990s and into 2OO0l2OOl;'

Regional shortages have been sporadic and short-lived, keeping real log (and, for the most part, commodity wood products) prices subdued. Most experts do not predict any global timber shortages in the decade ahead and, in some cases, not for two decades. However, with Russia's mainly undeveloped forests representing about half of the world's standing softwood timber, the potential of more investment to that region could alter the global supply/demand balance sooner.

The

U.S. now appears

poised to return to a period of robust and sustainable growth.

materially over the next l0 years.

Softwood log production/consumption rates indicate that fiber-deficit regions are Asia and North America. Surplus areas are Southern Hemisphere plantation regions and Russia./ Northern Europe. About 5Va of the world's forest area is in plantations. "Today," Taylor adds, "plantations are estimated to be producing about 357o of the world's industrial roundwood supply. a figure projected to reach 44Vo by 2020." Global timber plantations have increased more than tenfold in area during the last 20 years.

In 1995, Russia replaced the U.S. as the world's largest log exporter and in 2001 China replaced Japan as the wodd's largest log importer-trends that should continue. North American Iog exports have declined by 4OVo since 1989. Europe had the largest volume increase in exports (+817o), but trade is mainly between European countries. The largest percentage increase in exports was by Oceania (mainly New Zealand) at?ffi+Vo.

Overall global population and economic growth will continue to increase industrial roundwood (logs) consumption. However, new pulping, composite wood and veneer/paper overlay technologies are producing more efficient products that use less wood fiber and/or lower-cost wood resources not previously considered part of the industrial roundwood supply base. Consequently, the supply base is expanding in new areas, as previously non-usable fiber becomes economically viable and new plantations yield increased volumes of fastergrowing roundwood for superior, technologically enhanced products. These global trends should lessen demand for o1d-growth, higher cost logs.

Average global roundwood prices have generally been decreasing since 1993 as the rate of increase in supply has exceeded the demand growth. This trend is not expected to change

There is a growing concern that the U.S. and Canada have lost their costcompetitive advantage as industrial roundwood and/or manufactured wood product exporters. "This may not be as serious a problem for U.S. manufacturers," says Taylor, "as inereasing internal demand provides a good market for non-competifive exports. Canada, however, must export more than 60Vo of its production to retain its current industry size and scale."

The global qnvironmental movement and certification process are increasing pressure bn the indusoy to reduce native or old-growth harvesting, implement sustainable forestry practices, and increase the world's forest cover-all issues producers must address in the next five years.

Noilh Amedcon ffiroods

The report predicts a relatively optimistic U.S. lumber market scenario through 20M, assuming that a number of key economic and supply responses occur. "The end result is that rebounding U.S. housing starts, and repair and remodeling activity, will drive lumber consumption higher through 2004," says Taylor. "This will allow lumber prices to move up to stronger levels than those experienced in 2001-though not as high as the glory days of the mid- 1990s."

The greatest unknown element in the forecast (finalized in late Feb.) for North American softwood is the outcome of U.S.-Canada trade negotiations, which affect the supply response of Canadian. U.S. and offshore importers, not to mention the "floor price" of lumber. However, the greatest economic drivers impacting the forecasts are still the growth rate of the U.S. economy and the strength of the U.S. dollar. These factors will also influence sawmill capacity and operating rates, which both can quickly alter the supply/demand balance in a positive or negative way.

Strong housing starts, fueled by a robust economy, will move lumber consumption to new record levels in 2004. While U.S. lumber consumption is forecast to increase by only 300 million bd. ft. from 2001 to 53.9 billion bd. ft. in 2002, demand by 2OO4 should reach a record 56.7 billion ft.

Lumber consumption will also occur in repair and remodeling, which uses about 3OVo of all North American lumber. Predicted is a gain in demand of more than I billion ft. from 2001 to 20014 (from 16.3 to 17.4 billion ft.).

While capacity levels at many North American sawmills have been increasing over the last few years as a result of technological upgrades, the economics of sawmilling will continue to be one of the major factors limiting production levels in 2001 and 2002.

The North American production forecast is for steady advances from 2ffi2 to 2OO4 to reach. a record 66.1 billion bd. ft. This compares to a 1999 peak of 65.5 billion ft. and 2001's 62.6 billion. Canadian output should rise 1.8 billion ft. from 2001 to 29.8 billion in 2004, while U.S. production climbs 1.6 billion ft. to 36.2 billion.

Price are not forecast to reach record levels (although it is possible if 29Vo duties are maintained on Canadian lumber exports to the U.S.). However, on average they should offer good returns to producers.

Strucfurol Ponels

The outlook also appears strong for North American OSB and plywood in 2002 and 2003. On the supply side, ilo new OSB capacity is scheduled to start up until mid-2003, keeping production levels steady in the short-term. As a result. higher prices are anticipated in 2002 and 2003. with favorable prices still expected in2004.

