Diversified markets

By Karl W. Lindberg President Southern l;orest Products Association

-QeVennL years ago, the strategy of the southern rYpine lumber industry resembled an Ohio State football team: three yards and a cloud of dust through the middle of the homebuilding market. No more.

Today, the industry relies less on framing for the housing sector and more on diversified markets such as engineered wood systems, exports and treated products. In football terms, we spread the defense. We are harder to stop now in any one sector.

That's an important change in strategy if you believe what economists say is in store for the nation in 1989. The conventional wisdom is that after the shakeout of the presidential election, the Fed will begin a serious move to tighten credit to rein in the soaring deficit. That could push the economy to the edge of a recession. Housing, already weakened by changing demographics, is projected to fall below 1.3 million units in 1989.

Story at a Glance

Southern pine industry braced for 1.3 million housing starts. treated products use will grow. exports rising engineered wood systems use increasing.

Story at a Glance

Hot Industrlal & consumer hardwood markets. overseas sales could reach $1 blllion oversupply, lower prices willcontlnue In'89.

lished in the hardwood industry, you can see that some species in some grades are selling at lower prices than in recent months. Analysts attribute this not only to conservative inventory practices at lurniture plants, but also to the real efliciencies in the hardwood lumber industry. l-umber prices are a function of both changes in demand and changes in supply. At this point in time it appears that the hardwood sawmiller has added enough capacity through second shifts and additional machinery coming on line to produce more lumber than the market will bear at this time. Therefore, the recent downturn in some prices is more attributable to an over-supply situation than falling demand and may continue this way through the first of the year.

h,ngineered wood systems, exports and treated products are being substituted for whatever might be lost in homebuilding, plus some extra demand for southern pine that development of these market segments has enhanced.

All this is not by accident. Four years ago, a Marketing Marathon program was launched, designed to boost demand for southern pine lumber by 1.4 billion board feet a year at the end ofthe fifth and final year ofthe program. In 1988, a year ahead of schedule, we crossed the finish line. We are still running, now pushing back the finish line as a new Marketing Marathon is planned for r 990-95.

The booming treated markets alone burst the 1.4 BBF tape. More than 6 BBF or 5006 of total SP production was treated, compared to only 200h back in 1980. Decks, gazebos and other outdoor wood structures took the bulk of our treated products. We think our promotion of porches will add to that total. A growing amount of treated SP is flowing into wood floor and foundation systems and exports. And as soon as research is completed, we expect treated SP to play a key role in replacement of thousands of timber bridges.

From January through August, SP exports were running 830/o ahead ofthe hot pace for 1987, and had already exceeded the total volume for the last year. SP design values, grades and sizes are now part ofthe British standards. The Caribbean is winning converts to wood frame construction, and we are coordinating use offederal assistance programs to build and promote southern pine tourist facilities in the Dominican Republic. The doors to the Middle East are opening, particularly in lraq, thanks to hard-working trade missions and aggressive members.

Engineered wood systems are the wave of the future and we have been riding the crests. Southern pine has been out front, pushing for reliability based design, which will assure a state-of-the-art design format for architects and engineers responsible for trusses and other components.

That would stuff the three-yard run through homebuilding. But thanks to our more balanced offense, the SP industry would still have several ways to move the ball.

Southern Pine can strike from several formations now. If the market tightens up in '89, we can pick our plays carefully and take what the defense gives us. If the economy manages to escape a recession, we can run up the score.