Hardwood Demand Will Exceed Supply

Hardwood demand is expected to continue to outpace supply in the coming months with prices continuing to escalate.

George Barrett predicts in the Weekly Hardwood Review pricing report that firm to increasing price levels will continue in the coming months due to continuing inventory shortages. Lumber production increased only slighfly during the summer, he explains, making lumber inventories as shallow now zrs anytime in the last year. Rain, snow and winter weather will exacerbate the situation. he advises lumber buyers.

Demand for hardwood continues to escalate with kitchen cabinet sales up l4%o duing the first six months of 1992. Dimension manufacturers are reporting full order files and hardwood flooring shipments are up llqo over 1991 levels, Biurett notes.

Despite housing starts ahead of last year, George A. Christie, F. W. Dodge economist, says, "The potential for a one million unit rate of single family home building (in 1992) is realistic enough, but will be hard to sustain until the economy strengthens. Driving interest rates down is not enough, hecause refinancing existing mortgages has more appeal than taking on new debt."

While the overall demand for lumber has improved across major markets, the transition from a supply to a demand driven market has not occurred, Barrett reports. He estimates lunrber production will fall slightly in tle coming winter months as customary !o push prices up for the next two quarters on many key items. However, with timber prices at record levels timber owners have an incentive to sell. Logs and timber should be available in most regions, making production increases possible.

"While the hardwood industry may have its ups and downs, the outlook is still positive as evidenced by the increased investments being made by many companies within our industry," Barrett concludes. "The biggest challenge remains gening a handle on raw material costs, as the inoeasing cost of logs is governing profitability for the sawmills to a greater extent than ever."

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