"Structural panel consumption is expected to rise almost unabated over the next five years given generally positive economic and housing outlooks," Taylor adds.

Structural panel production capacity will continue to grow to keep pace with overall North American demand, although supply may lag behind demand in 2002 and especially 2003. No new OSB mills will start up in 2002, as most companies were scared off a few years ago by the threat of over-capacity. The next wave starts with new capacity installations between mid-2003 and 2005-06, when 10-ll mills are scheduled or planned, representing almost 8.5 billion sq. ft., an increase of 40Vo from 200 I

OSB attained a 557o market share of North American structural panel consumption in 2001, compared to just 27Vo in 1990. OSB should hold 65Vo of the market by 2008. North American OSB production reached 21.65 billion sq. ft. in 2001-double that of 1994 and tripling 199I's level.

OSB output should rise by another 6 billion ft. by 2006 to 21.6 billion ft. Plywood will remain under pressure and need to fit around the peaks and valleys of the OSB supply/demand balance. Following the sharp 2+ billion-sq. ft. cutback in plywood production to 17.8 billion ft. in 2001, further reductions are expected to be less dramatic. From 2OO2-2006, ongoing reductions in North American plywood capacity totaling at least I billion sq. ft. are expected-and more if markets are weaker than forecast or if additional OSB capacity is installed.

As in the pulp and paper industry, industry-wide planned or scheduled curtailments may limit the downside on prices. Improving prices are expected in 2003 and into 2004, as rising consumption improves the supply/demand balance.

Non,Struclurol Ponels

With economic conditions expected to improve rapidly in the U.S. in20022004. the dismal conditions of the North American particleboard market that existed at the end of 2001 should enjoy a reversal. Over the next five years expect steady growth in both the U.S. and Canada for particleboard, with new or proposed capacity coming from agricultural fibers (wheat, straw, etc.). As a result, output of North American particleboard is expected to exceed 7.2 billion sq. ft. by 2006-l billion ft. higher than 2001.

During the last 20 years, North American MDF production growth has averaged l87o a year. Output reached 2.4 billion ft. in 2001 at 28 mills and may hit 3.2 billion by 2006.

A surge of new MDF capacity began in 1995. By 1997 the market was awash in product. The capacity glut still exists, but 2001 was the first year since 1996 that prices moved off the floor. While a few new MDF projects have been completed in recent years and others are being considered, most are expansions of existing mills, diversification into thin board, or construction of specialized plants using alternative fiber sources.

Over the past 15 years, imported MDF has supplied only 3%-57o of total domestic usage of MDF in any particular year. Since 1997, this relationship has changed, with MDF imports now poised to capture more than 3OVa of total U.S. consumption in 2001. This fundamental shift should continue due to the MDF capacity in Canada and lower-cost offshore countries. Canadian particleboard output is forecast to climb slowly but continuously, reaching almost 2 billion sq. ft. in 2006 versus 1.57 billion ft. in 2001. With no new capacity in the works since 1998. Canadian operating rates at MDF plants have been improving steadily, from a dismal TOVo in 1997 to 847o in 1999,857o in 2000 and 867o in 2001. By year's end, operating rates should rise to 9OVo, the highest level since 1994. They should get even better h 200312004, reaching 92Vo at a time when prices are likely to be approaching their cyclical peak.

Particleboard imports have been low, but increasing with the strength of the U.S. dollar. Rising imports come from various regions, including South America, Europe and even Asia. MDF imports have also surged over. the last few years, with Canada's market share of U.S. imports dropping despite large increases in its exports south of the border. Off-shore MDF suppliers include Germanyo Chile and New Zealand.

After the price spikes of 1995 and 1996, panel prices moved closer to cost between 1997 and 2001. Taylor anticipates stable particleboard prices in the short term. Over the next five years, excess capacity plus more stable consumption levels will keep particleboard and MDF prices in check.

Rrrlrrrns

Henson Building Materials, Forest City, N.C., has acquired American Builders Supply, Granite Falls, N.C., as its 6th location; Calvin McKinney, mgr. ...

Twin Oaks Hardware, Austin, Tx., has closed after 2l years in business...

Safrit Building Supply, Beaufort, N.C., has broken ground in Jacksonville. N.C.. to consolidate its two smaller stores in town. Jacksonville Building Supply and Square One Lumber;the new Jacksonville Building Supply should open in early spring 2003, reports Leonard Safrit ...

Hope Lumber & Supply Co. has acquired Wickes Lumber Co.'s Harlingen and McAllen, Tx., locations

84 Lumber is looking to build a 19,000-sq. ft. building with retail and warehouse space on l0 acres in Tampa, Fl. ...

Stanley Lumber & Hardware, Stanley, N.C., has closed ...

Kobrin Builders Supply, Orlando, Fl., has applied to build two additional buildings, totalling 37,000 sq. ft., at its operation in the Greenland Park section of Jacksonville, Fl. ...

Wilson & Sons Building Supplies, Russell Springs, Ky., is adding a new building and plans to remodel its existing facilities ...

Wolfe Nursery, San Antonio, Tx., is closing its eight retail nurseries after filing for bankruptcy late last year

Home Depot this month opens new home centers in Loganville, Ga.; Winston-Salem and Winterville (Greenville), N.C., and an Expo Design Center in Nashville, Tn....

Home Depot has acquired 24 acres in S. Austin, Tx., and paid $10.8 million for the 25-acre Midtown Square mall site in Charlotte, N.C., to build an Expo Design Center

Lowe's Cos. opens new stores late this month in Snellville. Ga. (Dennis Crawford, mgr.); Smyrna, Tn. (Brenda Weddle, mgr.), and N. San Antonio, Tx. (Jeff Loudon, mgr.)'.'

Lowe's has acquired pud $7.26 million for a large site in Kissimmee, Fl., to build a new store by next spring and filed a tax suit challenging an appraisal of its regional DC and property in Mount Vernon, Tx.; the company claims the appraisal was more than one-third higher than the market value ...

Hope Lumber, Oklahoma City, Ok., co-sponsored the East Area Council Festival of Homes ...

Congleton Brothers Pro Hardware, Beattyville, Ky., was awarded the Paul L. Cosgrove Memorial Award by Pro Hardware ...

Wror:srurns/trrurrcrurrrs

Weyerhaeuser Co.plans to completely merge all former Willamette Industries operations into its company by June 30

Hassinger Wholesale Co., Greensboro, N.C., is closing after 50 years and auctioning off its remaining assests and inventory; Bill Hassinger, Jr. is retiring after 44years with the company

FAX us your news!

Have a notice of your recent expansion, promotions or other company changes published in the next issue of Building Products Digestl Just FAX vour news to 949-852-0231.

Pat Brown Lumber Corp., Greensboro, N.C., has been renamed Patriot Timber Products

Coastal Lumber sold its SYP sawmill in Thomasville. Al.. to former mill mgr. James Dixon, who hopes to reopen this month as Thomasville Lumber: the facilitv closedlastfalldueto afire ... -

Boise Distribution has relocated its Greensboro, N.C., DC to alargerfacility...

Blue Ox Products, Kernersville, N.C., has been renamed Stock Components, three years after new owners acquired the truss plant

Rex Lumber, Bristol,Fl., has begun construction on a new sawmill in Graceville, Fl. ...

G eo rgia- Pac ific anticipated a June 1 restart of its Louisville. Ms., plywood mill

Earl Bumgarner Lumber Co., Claremont, N.C., is installing a new resaw and remodelins its offrce...

Huttig Building Products flJed suit against Rugby Group Ltd., claiming Rugby broke its contractual obligations to protect Huttig from liability claims; Huttig acquired Rugby subsidiaries Rugby USA and Rugby Building Products in 1994...

Atlanta Structural Products, Norcross, Ga., is now distributing Lo ui s iana- Pa c ifi c's engineered wood products

Anniversaries: Quality Forest Products, Enfield, N.C.,25th ...

Housing starts inApril (latest figs.) fell 5Vo to a seasonally adjusted annual rate of 1.555 million single-family starts slipped 2Vo to 1.270 million; multi-family was at a rate of 261,000 for 5+ units permits held steady at an annual rate of 1.634 million.

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Listings are often submitted months in advance. Always venfy dates and locations with sponsor before making plans to attend.

Furu

North American Wholesale Lumber Association - June 10'12, I lOth annual meeting, Broadmoor Hotel, Colorado Springs, Co.: (800) 527-8258.

Temperate Forest Foundation - June 12'15, Southeastern Teachers' Tour, Jacksonville, Fl.; (503) 579-6762'

House-Hasson Hardware Co. - June 13-16, summer dealer market, Nashville, Tn.; (865) 525-0471.

National Association of Wholesaler-Distributors - June 18-19, logistics networking conference, Chicago, 11.; (202) 872-0885'

Forest Products Society - June 23'26, annual meeting, Hilton, Madison, Wi.; (608) 231-1361.

Lumbermens Association of Texas - June 26, committee meetings, Austin, Tx.; (512) 472-1194.

Construction Specifications Institute - June 27-30, annual convention and expo, Las Vegas, Nv.; (206) 382-3393.

Futv

Kentucky Lumber & Building Material Dealers AssociationJuly 9, golf outing; July 10, board meeting, Maniott's Griffin Gate Resort, Lexington, Ky.; (502) 245-6730.

Construction Suppliers' Association - July 11-14, summer management conference, Brasstown Valley Resort, Young Harris. Ga.; (77 O\ 7 5 | -637 3.

Appalachian Hardwood Manufacturers - July 14-16, summer meeting, The Homestead, Hot Springs, Va.; (336) 885-8315'

National Retail Hardware Association - July 14-L6, annual convention, San Diego, Ca.; (317) 290-0338.

International Lawn, Garden & Power Equipment Exposition - July 19-21, Kentucky Exposition Center, Louisville, Ky'; (800) 5s8-8767.

North American Wholesale Lumber Association - July 20'25' wood marketing seminar, Moscow, Id.; (800) 527-8258'

American Lumber Standard Committee - July 25, summer meeting, Washington, D.C.; (301) 972-l'700.

International Exhibition on Rooflrng & Waterproofing Tech' nology - July 31-Aug. 3, Beijing, China; (956) 664-2370.

Association of Woodworking & Furnishings Suppliers - July 31-Aug.4, supply fair, Anaheim, Ca.; (800) 946-293'1

Auousr

National Association of Women in Construction - Aug. I' chapter meeting, Austin, Tx.; (512) 476-5534.

Southeastern Lumber Manufacturers Association - Aug. l-3, annual meeting, Charleston Place Hotel, Charleston, S.C.; (404) 36t-rM5.

Southern Building Material Association - Aug. l-4, summer outing, Ramada Inn, Virginia Beach, Va.; ('104) 316-1503.

Window & Door Manufacturers Association - Aug. 3'6, summer meeting, Montreal, Quebec; (800) 223-2301.

Mississippi Building Material Dealers Association - Aug. 9'10' mid-year meeting, Imperial Palace, Biloxi, Ms.; (601) 2675522.

National Hardware Show & Building Products Expo - Aug. 11-13, McCormick Place, Chicago, I1.; (847) 605-1025.

Hoo-Hoo International - Aug. 11-14, annual convention, Minneapolis, Mn.; (800) 979-9950.

National Hardwood Lumber Association - Aug. 14-16' hardwood grading short course, Memphis, Tn.; (901) 377-1818.

Moore-Handley Inc. - Aug. 16-18, fall show, Jefferson Convention Complex, Birmingham, Al.; (205) 663-8235.

Florida Building Material Association - Aug. 22-24, anwal building products & design show, Renaissance Resort, Orlando, Fl.; (352) 383-0366.

Florida Building Material Association has recruited football legend Fran Tarkenton as kickoff breakfast speaker during its annual convention and buildine products/design show Aug.22-24 at thi Renaissance Resort. Orlando.

Kentucky Lumber & Building Material Dealers Association national director Steve Kelly was joined by members Gerry and Bonnie Boland, Ralph Jones and staffers Chris Quinn and Martha Trotter at the national dealers association's

K-l Lumber Opens New Ouilet

Kentucky Indiana Lumber Co., Louisville, Ky., has opened a new truss/panel plant and retail outlet in Shelbyville, Ky.

K-I Lumber opened the Shelbyville location on a limited basis in March, until finishing touches were completed last month. "We're open," said executive v.p. Ron Mason. "We just haven't had a grand opening yet."

Mason said the new facility is modeled after the company's operation in annual Legislative Conference in Washington, D.C.

Mississippi Building Material Dealers Association has scheduled its mid-year meeting for Aug. 9-10 at the Imperial Palace, Biloxi.

Southern Building Material Association will hold its summer management conference and leadership meeting Aug. l4 at the Ramada Plaza Resort Oceanfront. Virginia Beach, Va.

Lexington, Ky., which is set up to serve both builders and developers on the wholsale side along with d-i-yers seeking a retail environment.

"We can furnish an entire house package. All of the shell, the inside trim, shingles-everything but the dry wall and mechanicals," said Mason.

K-I Lumber has begun building three more sheds in Shelbyville to cover lumber and building products. Currently four sheds are in place.

The company owns 22 acres in the

Breighton Park section of Shelbyville. The current facility occupies eight acres. Additional land will be held for future expansion projects.

K-I Lumber has six retail outlets.

Huber Plans New OSB Plant

Huber Engineered Woods, Charlotte, N.C., plans to build a new OSB facility in Texas, Oklahoma, Louisiana or Arkansas.

The $125 million, 425,000-sq. ft. plant wil produce 600 million sq. ft. per year of OSB, 3/8" basis.

Huber chose the South-Central region for proximity to a sustainable wood supply, transportation and services infrastructure, access to customers and a skilled labor pool. The specific location, now in the negotiation stages, will be decided based on which of several communities in the region "best meets these needs."

"Once the site is determined in early June," says John Bozeman, v.p. of business development for Huber Engineered Woods, "groundbreaking will begin in early fall and the plant will be fully operational in 2004."

J.M. Huber also operates engineered wood plants in Georgia, Tennessee, Virginia and Maine.